HomeMy WebLinkAbout04A3- City Manager's Office CITY OF SAN BERNARDINO - REQUEST FOR COUNCILDR464NA L
From: Charles McNeely, City Manager Subject: Authorization to proceed with a
Utility Cost Allocation Study to explore the
Dept: City Manager feasibility of increasing utility franchise fees
Date: June 25, 2010
Synopsis of Previous Council Action:
4/22/2010 Budget Workshop - the Mayor and Common Council directed the City Manager present additional
research regarding the possibility of increasing the General Fund transfer(10%to 15%) from the Water Fund,
and establishing a 15%transfer of the Sewer Fund and Refuse Fund revenues to the General Fund.
Recommended motion:
That the City Manager be authorized to proceed with a Utility Cost Allocation Study to explore the feasibility
of increasing utility franchise fees.
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Signature
Contact person: Debra Kurita Phone: 5122
Supporting data attached: Staff Report Ward: All
FUNDING REQUIREMENTS: Amount: �
Source: (Acct.No.)
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(Acct.Description)
Finance:
Council Notes:
Agenda Item No. j� A�
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CITY OF SAN BERNARDINO — REQUEST FOR COUNCIL ACTION
Staff Report
Subiect:
Authorize staff to proceed with a cost allocation study to explore the feasibility of increasing
utility franchise fees.
Background:
At the April 22, 2010 Budget Workshop, the Mayor and Common Council directed the City
j Manager to perform additional research and present implementation plans for a series of budget
balancing measures that included revenue enhancements. One such measure was the possibility
of increasing the current transfer from the water fund and establishing a 15 percent transfer from
the sewer and refuse funds revenues to the General Fund. These revenues would be applied to
certain costs associated with these utilities that are not being fully recovered by the General
Fund. Preliminary estimates indicate that implementing a 15 percent transfer for the water,
sewer, and refuse utilities could increase revenue to the General Fund by approximately $6.2
million annually. However, a cost allocation study identifying those costs will be necessary to
provide the justification for the transfer of revenues from the utilities to the General Fund.
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Many cities such as Riverside, Glendale, and Pasadena transfer significant amounts to their
general fund from revenues of their utilities.
Comparison of Utility Transfers (FY 2009/10)
City Water Fund Sewer Fund Electric Fund Refuse Fund
San Bern.: $2,530,852 $0 N/A $1,951,890
Riverside: $5,818,700 $1,000,000 $32,592,100 $ 600,000
Glendale: $4,160,000 $0 $19,107,000 $0
Pasadena: $2,624,485 $0 $13,543,355 $198,240
Anaheim: $2,388,100 $0 $15,279,815 $2,546,264
In 1996, the voters enacted Proposition 218 which governs the process by which local
governments can impose or increase property-related fees and charges; therefore, any transfers
from utility revenues must comply with restrictions pursuant to this proposition. In consultation
with the City Attorney's Office, staff determined that in order to comply with the provisions of
Proposition 218, the City must provide a detailed justification for the transfer of funds from the
utilities. This justification must be based on the full recovery by the General Fund of the costs
incurred from the operations of the utilities. To calculate an enterprise fund's fair share of City
expenses, the League of California Cities recommends that an organization-wide cost allocation
plan, one based on the federal standards, be performed. It is important that a consultant with
expertise in conducting this type of study perform the analysis. After the study is complete, the
transfer and this documentation will be the subject of a memorandum of understanding between
the City and the utilities.
Recommendation
That the City Manager be authorized to proceed with a Utility Cost Allocation Study to explore
the feasibility of increasing utility franchise fees.
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