Oxnard Wastewater Ratepayers Panel Concluded- sends rate increase recommendation to City Council for action

By George Miller

The Oxnard Wastewater Ratepayers Advisory panel selected  a staff-modified version of a previous staff recommended rate “scenario” – Scenario 2.2b in here: URAP Scenarios Handout 2-22. Comparison: Scenarios.with Panel choices.ro (1). While it is smaller than what was approved last year, This amounts to to approximately 74+% over what rates were in January 2016, Through July, 2022.

They also considered six other procedural/policy recommendations by Panel Member Aaron Starr and approved two of them.

They reviewed staff ideas for a ratepayer assistance program for the indigent/elderly, which called for solicitation of donations from ratepayers, private sources and public grants.

Consultant Alex Bugsbee of Carolla Engineers explains some finer points on rates, with Asst. City Manger Ruth Osuna standing by, while  4-person City tech team livestreamed the Oxnard URAP meeting on 2-21-17 while Dan Pinedo did his own version solo, which will have readable presentation materials. Photo: George Miller/CitixzensJournal.us

Live stream of Feb. 22 Utility Ratepayers Advisory Panel Meeting: www.ustream.tv/channel/oxnardnews. Click here to view the agenda.

 

The recommendation assumes that  last year’s 35% increases will be upheld, infrastructure fees are legal and provides for five additional annual increases of 5 1/4%, if we understood the modifications approved. That amounts to about 74% more than rates in January, 2016, with increases which would be scheduled for July of each of the years.

In January 2016, the typical residential rate was $30.94/month. After the 35% increase, it is $41.77 (Council deferred the 10% increase scheduled earlier this year. The additional increases would bring it up to $53.95, for a total 74.4% above what it was at the start of 2016. Additional “pass-through” charges could be added at any time, for vendor increases and certain other commodities.

Recommendations will likely go to the Utilities Task Force first before hitting the Council agenda, which was planned for 3-7-17.  The Task Force is currently made up of Mayor Flynn and Councilman MacDonald, but we see it is up for a vote on its composition at the 2-28-17 meeting.  If the Council votes the increase, that would trigger a Proposition 218 notice to ratepayers. 45 days is then allocated for review, hearings, objections and then a vote. Last time this happened, the enormous increases proposed led to a revolt by 71% of the voters , to rescind the rate increase. The rescission is now stayed by a court order, pending a trial in Ventura County Superior Court in June. 

The rate scenario and subsequent increases embedded in the rate model, call for a large amount of new debt- doubling over a ten year period. However, only 5 years were recommended by the scenario, under guidelines set by Council at the inception of the process.  It also violates city utilities investment policy: ( 2016_01_19 Council Policy Resolution 14887 – As Amended ), intended to reduce debt to cash funding ratios, finance projects with a life of less than 15 years with cash, and ensure that financing does not exceed 75% of the useful life of projects. Starr points out that debt service alone in 10 years under recommendations would exceed the entire amount of current annual revenue of about $30 million.

Starr and his wife Alicia Percell had obviously done  a lot of homework, significantly eclipsing all other panel members in comprehension of financial and some other items (Nash has long practical experience from when he was a Wastewater employee). But the majority mostly stuck with staff insistence that the full $84 million 5 year capital improvement program, very generous bond coverage, reserves policy (although with a time-phased buildup) and at least some of the “infrastructure fees” paid to the general fund were necessary and prudent to keep the Wastewater plant running, provide an operational and financial safety cushion.

Panel Member Steve Nash (Alternate Panel Member acting as voting member tonight) committed to supporting absent Panel Member Bill Littell’s position. A longtime Wastewater plant retired employee, he expressed confidence in the staff-recommended capital investment plan of $84 million over 5 years. Starr was stunned that the $309 million capital plan he found buried in the current rate model spreadsheet had mysteriously grown $40 million in two weeks. He brought this up multiple times. No explanation was ever proferred nor did the panel seem inclined to hold staff accountable.

The staff again answered numerous questions: Item E1_Responses to questions by URAP members (mtg 2-22) (2) previously submitted by the Panel Members.

Osuna again insisted that the methodology used to impose the Infrastructure fees paid to the overall General Fund was legal, while Starr insisted it wasn’t. In any case, the money would be needed in the General Fund. Some panel members said Starr might be right and voted to submit a recommendation to Council to end it and raise the money some other way. This , if it occurred, would likely not take effect soon and would need staff planning, council vote and implementation.

In the previous meeting, Osuna had intended to build a Panel consensus on one of the City-proposed scenarios, but was unable to do so. In this meeting, the majority opted to go with 2.2b, which had been modified from 2.2 by staff to incorporate Panel-requested changes. 

Panel Member/civil rights lawyer Barbara Macri-Ortiz said that a sales tax to raise it would be too regressive and overly burden the poor. Starr replied that it could be added to rates or a parcel tax via  a vote of the people.

Utilities Director Dan Rydberg has kept a very low profile during the whole process, speaking minimally only a couple of times, but was said to be quite active in the background. He ran the last panel process in 2016. Wastewater Div. Manager Ng Thien stayed very neutral and professional, attempting to respond to every staff and panel request. The point person was Assistant City Manager Ruth Osuna, who fully advocated the staff position. Assistant City Atty. Shiri Klima also defended every City legal position taken.

 

Additional Scenario proposed by Panel member

Starr proposed a radically stripped down “Scenario #6” which eliminated further rate increases (beyond the 35% already in effect, under a court stay of passed Measure M rate rescission vote), cut the capital plan from 84 million to $11 million, saying it was only the urgent work . He said it would replenish reserves, meet bond covenants and give the City some breathing room to rework/finish the Utilities Master plan, saying that the plan presented was a significant departure from that plan.

Panel Member Manuel Herrera said that something between Scenario 6 and 2B might be acceptable. But the Panel was in no mood to delve into that and Starr didn’t follow up with another motion before Panel Chair Nancy Lindholm deftly moved her chosen scenario ahead first to  a final recommendation to Council.

Starr appeared to be questioning all drivers that would move rates up and look for weaknesses, playing devil’s advocate. Although he is no technical expert, sometimes suggested answers become more obvious under his questioning and investigation. Staff and much of the panel clearly didn’t like that approach.

Some thought that his proposed Scenario #6 was a bridge too far, leaving insufficient cushion and postponing what were said to be badly needed projects even longer, increasing the risk of serious failures.

 

Other

Some members worried that insufficient employees would be available, but none of the scenarios or Starr’s #6 would have done that. Some feared that vital work wouldn’t be done. All addressed identified emergency repairs. Some feared that delayed projects could result in catastrophic failure. No evidence was produced to support that, but doing them would likely increase the margin of safety. Thien pointed out that loss of even one clarifier would leave the City with inadequate capacity to break down some solids, which would then have to be passed through the waste stream. Nancy Lindholm pointed out that more major unplanned emergency repairs, such as the pipeline below the railroad tracks, could eat up most of the $4mm/year capital budget proposal, although faster reserve buildup under that scenario would actually accumulate sufficient reserves to deal with such a situation.

 

Details of the selected rate scenario

SCENARIO 2.2B:

  • CIP with an Outlook to the Future, Full IUF Beginning FY 2019-20, Reserve Policy Met in 5 Years, Begin to Build Reserves in FY2017-18
  • Updates from Scenario 2B: Suspend the IUF for 2 years. $5 Million in Design costs moved out of years 1 to 5.
  • This scenario has an initial lower rate increase of 5.25% compared to Scenarios 1, 2A, and 2.2A and continues to be at the same level for years FY 2018-19 through FY 2012-22.
  • Suspension of the IUF in in FY 2017-18 and FY 2018-19 allows the buildup of reserves to begin in FY 2017-18.
  • The capital improvement program allows for the City to take care of urgent capital improvements with a cost of $83,890 million, but has to borrow more than Scenario 2A and 2.2A or $55.840 million.
  • Cash would have to build up in the first two years in order to allow the City to able to borrow $55.840 million to complete projects.
  • The City is able to reach the City Council’s adopted financial policies for reserves in four years or be delayed by one year compared toScenarios 1 and 2A.
  • The debt coverage policy is met in the first year of adoption of this scenario, which is the same time period as Scenario 2A.
  • This scenario will allow the wastewater utility fund to improve its credit rating over time.

 

This scenario was recommended, along with a minor modification. Source: Oxnard City staff- 2-22-17

 

Previous meeting:

Final scheduled Oxnard Wastewater Ratepayers Advisory Panel meeting Wed. 2-22-17

Final scheduled Oxnard Wastewater Ratepayers Advisory Panel meeting Wed. 2-22-17

By George Miller, originally published 2-17-17, updated 2-21-17 After several sometimes contentious, but very informative, meetings, the City wants to wrap up the Oxnard Wastewater Ratepayers Advisory Panel activities and get a vote on their final recommendations to City Council. Assistant City Manager Ruth Osuna tried to do a trial close on that at the last […]

Comments on just-concluded Oxnard Utilities Panel by Alternate Member

Comments on just-concluded Oxnard Utilities Panel by Alternate Member

By Steve Nash- (Editor’s note: Utilities Panel alternate, 2016 member, retired Wastewater employee and community activist Steve Nash comments on the just-concluded activities of the Panel). As we head into the fifth meeting of the URAP (Utility Ratepayers Advisory Panel) I have a few thoughts on the process. I was selected as a residential alternate […]

 

George Miller is Publisher of CitizensJournal.us and a “retired” operations management consultant residing in Oxnard


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3 Responses to Oxnard Wastewater Ratepayers Panel Concluded- sends rate increase recommendation to City Council for action

  1. Citizen Reporter March 1, 2017 at 10:55 pm

    Received from Alicia Percell

    —–Original Message—–
    From: Alicia Percell
    To: Ruth Osuna ; greg.nyhoff
    Sent: Wed, Mar 1, 2017 10:32 pm
    Subject: Corrections for memo to UTF

    Ms. Osuna, (bcc: city council members)

    I am writing to alert you and the Utilities Task Force members to a number of factual errors in the agenda packet (see attached) posted for the March 2 meeting of the UTF.

    1) Page 1 of your memo states, “Thus, the URAP held five meetings and most members also participated in a wastewater facility tour.” On slide 3 of the PowerPoint presentation, it again says there were five meetings, and it shows a schedule of 5 meetings. The January 30 tour of the OWTP was a special meeting, so there were 6 meetings.

    At the end of the February 1 URAP meeting, Aaron Starr mentioned that he had not received a 24-hour written notice for the January 30 meeting as required by the Brown Act, having only received written notice a mere 24 minutes prior. Your reaction was to argue that the tour was not a meeting, though the agenda posted online said it was a special meeting, and a majority of the URAP members were present, and they discussed subject matters within the jurisdiction of the URAP. Under the Brown Act, that is clearly a meeting, and I don’t understand your apparent aversion to acknowledging it as such, even now in this memo to the UTF, after you were shown a copy of the posted agenda for a special meeting.

    The URAP never received draft minutes from that January 30 meeting for approval, though they did approve minutes of the other meetings (with the exception of the final one).

    See the posted agenda for the January 30 tour of the OWTP as a special meeting of the URAP here:
    http://oxnard.granicus.com/DocumentViewer.php?file=oxnard_adc0d1806fba8ce33aa2d755e93f9e2e.pdf

    2) Page 2 of your memo states, “In addition to the above rate recommendation, the members of the URAP considered six motions…” There was a handout circulated by Aaron Starr with six motions on it, however, at the end of the final meeting he only chose to offer five of those motions for consideration by the URAP.

    There is a bullet list spanning pages 2-3 of the memo, and for the 5th bullet point the memo indicates that it failed due to a lack of a second. That is incorrect. This is the motion that Aaron decided to skip. Since he never made the motion, there was no request for a second, and it should not be reported that a motion never made was deemed to have failed.

    The same error occurs on slide 36 of the presentation, asserting that the motion failed due to a lack of a second, though it was never moved.

    3) The first bullet point on page 2 of your memo does not accurately reflect the amendments made during the meeting, which were to delete and insert a few words as follows:

    A motion to recommend that the City Council require that the Cost of Service Study list the planned emergency repairs and capital improvement projects, along with their expected costs and completion dates, and that the City Council establish a policy that each utility shall make an annual report to the Council regarding all such planned emergency repairs and capital improvement projects included in the most recent Cost of Service Study. The report shall itemize for each project the following:
    Construction status
    Original projected date of completion from the Cost of Service Study
    Revised projected date of completion
    Original projected costs from the Cost of Service Study
    Costs incurred to date
    Revised projected costs to completion

    4) Page 3 of your memo states, “One additional scenario (Scenario 6) was presented to the URAP at the February 22 meeting, which was not considered in discussing the final recommendations due to a lack of support for a very small CIP program, no IUF, and not meeting the City’s financial policies.”

    That’s incorrect in several ways.

    The Scenario 6 which Aaron Starr developed was not only discussed, but it was voted on. You can see the vote on it in this video at the 02:53:50 time stamp.

    http://www.ustream.tv/recorded/100233678

    The vote on the motion was 2 in favor, and 5 opposed.

    It is also interesting that your memo projects your own opinions of that scenario onto the members of the URAP. Your memo alleges that it was opposed, in part, because it contained no infrastructure use fee (IUF), yet a majority of the URAP later adopted a recommendation that the city stop charging the IUF.

    Your memo also claims that Scenario 6 did not meet the city’s financial policies. Which of the city’s presented financial policies did it fail to meet? It met the debt coverage and reserve requirements. Unlike EACH of the 9 scenarios developed by staff, Scenario 6 also met the council policies regarding using no more than 50% debt for long-term-asset financing, and that assets not be financed for more than 75% of their useful life. Your memo fails to even mention that Scenario 2.2B adopted by the URAP fails to meet those policies, and it falsely asserts that Scenario 6 didn’t meet the city’s policies.

    5) Slide 32 of the PowerPoint presentation incorrectly reports that the vote total for that motion was 5-0 with 1 abstention. As can be seen at the 02:57:55 time stamp in the same video linked above, the vote on this motion was 6-0.

    You and I may have differing opinions about what the council should do on this subject, but surely we can agree on the importance of accurately relaying facts to the decision makers.

    Alicia Percell

    Reply
  2. Steven Nash February 26, 2017 at 10:45 pm

    I am sorry you feel that way, Mr. Michael. I can only tell you that I put in my due diligence and tried to serve the public as best as my abilities allowed. Every URAP member realizes the rate increases are a bitter pill to swallow but if we continue to monitor the C.I.P.’s and hold staff and council’s feet to the fire then maybe the projected increases can be dialed back a little. I think real cost savings can be achieved in the design and construction of the buildings, do tilt-ups, for goodness sakes. The cost of the mechanical and electrical infrastructure is more fixed and it would be unwise to skimp in these areas.

    Reply
  3. Richard Michael February 25, 2017 at 10:42 am

    Did anyone really expect a kangaroo court like this would come out any differently? Another violation of due process with a sham proceeding for show.

    Reply

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