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Part two of two.
Twelve members of the public attended the City Council’s water and sewer rate study session on April 28. The council took no action. The process for water and sewer rates will be discussed at the Monday, May 12 City Council meeting.
Those who spoke during the public comment part of the meeting were concerned about management of infrastructure and whether Leisure World and the Naval Weapons Station were paying their fair share. One resident called for a forensic accountant to look at the city’s financial records.
City officials and consultants say that rate increases are needed to cover costs of the services and debt.
Background
Project Manager Steve Gagnon, of Raftelis, argued that rate increases were necessary, citing the financial impact of inflation, rain, imported water costs, aging infrastructure, and the need to cover the sewer system’s debt ratio.
Public Works Director Iris Lee said: “To sum up, we are in the red. We have failing infrastructure and we need to adjust the rates to protect your health and safety.”
Two scenarios were presented to the council for water rates and two for sewer rates. Scenario 1 was with consultant-recommended water and sewer infrastructure projects. Scenario two was for a smaller number of water and sewer infrastructure projects.
Focusing on water first, Gagnon said it looked like Seal Beach was trying to end its debt service this year. (Debt service for the sewer system is another matter.) “But in this fiscal year, which is about two months over, you are in the red, so to speak,” Gagnon said.
“This is without an increases in rates,” he said.
According to Gagnon, revenues would increase by 38% in the first year in scenario one for water rates.
When discussing sewer rates, Gagnon said that a single family house pays $48 (bimonthly) and under scenario 1 that would go to $64 and then go up to $104 bimonthly up to the end of a five-year period.
Public comments
The following is not a transcript. What follows are highlights from the discussion.
Ellery Deaton, a former council member (she ended her second term in February 2019), said she was taken aback that the public was given 5 minutes for comment. “This is supposed to be informal. There are lots of questions,” Deaton said.
“Obviously, we’ve had a lot of mismanagement. I mean we are looking at living on a credit card here for the next five years and we have all of these projects that have not been done,” she said.
“So the amount of mismanagement is just overwhelming,” Deaton said.
“The important thing here is our master plan is not correct,” Deaton said
“The Water Plan is 13 years old,” Deaton said.
“There’s entirely new legislation, new drought regulation, people have gone to zero scaping, the city has let medians die, all the information is old,” Deaton said.
“The same thing with the Sewer. The sewer was last done in 2018. That is old information,” Deaton said.
“So what we’re doing is taking old, inaccurate information, and trying to do a cost of service and rate study on top of old information,” Deaton said.
“I would submit that the first thing we need to do, to do this right, is to do a new water and sewer master plan so we get it right this time,” Deaton said.
“I mean we’re asking people to pay over a 100% increase because in the past year we haven’t kept up with our infrastructure and we’re asking people to pay it on a credit card,” Deaton said.
She told the council that water rates have increased 40% since 2021 and the city still doesn’t have projects done. “We have some that are in design,” Deaton said.
“There are two ways to balance this budget. We can ask the people for more money or you can cut the budget,” Deaton said.
According to Deaton, when City Hall pays for water, it’s the residents and businesses that pay for water.
District Three Councilwoman/Mayor Lisa Landau asked if anyone could answer her question. Finance Director Barbara Arenado said the city pays the water bill as if the city were a resident and uses the General Fund to pay that.
City Attorney Nicholas Ghirelli said it would not be permissible to spread the cost of the city’s water use to ratepayers.
District Two Councilman Ben Wong asked if the city knew why personnel costs were high and why they were expected to decline if the city moved forward with some of the improvement projects.
Public Works Director Lee said some of the personnel costs had to do with a frozen position and vacancies. “So there was a decline given that our adopted budget has reflected that.
In response to a question from a resident, Lee said at the May 12 City Council meeting, the city would adopt the Prop. 218 procedures, referring to the procedures that govern the water and sewer rate increase process. Lee said Leisure World mutuals would have the option of deciding whether they wanted to submit a protest toward the rates.
The resident also asked for a more recent study.
Matthew Terry asked for more information about the Naval Weapons Station.
He had previously mentioned the question during a budget workshop. According to Terry, the NWS puts a large burden on the city. “Let’s say if you’re building a city, you would basically put a road down. You put utilities down the middle of the road and then you pop businesses on both sides of the road,” he said.
“But for us, we have a huge entity within ourselves that kind of blocks a lot of the things that we can do in terms of subsidizing costs of things,” Terry said.
Terry said he was confident that the NWS was not paying “their fair share”.
He said he would love to see the council proactively talking to the Navy base. “If they were a city that we were bordering, they would cover 100% of the costs of the water line on Westminster Boulevard between Seal Beach Boulevard and Bolsa Chica,” Terry said.
Public Works Director Lee said the Westminster Avenue line is a transmission line. “That’s not where a majority of the Naval Weapons Station is tapping off their water,” Lee said.
“This is our conduit to actually get import water,” Lee said.
According to Terry, neither the Navy nor the county would pay to maintain the water line.
“Yes, that is our water line,” Lee said.
Terry asked if the Navy was paying rates that were roughly in line with what he was paying.
Lee said the Navy’s rates are calculated the same way as any other rate payer.
Terry said that wasn’t fair.
Gagnon said that was described in the 2020 cost of service study.
He said the Naval station and the neighboring customers use that sewer line and the cost had been apportioned in proportion to flow. “So the Navy is charged for that sewer line in proportion to their use of that sewer line,” Gagnon said.
He said he did not agree with the statement that the Navy wasn’t paying their fair share.
Teresa Miller, referring to last year’s water and sewer rate process (which was postponed), said the public asked for information about the condominiums and the apartment buildings to see if they were paying their fair share versus what single family homes were paying.
“The five of you were elected and there’s a lot of people that are over 65, not just in Leisure World,” Miller said.
“The average age in our town is 62,” Miller said. “They don’t all live in Leisure World.”
“We are hearing from people that are about to be forced out of their homes because of rising costs and it’s not just the water,” Miller said.
She said there was a way to fund the study. “We don’t need to have the smart meters. There’s three cities right now that I’ve seen in Orange Count that are starting to phase them in,” Miller said.
“There’s no reason why we have to do that,” Miller said.
She argued Seal Beach didn’t need them.
“It’s kind of presumptuous that on the warrant there was already a bill for the provider of smart meters,” Miller said.
“I think we need to freeze the hiring,” Miller said.
“I think we need to review the percentages for all personnel that get paid from the enterprise fund and make sure there’s accountability,” Miller said.
“We know there wasn’t. We’ve seen it,” Miller said.
She called for a forensic accountant to go through the budget line by line to figure out who has been paid off that account in the past five years.
“I think we have to look at some alternative ways that are more fair, more in line,” Miller said.
She wanted to know how the city was accounting for accessory dwelling units.
“Remember this is every five years. Then. You’re going to come back with something else. There’s never an ending,” Miller said.
She asked who was doing the negotiating and suggested Seal Beach work with other cities to negotiate costs of projects.
Lee said Seal Beach publicly bids improvement projects. “So they are not negotiated,” Lee said.
“These are actual line items that contractors bid for,” Lee said.
“And we have to adhere to it,” she said.
She said Seal Beach was not alone in terms of pricing increases across the board.
“I don’t want to sound like we’re not sympathetic to the situation,” Lee said.
She said the city was providing two options for consideration because they are sympathetic to how much the cost of living is increasing.
Lee said she didn’t disagree with the calls for updating the water and sewer master plan, but she said it was an undertaking the city cannot pay for.
As for ADUs, Lee said there isn’t a regulation that requires a separate meter for ADUs.
Lee said the smart meter project had come to a halt for funding reasons. “We did submit a grant application for the project.
Lee said smart meters would be a big part of the city’s ability to comply with state mandates on water conservation.
Deaton returned to the podium. She said she believed Seal Beach is required to import water because she believed the city was legislatively allowed to take only a certain amount of water.
Lee said the Orange County Water District does prescribe a percentage of water that Seal Beach can pump without a penalty. She put the current figure at 85%. “It does fluctuate from year to year depending on the water reserves,” Lee said.
She also said there were opportunities that would allow Seal Beach to pump up to 100%.
District Two Councilman Ben Wong wanted to know when the last study was done prior to 2020. He was told 2012.
A man identified as James said Seal Beach was in the red.
“A broke business, which is what our city is, should have financials attached to everything,” he said.
“Clean water to our homes and apartments, and dirty water leaving them is essential.
Fun runs, car shows, concerts at the beach, and other parties are not,” he said.
He said “buried” in the latest edition of the city manager’s newsletter as the information that the water and sewer study session “could” impact rates.
He suggested that if the newsletter had said the meeting “would” have a major impact on rates, there might be more people at the meeting.
“We can’t sustain our grossly inflated local government and actually do the work of the people,” he said.
“When the city found out the pipes the city owns from the curb to the sewer line were getting old and problematic, they snapped into action and made that the responsibility of the residents to repair, to replace them, and to pay the city for a permit to do that,” he said.
Citing what he’d like to see in the city manager’s newsletter, James called for a hiring freeze on city employees and pay raises.
Regarding sewer lines, Public Works Director Lee said the services are privately owned and maintained by the property owners.
