June 21, 2005

SUBJECT: Collection of Wastewater Charges for Property Outside the City on the FY 2005/2006 Property Tax Roll

REPORT IN BRIEF

The City provides wastewater service to various properties located outside the City limits. Payment for these services is received through property tax assessments.  In accordance with legal requirements for the collection of fees on the property tax roll, the City Council set a public hearing on proposed charges for wastewater services provided by the City of Sunnyvale to properties located outside the City limits.  A report addressing the hearing and the proposed FY 2005/2006 assessments was filed with the City Clerk.

Staff recommends adoption of a resolution establishing outside wastewater charges to be placed on the FY 2005/2006 property tax roll.

BACKGROUND

In the mid 1950’s, an area known as Rancho Rinconada was being developed as a mostly single-family residential area.  At the time, this area was in a pocket of the county that had no direct access to a sewer collection system.  The City of Sunnyvale entered into a series of agreements with the developers that allowed the Rancho Rinconada sewer system to be tied into a 15 inch City sewer main that was extended 1.7 miles for that purpose.  The agreements required developers to construct sewers that met the City’s standards and allowed the City to collect fees from the homeowners for the purpose of reimbursing the City for its costs of providing on-going sewer service.

On June 7, 2005, the City Council adopted a resolution setting June 21, 2005 as the date for the public hearing on proposed assessments for 1,867 properties located outside of the City which are served by the City’s wastewater utility.  As shown on Attachment D, the areas serviced are bounded by Stevens Creek Blvd., Lawrence Expressway, Blaney Ave., and Bollinger Road in the City of Cupertino, and by Bollinger Road, Lawrence Expressway, Johnson Avenue and Castle Glen Avenue in the City of San Jose.  A report containing each parcel number receiving wastewater services from the City was filed with the City Clerk and was made available for public inspection on June 7, 2005.

EXISTING POLICY

Assessments are made pursuant to Section 5473 of the Health and Safety code and Section 12.16.020 of the Sunnyvale Municipal Code.

DISCUSSION

The City Council approved a 5.5% increase to the wastewater rates for the coming year during its April 19, 2005 meeting.  The assessments proposed for properties outside the City are equivalent to the rates charged to similar customers inside the City limits.

Wastewater rates are based entirely on the City’s cost for operating and maintaining its wastewater facilities and services. As was identified in the FY 2005/2006 Utility Rate Report (RTC No. 05-113) infrastructure maintenance and replacement has been, and remains, the largest issue for the Wastewater Management Fund. In order to address this issue staff took a two pronged approach. First, on December 19, 2001, the Sunnyvale Financing Authority sold its Water and Wastewater Revenue Bonds Series 2001 in the amount of $34.3 million. The project refunded the Authority’s 1992 Utility Revenue Bonds and provided an additional $12.5 million for new wastewater projects.

The bond money is being used or has been used to fund the cost of the most pressing infrastructure projects at the water pollution control plant (WPCP) and throughout the city’s collection system. Major projects include the Borregas sanitary sewer trunk replacement, rehabilitation of the treatment ponds, pond levy improvements, rehabilitation of storm pump stations #1 and #2, resurfacing of the sludge drying beds, chlorinating and decholorinating equipment replacement, rehabilitation of the digesters, and laboratory roof and air exchange equipment replacement. A detailed status on the bond funded projects was provided to Council on September 8, 2004 (RTC#04-341).

Second, staff has been focused on the continued identification of projects for the future. In the past two years, Public Works staff have worked together to identify and isolate the cost and life span of various pieces of infrastructure and schedule those into the long term infrastructure replacement plan. A significant piece of this analysis will come to a close late this calendar year with the completion of the WPCP Infrastructure Assessment Study being performed currently by Corollo Engineers. The FY 2005/2006 Long Term Financial Plan reflects large infrastructure and capital expenditures on projects that have been identified through this process, with a focus again on the most critical projects.  The adopted rates fund these projects through the prudent use of the Rate Stabilization Reserve combined with five years of significant rate increases.

Affect on Wastewater Customers Outside the City Limits

There are 1,864 single family residential properties, two multi family properties, and one commercial property for a total of 1,867 total properties located outside the City limits that are serviced by the City’s wastewater collection and treatment system.  Charges for single family residential customers are equal to the City’s yearly flat rate charges adopted on April 19, 2005.  Multi family customers pay a yearly, per unit, flat rate, also the same as adopted by council for similar customers within the City.  The commercial property is charged based on the customer’s water usage over the past fiscal year at the same rate as similar customers within the City.

The proposed annual assessment for a single-family residential property is $250.20 per parcel.  Four single-family properties are not being assessed as they do not have any structure on the parcel and therefore do not impact the City’s sewer system.  The proposed annual assessment for the two multi family properties is $625.44 for parcel number 375-07-003 (four units) and $6,254.40 for parcel number 375-07-060 (forty units).  The proposed assessment for the commercial property is $2.0353 per hundred cubic feet of water consumption.  Based on the customer’s past year consumption, their total proposed charge for Fiscal Year 2005/2006 is $1,339.23.

FISCAL IMPACT

The City collects these fees as part of the County Tax Roll.  The fees go directly into the Wastewater Management Fund and are used to offset the costs of operating the City’s wastewater utility.  The proposed assessments total $474,091.47 an increase of $24,417.62 compared to the Fiscal Year 2004/2005 assessment of $449,673.85. 

CONCLUSION

The proposed assessments are consistent with past practice and applicable legal requirements.  In addition, placing assessments on the tax roll is consistent with the original agreements established with the development of the properties.

PUBLIC CONTACT

Notice of public hearing was published in the San Jose Mercury News.  A copy of the list of properties to be assessed and the proposed assessment amounts was made available in the City Clerk’s office on June 7, 2005.   A copy of this report is also available in the library and on the City’s website.

ALTERNATIVES

1. Adopt the resolution approving the proposed assessments.

2. Adopt the resolution, with the roll modified to a different amount than recommended by staff.

3. Do not adopt the resolution.  This action would prevent collection of charges on the property tax roll, requiring some other form of billing.

RECOMMENDATION

Staff recommends that the City Council adopt Alternative 1.

Prepared by:

Timothy J. Kirby
Revenue Systems Supervisor

Reviewed by:

Mary J. Bradley
Director of Finance

Approved by:

Amy Chan
City Manager

Attachments

A. Resolution (.pdf format)
B. Outside Sewer Roll (.pdf format)
C. Public Notice (.pdf format)
D. Map (.pdf format)