Hearing Tuesday on temporary surcharge

Benicia City Council is poised to raise water rates through a drought surcharge, but will take public comment Tuesday before it takes its votes.

City Manager Brad Kilger wrote the Council on Wednesday, saying action needs to be taken to ensure “the health and safety of the community and the financial integrity of the Water Enterprise Fund.”

If approved, the surcharge rates would apply by tiers to residential, low-income older residents and nonresidential customers, Kilger said.

Residential customers are divided into three tiers, depending on the amount of water used each month.

Tier 1 residential customers, who use 0 to 8 units, would see a 63-cents-per-unit increase; Tier 2 customers, who use 8 to 30 units of water, would see a 97-cents-per-unit increase; and those using more than 30 units would see a $1.25-per-unit increase.

Of low-income older residents, whose water bills are being subsidized by the city, Tier 1 customers would see no increase; Tier 2 would see a 97-cents-per-unit increase; and those using more than 30 units would be charged $1.25 a unit more.

Nonresidential customers are divided into two tiers: those using 30 or fewer units and those who use more than 30 units. The lower tier would see a 61-cents-per-unit increase, and those in the second tier would be charged 86 cents more per unit.

Benicia water customers receive bills for two months of water use at a time. A unit of water is 748 gallons.

Valero Benicia Refinery consumes about half the city’s water use, but is an untreated water customer, Kilger wrote.

“While serving as an emergency water source for Benicia’s citizens, Lake Herman also operates as a backup raw water source to the Valero refinery,” he wrote.

He said Valero has made “significant conservation efforts” in the past 13 years, but added that the refinery is limited in its ability to conserve raw water because of the nature of its operations.

On the other hand, customers of the city’s treated water have been asked to cut back consumption by 20 percent and abide by emergency outdoor water restrictions, Kilger wrote. Like other customers, Valero also would pay the nonresidential surcharge rates for its treated water, he wrote.

Kilger has calculated Valero’s estimated drought surcharge would be $1.19 million for 12 months, and city staff has recommended the refinery make a $99,000-a-month surcharge payment each month starting Oct. 15 until the surcharge is terminated.

Once the surcharge has ended, total costs would be calculated and the difference between drought costs and Valero’s payments would be settled, Kilger wrote.

He also suggested city staff provide the Council with reports every four months.

The Council already adopted a resolution July 22 of its intent to impose the drought surcharge and to provide notice of the Proposition 218-mandated public hearing.

City employees mailed notices to the owners of the 9,347 affected parcels and water customers July 24, giving them 45 days’ notice of the hearing and informing them of the Prop. 218 procedures.

Part of Tuesday’s meeting will be dedicated to that hearing.

Kilger explained that under Prop. 218, at least 4,675, or 50 percent plus one, of the affected owners must submit written protests if the proposed increase is to be stopped.

He said as of Wednesday Benicia had received objections from less than 2 percent of the number needed to invalidate the rate increase.

City staff is recommending the Council not only adopt an urgency ordinance amendment as well as introduce a conventional amendment to address the financial impact of the drought, Kilger wrote.

The Council approved water rate increases in January 2013, but those increases don’t address the costs associated with the severe drought, he explained.

“Staff acknowledges the financial impact the drought surcharge may have on the city’s water customers,” Kilger wrote, “however, the surcharge is critical to the financial viability of the Water Enterprise Fund.”

A drought study by Bartle Wells indicated the total drought-related costs were expected to be about $2.58 million, though that estimate has been reduced by $200,000 through conservation projects that have been underwritten by Valero-Good Neighbor Steering Committee settlement agreement fund grants.

Still, drought-related costs are expected to reach $776,000 for additional water purchases, of which Benicia has spent $425,000.

Other expenses are expected to be caused by utility pumping, public outreach efforts and municipal conservation projects.

City employees have recommended the surcharge rates also be reduced. If the revised rates are adopted, they will reduce the budgeted Water Enterprise Fund revenues by $106,300, and result in a budgeted operating deficit of $769,000 during Fiscal Year 2014-15, Kilger wrote.

The hearing, which Mayor Elizabeth Patterson will open, will let the public hear staff reports on the drought surcharge, as well as responses to the mailed notices. The Council then will hear public testimony, after which Patterson will call for written protests, then close the public testimony portion of the hearing.

City Clerk Lisa Wolfe will announce the final number of written protests just before the hearing is concluded, Kilger wrote.

If the emergency surcharge is adopted, it will become effective on or about Oct. 15, Kilger wrote.

The Council will meet in a closed session at 6 p.m. Tuesday to discuss lease terms of the Commanding Officer’s Quarters. The regular meeting will start at 7 p.m. Tuesday in the Council Chamber of City Hall, 250 East L St.