FOR: City Council and Rialto Utility Authority Meeting [August 22, 2023]
TO: Honorable Mayor and City Council
APPROVAL: Henry Garcia, Interim City Manager
FROM: Thomas J. Crowley, P.E., Utilities Manager
Toyasha Sebbag, Assistant to the City Manager
...Title
Request that the City Council/Rialto Utility Authority Authorize Staff to proceed with the Preparation of Phase 2: Water and Wastewater Rate Study
(ACTION)
...Body
BACKGROUND:
In 2012, the City Council/Rialto Utility Authority adopted resolutions approving a Concession Agreement with Rialto Water Services (RWS). The Concession Agreement outsourced the operations and maintenance of the City’s Water and Wastewater enterprise to a private contractor for a term of thirty years.
Per the Concession Agreement, the City maintains ownership of all assets and the authority and responsibility for setting utility rates subject to contractual obligations and financial performance standards.
In 2012, the City adopted a five-year rate schedule through the Proposition 218 process. The water and wastewater rates were last adjusted on January 1, 2018. The multi-year rate adjustments approved in 2012 allowed for the financing and implementation of $41 million in improvements and repairs that improved system reliability and efficiencies for both the water and wastewater systems.
ANALYSIS/DISCUSSION
On April 11, 2023, the City Council authorized a sole source Professional Services Agreement Contract with F.G. Solutions, LLC to complete Phase 1: Water/Wastewater Revenue Analysis of the Water and Wastewater Rate Study. Staff presented the results of the Revenue Analysis to the Water Subcommittee on June 28, 2023, and again on July 26, 2023, to provide answers to questions from the June meeting.
Water and Wastewater Rate Study Timeline
Staff was directed to present the results of the Revenue Analysis to the City Council for direction on whether Phase 2 of the Water and Wastewater Rate Study should be completed. The Revenue Analysis is presented in the attached presentation (ATTACHMENT 1)
The completion of the water and wastewater Rate Study and the presentation of these results to the City Council in September 2023 will determine the assessment of the City's rate structure for the State Revolving Fund (SRF) Loan application or California Infrastructure and Economic Development Bank (IBank) Loan and potential evaluation by the US EPA for the Water Infrastructure Finance and Innovation Act (WIFIA) loan. The timeline for the SRF, IBank, and WIFIA loans aims to be finalized by January 2024, with some project costs eligible for reimbursement before the loan is issued.
Should the City not meet the following schedule, it is likely that the earmarked funding of $68 million from WIFIA will be put back into the general funding pool with the city eligible to start the process over by reapplying for funding and resubmitting a Letter of Interest (LOI). Therefore, an updated project timeline is provided below.
ENVIRONMENTAL IMPACT:
The requested City Council action is not a “Project” as defined by the California Environmental Quality Act (CEQA). Pursuant to Section 15378(a), a “Project” means the whole of an action, which has the potential for resulting in either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment. According to Section 15378(b), a Project does not include (5) Organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment.
GENERAL PLAN CONSISTENCY:
Approval of this action complies with the following:
Our City government will lead by example and will operate in an open, transparent, and responsive manner that meets the needs of the citizens and is a good place to do business.
In addition, approval of this action complies with the City of Rialto General Plan Goals and related Policies:
Policy 3-6.3: Require an increasing level of public safety infrastructure and service capability tied to population increase and increasing service demand.
LEGAL REVIEW:
The City Attorney has reviewed and approved this staff report.
FINANCIAL IMPACT:
Operating Budget Impact
On April 11, 2023, the City Council authorized a Sole Source contract with FG Solutions, LLC for both Phase 1 and Phase 2 of the Water and Wastewater Rate Study for an amount not to exceed $138,297, which has an available balance of approximately $88,000 to move forward with Phase 2 of the Water and Wastewater Rate Study.
Capital Improvement Budget Impact
The proposed action will not affect the Capital Improvement Budget.
RECOMMENDATION:
Request that the City Council/Rialto Utility Authority authorize staff to proceed with the preparation of Phase 2: Water and Wastewater Rate Study.