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File Number: 19-224 Construction of a 1-megawatt solar array, for which the City received a $1.9 million California Energy Commission grant covering approximately 50% of the cost, is nearing completion. A project funded by the San Francisco Bay Restoration Authority (Measure AA) to create plans for building of a Treatment Wetland project, a first in the East Bay, is also under way. The State Water Resources Control Board recently placed future requirements on the release of nutrients into the Bay and indicated that these requirements will become more stringent over time. Through the East Bay Dischargers Authority (EBDA), staff consulted with the firm HDR to make an initial estimate of the cost to comply with these requirements. Their report shows that the required upgrades could cost between $12 and $91 million (see attached report), largely dependent on how low the Water Board sets the future requirements. Current Sewer Service Fees The City’s current sewer service fees are roughly the same as several local agencies, but much less than those of Oakland and San Francisco. The fee for service to a single-family residence is currently $35.75 per month, compared to $34.92 per month for Castro Valley Sanitary District and $72.78 per month in Oakland (served by EBMUD). For multi-family homes, San Leandro charges $25.37 per month, while Castro Valley Sanitary District charges $34.92 per month and in Oakland users pay about $40 per month. See the attached Monthly Fees Survey for residential fees in surrounding areas. Fiscal Impact City staff, with the support of Municipal Financial Services, analyzed the adequacy of sewer revenues to meet the projected operating, maintenance, capital and debt service costs of the City’s sewer collection system and the Water Pollution Control Plant. In addition, staff analyzed current Capacity Charges paid by new or increased users of the City’s sewer and treatment system. Rates and fees were developed for the five-year period from Fiscal Year 2019-20 through Fiscal Year 2023-24 and are outlined in Attachment 3 (Proposition 218 Public Notice). The financial analysis conducted by Municipal Financial Services found that continuing to adjust current rates by CPI, which has been the practice for the past three years, would be insufficient to meet projected expenditures over the next five years. Without increasing rates beyond CPI, the Water Pollution Control fund balance is projected to fall to just above the State-required fund balance and would be insufficient to fund upgrades necessary to meet new State laws and regulations for discharge requirements. This could curtail the City’s ability to properly maintain the sewer conveyance and treatment system, expose the General Fund to costs required to meet more stringent water regulations, and affect the ability to secure future funding. It should be noted that the recommended fee increases listed in the attached report would be the maximum recommended fees that could be justified pursuant to Proposition 218. As has been past practice, City staff will evaluate actual expenses and revenues and will only increase fees annually that would be necessary to maintain the appropriate fund balance. The recommended fee increases would maintain a fund balance that would allow the City’s Water Pollution Control Fund to have the resources necessary to address upcoming regulatory changes and unforeseen circumstances, including but not limited to a natural disaster. Page 2 City of San Leandro Printed on 4/30/2019