TO: COMMUNITY AND HUMAN SERVICES COMMISSION
FROM: JEREMY SWAN, COMMUNITY SERVICES DIRECTOR
DATE: MAY 1, 2024
Reviewed by:
City Manager: n/a
SUBJECT:
Title
SANITATION AND SEWER RATE INCREASE OF 3.0 PERCENT BASED UPON THE CONSUMER PRICE INDEX FROM MARCH 2023 TO MARCH 2024, EFFECTIVE JULY 1, 2024
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SUMMARY
The Sewer and Sanitation Fee Ordinances provide a mechanism to increase rates automatically based on the Consumer Price Index (CPI) for the Los Angeles area, as reported by the U.S. Bureau of Labor Statistics. Rate increases must be based upon the finding that the revenue generated by the CPI increase is necessary to cover the cost of operations and maintenance, labor and insurance, equipment and capital, facilities, debt, contingencies, and reserves to maintain solvent sanitation and sewer maintenance operations. The Sewer and Sanitation Fee Ordinances cap CPI increases at an amount not to exceed 3.0 percent. The CPI from March 2023 through March 2024 for the Los Angeles area was 4.0 percent.
After evaluating anticipated revenues and expenditures for 2024-25 and beyond, staff determined that a 3.0 percent increase in sewer and sanitation rates is necessary to sustain operations. The automatic CPI increase has been approved by the City Council via Sewer and Sanitation Fee Ordinances 2021-01 and 2021-02, respectively. The proposed fees, as outlined in the attachment, will be administratively approved by the City Manager and will go into effect on July 1, 2024.
RECOMMENDATION
Recommended Action
Staff recommends the Community and Human Services Commission receive and file this report.
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ALTERNATIVES TO RECOMMENDATION
In addition to the recommendation, there is the following alternative:
• Request additional information from staff.
FINANCIAL REVIEW
The draft 2024-25 Sewer Fund budget includes $1,232,092 in anticipated expenditures to cover ongoing costs to provide sewer maintenance services. In addition, the draft 2024-25 budget includes a proposed Sewer Cleaning and Condition Assessment in the Capital Improvement Project budget, with an estimated cost of $800,000, bringing total draft expenditures to $2,032,092. The condition assessment findings will be utilized to develop a multi-year Capital Improvement Project to repair any identified defects in the sanitary sewer system. Such assessments and the resulting Capital Improvement Projects are funded using balances that have accumulated in the Sewer Fund. Revenue projections for 2024-25 total $1,665,000, including the proposed 3.0 percent service fee increase and $728,000 in one-time sewer connection fees, resulting in a $367,092 shortfall. Therefore, the 3.0 percent increase is necessary to ensure that adequate funds are available for upcoming Capital Improvement Projects and to sustain increases in operating costs in accordance with the fee ordinance.
The draft 2024-25 Sanitation Fund budget includes $9,687,014 in anticipated expenditures to cover the cost to provide refuse collection and street sweeping services. The City anticipates generating approximately $8,550,500 in revenues with the proposed 3.0 percent increase. The $1,136,513 deficit is due to scheduled vehicle replacements. Sanitation vehicles are purchased using funds that have accumulated in the Sanitation Fund balance. Therefore, the 3.0 percent increase is necessary to ensure that funds are available for scheduled vehicle replacements and to sustain increases in operating costs in accordance with the fee ordinance.
The staff cost to prepare this report and administer this program is estimated at $5,500 and is included in the operating budget of the Community Services Department.
ANALYSIS
The City is required to cover all of its expenses for sewer and sanitation services through fees and charges for service. These fees are deposited into the Sewer and Sanitation Funds and are used solely for the provision of sewer and sanitation services. The Sewer Fund covers the costs to maintain the City’s sanitary sewer system. The Sanitation Fund covers the costs associated with the City’s solid waste and recycling collection programs and street sweeping services.
On June 8, 2021, the City Council adopted Ordinances 2021-01 and 2021-02, which created a mechanism for annual increases in Sewer and Sanitation fees. Through 2026, annual increases in fees shall be based upon the Consumer Price Index (CPI) for all urban customers in the Los Angeles area, published by the United States Department of Labor, Bureau of Labor Statistics, for the period of March of the previous year through March of the current year, not to exceed 3.0 percent annually. As required by Proposition 218, notice of each increase will be provided to all ratepayers.
The CPI for Los Angeles-Long Beach-Anaheim from March 2023 through March 2024 is 4.0 percent. After evaluating anticipated revenues and expenditures for 2024-25 and beyond, staff determined that a 3.0 percent increase in sewer and sanitation rates is necessary to sustain operations. The proposed fees, as outlined in the attachment, have been administratively approved by the City Manager and will go into effect on July 1, 2024.
RELATIONSHIP TO CITY PLANNING DOCUMENTS
Staff has evaluated the agenda item in relationship to the City’s strategic and visioning documents and finds that it applies to the following City Planning Documents: Council Priorities, Sustainable City Plan, Economic Sustainability Plan, General Plan, and the draft 2024-25 Budget.
CEQA REVIEW
This item is not subject to environmental review under the California Environmental Quality Act (CEQA).
PUBLIC NOTICE PROCESS
The agenda and staff report for this item have been posted on the City website and distributed to interested parties. If you desire a copy, please contact the City Clerk’s Office.
Submitted by: Prepared by:
Jeremy Swan Kristin Mikula
Community Services Director Community Services Manager
Attachment:
Sanitation and Sewer Fee Summary 2024-25