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Wednesday, January 16 , 2019, 5:03 pm | Overcast 60º


Lompoc Council To Vote on Scheduled Utility Rate Hikes, New Enterprise Fund Fees

On Tuesday, Lompoc City Council members will be awash in critical decisions affecting the municipal utilities and ratepayers — including whether to approve scheduled rate hikes and a controversial plan to collect new “enterprise cost reimbursement” fees from utility funds and airport users.  

The city is seeking to implement a fourth year of planned rate increases for water and wastewater — at 23.6 percent and 10.5 percent, respectively — and the third-year increase for solid waste, at 3.6 percent. If approved, the hikes will take effect July 1. 

The scheduled rate hikes were initially approved by the City Council in 2013 and 2014 as part of a five-year schedule of annual increases to raise revenue for debt obligations, rebuilding utility fund reserves and replacing aging water and wastewater pipes. 

Although the rate hikes were approved by a previous council, council members committed to review each annual rate increase before it takes effect. The rate hikes as originally approved would nearly double ratepayers’ utility bills for water and wastewater in five years.  

Earlier this month, the city’s advisory five-member Utility Commission declined to recommend the scheduled rate hikes and criticized the city for not yet starting to repair or replace aging utility infrastructure. 

The controversial enterprise cost reimbursements were initially brought to the council in March, but council members delayed taking action until the consultant paid to develop the plan could respond to questions about the underlying methodologies used to justify the fees.

A representative from HF&F Consultants, the Walnut Creek firm paid to develop the reimbursement plan, will be present at the council meeting to answer questions about the fees.

If the fees are approved, the city would collect a total of $4.35 million from six enterprise funds in the 2015-17 budget as follows: 

» Water — $898,000

» Electric — $1.15 million

» Wastewater — $1.68 million

» Solid Waste — $576,290

» Broadband — $18.517

» Airport — $5,203

The city maintains that the new cost reimbursement fees are necessary to ensure “that enterprise activities are paying their fair share of costs” borne by the city’s general fund for public safety, street maintenance, and capital improvement or replacement costs for City Hall and other city facilities. 

Altogether the proposed new fees would collect more than $2 million for public safety, $1.14 million for capital improvements to City Hall and other city facilities, and $1.16 million for street maintenance work in the city’s right of way.

The fee amounts are based on a calculated proportional share of other departments’ budgets so the amounts charged to utility funds and airport users could increase each budget cycle.

Thus, fees that would be charged for the 2017-19 budget cycle can’t be determined at this time, city staff said. 

The proposed fees to be charged for public safety are based on an assigned market and replacement value of the properties within each utility or enterprise fund.  

Street maintenance fees are based upon projections and averages of street surface and subsurface wear and tear created by each utility fund’s vehicles.

Altogether, the plan calls for utility departments to be charged 55 percent of the 2015-17 budget for street maintenance. 

Critics charge that two of the fees — for public safety and street maintenance — are really hidden taxes that should be subject to two-thirds voter approval as required by amendments to the state constitution from Propositions 218 and 26 that are intended to regulate or limit local government’s ability to charge fees. 

State court decisions have held that governments may collect fees as long as the charges do not “exceed the reasonable costs to the local government of providing the service or product.”

In April, the Utility Commission said the methodologies used to justify the new charges were “flawed” and not directly related to the actual costs of the services the enterprise funds would be charged. Commissioners voted unanimously to recommend the council reject the new fees as proposed. 

In addition to the proposed cost reimbursement fees, the city currently collects funds for general fund overhead allocations from each utility — including charges for purchasing, personnel, billing, legal and other administrative support services.

In the 2015-17 budget, the city will collect more than $10 million in overhead allocation fees from enterprise utility funds as follows: 

» Water — $2.4 million

» Electric — $3.3 million

» Wastewater — $2.2 million

» Solid Waste — $2 million

» Broadband — $52,668

The city also collects a direct budget transfer of 5.7 percent of the electric utility’s revenue to the general fund, which will total $3.9 million for the 2015-17 budget.

The electric utility is the only enterprise fund that is charged this budget transfer. 

The city staff report notes that the legality of this 5.7 percent transfer from the electric utility to the general fund may soon be decided by a court case now before the California Supreme Court. ​Ratepayers sued the city of Redding over a similar transfer of funds from its electric utility and a lower court ruled that the fees were actually a tax that required voter approval.

The council meeting begins at 6:30 p.m. Tuesday in City Council chambers, 100 Civic Center Plaza.

Noozhawk contributing writer Carol Benham is a longtime local journalist who lives in Lompoc. Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.

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