10/16/2023 City Council Regular Agenda PacketOctober 16, 2023 | 6:00 PM Page 1 of 5 City Council
Regular Meeting Agenda Packet
CITY COUNCIL
REGULAR MEETING
AGENDA PACKET
CITY COUNCIL CHAMBERS, CITY HALL
7351 ROSANNA STREET, GILROY, CA
95020
MONDAY, OCTOBER 16, 2023 | 6:00 PM
MAYOR
Marie Blankley
COUNCIL MEMBERS
Rebeca Armendariz
Dion Bracco
Tom Cline
Zach Hilton
Carol Marques
Fred Tovar
CITY COUNCIL PACKET MATERIALS ARE AVAILABLE ONLINE AT www.cityofgilroy.org
AGENDA CLOSING TIME IS 5:00 P.M. THE TUESDAY PRIOR TO THE MEETING
PUBLIC COMMENTS ON AGENDA ITEMS ARE TAKEN BEFORE THE CITY COUNCIL TAKES ACTION. Please keep
your comments to 3 minutes. Time restrictions may vary based on the Mayor's discretion.
Send written comments on any agenda item to publiccomments@cityofgilroy.org or City Hall, 7351 Rosanna
Street, Gilroy, CA 95020. Comments received by 1 p.m. on the meeting day will be distributed to the City Council
before the meeting. Comments are also available at bit.ly/3NuS1IN.
In compliance with the Americans with Disabilities Act, the City will make
reasonable arrangements to ensure accessibility to this meeting. If you need
special assistance to participate in this meeting, please contact the City Clerk’s
Office at least 72 hours prior to the meeting at (408) 846-0204 or
cityclerk@cityofgilroy.org to help ensure that reasonable arrangements can be
made.
If you dispute any planning or land use decision from this meeting in court, you may only raise issues you or
someone else presented at this meeting's public hearing or in written letters to the City Council before the hearing.
Be aware that the time to seek a judicial review of any final decision made at this meeting is defined by Section
1094.6 of the California Code of Civil Procedure.
During this meeting, a Closed Session may be called under Government Code Section 54956.9 (d)(2). This will
happen if, in the City's legislative body's opinion (based on current facts, circumstances, and legal advice), there's
a significant risk of a lawsuit against the City.
Additional materials submitted after agenda distribution are available on www.cityofgilroy.org as soon as possible.
KNOW YOUR RIGHTS UNDER THE GILROY OPEN GOVERNMENT ORDINANCE
Government's duty is to serve the public, reaching its decisions in full view of the public.
Commissions, task forces, councils and other agencies of the City exist to conduct the people's
business. This ordinance assures that deliberations are conducted before the people and that
City operations are open to the people's review.
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FOR MORE INFORMATION ON YOUR RIGHTS UNDER THE OPEN GOVERNMENT ORDINANCE, TO
RECEIVE A FREE COPY OF THE ORDINANCE OR TO REPORT A VIOLATION OF THE ORDINANCE,
CONTACT THE OPEN GOVERNMENT COMMISSION STAFF AT (408) 846-0204.
If you need translation assistance, contact the City Clerk 72 hours before the meeting at 408-846-0204 or
cityclerk@cityofgilroy.org.
Si necesita un intérprete durante la junta y gustaría dar un comentario público, comuníquese con el
Secretario de la Ciudad un mínimo de 72 horas antes de la junta al 408-846-0204 o envíe un correo
electrónico a la Oficina del Secretario de la Ciudad a cityclerk@cityofgilroy.org.
To access written translation during the meeting, please scan the QR Code or
click this link:
Para acceder a la traducción durante la reunión, por favor escanee el código
QR o haga clic en el enlace:
bit.ly/3FBiGA0
Choose Language and Click Attend | Seleccione su lenguaje y haga clic en
asistir
Use a headset on your phone for audio or read the transcript on your device.
Use sus auriculares para escuchar el audio o leer la transcripción en el
dispositivo.
The agenda for this meeting is outlined as follows:
1. OPENING
1.1. Call to Order
1.2. Pledge of Allegiance
1.3. Invocation
1.4. City Clerk's Report on Posting the Agenda
1.5. Roll Call
1.6. Orders of the Day
1.7. Employee Introductions
2. CEREMONIAL ITEMS - Proclamations and Awards
3. PRESENTATIONS TO THE COUNCIL
3.1. Annual Presentation by the Arts and Culture Commission
3.2. PUBLIC COMMENT BY MEMBERS OF THE PUBLIC ON ITEMS NOT ON THE
AGENDA BUT WITHIN THE SUBJECT MATTER JURISDICTION OF THE
CITY COUNCIL
This part of the meeting allows public address on non-agenda topics within the Council's
jurisdiction. To speak, complete a Speaker's Card from the entrances and give it to the City
Clerk. Speaking time ranges from 1-3 minutes based on the Mayor's discretion. Extended
discussions or actions on non-agenda items are restricted by law. For Council action, the topic
may be listed on a future agenda.
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Email written comments on non-agenda topics to publiccomments@cityofgilroy.org or mail to City
Hall, 7351 Rosanna Street, Gilroy, CA 95020, by 1:00 pm on the meeting day. These comments,
available at City Hall, will be shared with the Council and included in the meeting record. Late
submissions will be shared as soon as possible. A 10-page limit applies to hard-copy materials,
but electronic submissions are unlimited.
4. REPORTS OF COUNCIL MEMBERS
Council Member Bracco – Downtown Committee, Santa Clara County Library Joint
Powers Authority, Santa Clara Valley Water Joint Water Resources Committee, SCRWA
Council Member Armendariz – Downtown Committee, Santa Clara County Library Joint
Powers Authority (alternate), Santa Clara Valley Habitat Agency Governing Board, Santa
Clara Valley Habitat Agency Implementation Board, Silicon Valley Clean Energy Authority
JPA Board (alternate), South County United for Health
Council Member Marques – ABAG, Downtown Committee, Gilroy Gardens Board of
Directors, Santa Clara Valley Habitat Agency Governing Board, Santa Clara Valley Habitat
Agency Implementation Board, SCRWA (alternate)
Council Member Hilton – CalTrain Policy Group (alternate), Silicon Valley Clean Energy
Authority JPA Board, South County United for Health (alternate), VTA Policy Advisory
Committee
Council Member Cline – Gilroy Economic Development Partnership (alternate), Gilroy
Sister Cities Association, Gilroy Youth Task Force, Silicon Valley Regional Interoperability
Authority Board, VTA Policy Advisory Committee (alternate), Visit Gilroy California Welcome
Center Board, VTA Mobility Partnership Committee
Council Member Tovar – Downtown Committee, Gilroy Youth Task Force (alternate),
Santa Clara County Expressway Plan 2040 Advisory Board,Santa Clara Valley Water
Commission, SCRWA, South County Youth Task Force Policy Team
Mayor Blankley – ABAG (alternate), CalTrain Policy Group, Downtown Committee, Gilroy
Economic Development Partnership, Gilroy Sister Cities Association (alternate), Gilroy
Youth Task Force, Santa Clara Valley Water Joint Water Resources Committee, SCRWA,
South County Youth Task Force Policy Team, VTA Board of Directors, VTA Mobility
Partnership Committee
5. COUNCIL CORRESPONDENCE
6. FUTURE COUNCIL INITIATED AGENDA ITEMS
7. CONSENT CALENDAR
Consent Calendar items are routinely approved with one motion. For separate discussion, a Council member
or public member must request its removal before the approval vote. If removed, it's discussed in its original
order. 7.1. Approval of the Action Minutes of the October 2, 2023 City Council Regular
Meeting
7.2. Acceptance of an Office of Traffic Safety Selective Traffic Enforcement
Program Grant in the Amount of $111,000 and Adoption of a Resolution of
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the City Council of the City of Gilroy Approving a Fiscal Year 2024 Budget
Amendment
7.3. Acceptance of an Office of Traffic Safety Traffic Records Improvement
Program Grant for $24,800 and Adoption of a Resolution of the City
Council of the City of Gilroy Approving a Fiscal Year 2024 Budget
Amendment
7.4. Acceptance of an Edward Byrne Memorial Justice Assistance Grant for
$19,822 for the Police Department and Adoption of a Resolution of the City
Council of the City of Gilroy Approving a Fiscal Year 2024 Budget
Amendment
7.5. Approval of a Notice of Acceptance of Completion for the Gilroy Sports
Park Playground Surface Repair Project No. 23-PW-276 and Approval of a
Final Contract Amount with Itech Solution of $144,098.78
8. BIDS AND PROPOSALS
9. PUBLIC HEARINGS
9.1. Public Hearing Regarding the Proposed Water and Wastewater Rate
Increases
1. Staff Report: Harjot Sangha, Finance Director
2. Open Public Hearing
3. Close Public Hearing
4. Possible Action:
1. Adopt as final the August 2023 Comprehensive Water and Wastewater
Utility Rate Study Report prepared by NBS.
2. Adopt a resolution approving water and wastewater rate adjustments.
10. UNFINISHED BUSINESS
10.1. Recommendations for Updates/Improvements to the Gilroy Garlic Festival
Memorial at Christmas Hill Park
1. Staff Report: Jimmy Forbis, City Administrator
2. Public Comment
3. Possible Action:
Discussion and direction regarding proposed updates/improvements to
the Gilroy Garlic Festival Memorial at Christmas Hill Park.
11. INTRODUCTION OF NEW BUSINESS
11.1. Authorize the City Administrator to Enter into a Three-Year Service
Agreement with the County of Santa Clara for Animal Sheltering Services
for the Period of July 1, 2023, through June 30, 2026
1. Staff Report: Pedro Espinoza, Police Chief
2. Public Comment
3. Possible Action:
Authorize the City Administrator to sign a three-year service agreement with
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the County of Santa Clara for Animal Sheltering Services from July 1, 2023,
through June 30, 2026. 11.2. Annual Review and Adoption of the City's Investment Policy
1. Staff Report: Harjot Sangha, Finance Director
2. Public Comment
3. Possible Action:
Adopt a resolution establishing the City’s updated Investment Policy.
12. CITY ADMINISTRATOR'S REPORTS
13. CITY ATTORNEY'S REPORTS
14. ADJOURNMENT
FUTURE MEETING DATES
November 2023
6 Regular Meeting - 6:00 p.m
20 Regular Meeting - 6:00 p.m
December 2023
4 Regular Meeting - 6:00 p.m
11 Special Meeting - 6:00 p.m
18 Regular Meeting - 6:00 p.m -CANCELED-
January 2024
8 Regular Meeting - 6:00 p.m
22 Regular Meeting - 6:00 p.m
Meetings are webstreamed at gilroy.city/meetings.
Access the 2024 City Council Meeting Calendar at https://bit.ly/3LLzY1n.
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7.1. Approval of the Action Minutes of the October 2, 2023 City Council
Regular Meeting
Agenda Item No. 7.1
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Page 1 of 6
City of Gilroy
City Council Regular Meeting Minutes
Monday, October 2, 2023 | 6:00 PM
1.OPENING
1.1.Call to Order
The meeting was called to order by Mayor Blankley at 6:00 PM.
1.2. Pledge of Allegiance
Pro Tempore Mayor Bracco led the Pledge of Allegiance.
1.3. Invocation
Pastor Greg Quirke of South Valley Community Church provided the invocation.
1.4. City Clerk's Report on Posting the Agenda
City Clerk Pham reported on the Posting of the Agenda.
1.5. Roll Call
Attendance Attendee Name
Present Rebeca Armendariz, Council Member
Dion Bracco, Mayor Pro Tempore
Tom Cline, Council Member
Zach Hilton, Council Member
Carol Marques, Council Member
Fred Tovar, Council Member
Marie Blankley, Mayor
Absent None
1.6. Orders of the Day
There were none.
1.7. Employee Introductions
There were none.
2.CEREMONIAL ITEMS - Proclamations and Awards
2.1. Proclamation Proclaiming October 2023 as The Great Shakeout
Mayor Blankley read aloud the proclamation and presented it to Emergency
Services & Volunteer Coordinator Andrew Young.
3.PRESENTATIONS TO THE COUNCIL
3.1. Presentation from Silicon Valley Clean Energy
Adam Selvin, Director at Silicon Valley Clean Energy of Silicon Clean Energy,
provided the presentation.
3.2. PUBLIC COMMENT BY MEMBERS OF THE PUBLIC ON ITEMS NOT ON THE
AGENDA BUT WITHIN THE SUBJECT MATTER JURISDICTION OF THE
CITY COUNCIL DRAFTAgenda Item No. 7.1
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Mayor Blankley opened Public Comment.
The following members spoke on items that were not on the agenda.
Paul Dommert, Jr. championed a disc golf course at Christmas Hill Park,
noting the sport's accessibility and community spirit.
Ron Kirkish expressed concerns about hybrid meeting disruptions,
referencing issues in other cities and emphasizing a need for a deliberate
Council approach.
Gregory Felios promoted "Coffee with the Mayor" on October 7th,
underscoring it as a chance for community dialogue with the Gilroy
Unified School District superintendent.
No further speakers present, Mayor Blankley closed Public Comment.
4. REPORTS OF COUNCIL MEMBERS
Council Member Bracco had nothing to report.
Council Member Armendariz shared updates from South County United for Health and
highlighted the 7th Annual Tamal Festival and Car Show held last Saturday.
Council Member Marques reported on the Santa Clara Valley Habitat Agency Governing
Board and Gilroy Gardens Board of Directors.
Council Members Hilton and Cline acknowledged the success of the recent 7th Annual
Tamal Festival and Car Show.
Council Member Tovar reported on the Downtown Committee,
Mayor Blankley reported on CalTrain Policy Group, VTA Board of Directors, and VTA
Mobility Partnership Committee.
5. COUNCIL CORRESPONDENCE
There were none.
6. FUTURE COUNCIL INITIATED AGENDA ITEMS
There were none.
7. CONSENT CALENDAR
Mayor Blankley opened Public Comment. There being no speakers, Mayor Blankley closed
Public Comment.
Motion: Approve the Consent Calendar
RESULT: Pass
MOVER: Fred Tovar, Council Member
SECONDER: Carol Marques, Council Member
AYES: Council Member Armendariz, Mayor Pro Tempore Bracco, Council
Member Cline, Council Member Hilton, Council Member Marques,
Council Member Tovar, Mayor Blankley
7.1. Approval of the Action Minutes of the September 18, 2023 City Council
Regular Meeting DRAFTAgenda Item No. 7.1
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A motion was made to approve the minutes.
7.2. Claim of Jose Aaron Munoz (The City Administrator recommends a "yes"
vote under the Consent Calendar shall constitute denial of the claim)
A motion was made to deny the claim.
8.BIDS AND PROPOSALS
There were none.
9.PUBLIC HEARINGS
9.1. Proposed Tentative Parcel Map to subdivide two developed commercial
lots located at 6955 Camino Arroyo into seven parcels, Application No. TM
23-01
Mayor Blankley asked the Council if they had received an ex-
parte communication. None were reported.
Planner II Melissa Durkin provided staff presentation and responded to
Council Member questions.
Mayor Blankley opened the Public Hearing at 6:30 PM. There being no
speakers, Mayor Blankley closed the Public Hearing at 6:30 PM.
Motion: Based on its independent analysis, determines that the proposed
project is exempt from further environmental review by State CEQA
Guidelines section 15061 (b), the “common sense” exemption because it
can be seen with certainty that there is no possibility that the activity in
question may have a significant effect on the environment, and adopt a
resolution approving the proposed tentative parcel map to subdivide the
property known as APN 841-17-045 and 841-17-036 into seven separate
parcels.
RESULT: Pass
MOVER: Tom Cline, Council Member
SECONDER: Rebeca Armendariz, Council Member
AYES: Council Member Armendariz, Mayor Pro Tempore Bracco,
Council Member Cline, Council Member Hilton, Council
Member Marques, Council Member Tovar, Mayor Blankley
Enactment No.: Resolution No. 2023-57 10.UNFINISHED BUSINESS
10.1. Appointments to City Boards, Commissions, and Committees with Seats
Vacant or Expired as of September 18, 2023
Mayor Blankley opened Public Comment. There being no speakers, Mayor
Blankley closed Public Comment.
The council appointed the following members:
Akur Varadarajan to the Open Government Commission with a term
ending December 31, 2024.
Dale Davis to the Parks and Recreation Commission with a term ending DRAFTAgenda Item No. 7.1
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December 31, 2025.
10.2. Justice, Equity, Diversity, and Inclusion Initiative Update
Police Sergeant Toney and Communications Manager Bedell provided staff
presentation and responded to Council Member questions.
Mayor Blankley opened Public Comment. There being no speakers, Mayor
Blankley closed Public Comment.
Council received the report and directed staff to have the consultant present
their findings at a future Council meeting.
11. INTRODUCTION OF NEW BUSINESS
11.1. Receive Preliminary Fiscal Year 2022-23 (FY23) Year-End Financial Report
Finance Director Sangha provided staff presentation and responded to Council
Member questions.
Mayor Blankley opened Public Comment.
Ron Kirkish expressed concerns about the city's current and future
revenues, urging the Council to prioritize spending and scrutinize
expenditures.
There being no speakers, Mayor Blankley closed Public Comment.
Motion: Motion to approve $225,000 to be transferred to the Section 115
Pension Trust, pursuant to the Pension Funding Policy.
RESULT: Pass
MOVER: Fred Tovar, Council Member
SECONDER: Rebeca Armendariz, Council Member
AYES: Council Member Armendariz, Mayor Pro Tempore Bracco,
Council Member Cline, Council Member Hilton, Council
Member Tovar, Mayor Blankley
NAYS: Council Member Marques
11.2. Discussion and Direction Regarding Other Post Employment Benefit
(OPEB) Section 115 Trust and Funding
Finance Director Sangha provided staff presentation and responded to Council
Member questions.
Mayor Blankley opened Public Comment. There being no speakers, Mayor
Blankley closed Public Comment.
Motion: Adopt a resolution establishing a Section 115 Trust for Other Post
Employment Benefits (OPEB), approving a one-time contribution to the
Section 115 OPEB Trust of $0.5 million from the General Fund balance
(reserves), and approving an OPEB Funding Policy, with the addition
Council to address the split between the OPEB and pension in equal
percentages to their respective unfunded balances.
RESULT: Pass
MOVER: Marie Blankley, Mayor DRAFTAgenda Item No. 7.1
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SECONDER: Rebeca Armendariz, Council Member
AYES: Council Member Armendariz, Mayor Pro Tempore Bracco,
Council Member Cline, Council Member Hilton, Council
Member Marques, Council Member Tovar, Mayor Blankley
Enactment No.: Resolution No. 2023-58
12. CITY ADMINISTRATOR'S REPORTS
12.1. Know Your Code
12.2. E-newsletter Mailbag
12.3. Love Gilroy/Fight Dirty
City Administrator Forbis provided the City Administrator’s Report.
13. CITY ATTORNEY'S REPORTS
City Attorney Faber provided the City Attorney’s Report.
14. CLOSED SESSION
Mayor Blankley opened Public Comment.
Richard Perino recounted a 2006 house fire experience, critiqued response times,
and pushed for fire department funding.
Mike Sterner appealed to improve fire department staffing and address retention
issues related to the CalPERS system.
Steven Hayes highlighted the urgent staffing need at Santa Teresa station,
emphasizing response times and urging action for optimal emergency outcomes.
Matt Tuttle emphasized a widespread staffing issue across county fire departments,
urging Gilroy officials to prioritize fire station staffing.
Christopher Cobillas advocated for continuous staffing at the Santa Teresa Station
and emphasized its role in emergency preparedness.
Kim Kurtis highlighted the critical need for funding and staffing fire departments
amidst Gilroy's growth.
Jason Lucero raised concerns about inconsistent staffing and resources at the Santa
Teresa Fire Station and questioned city transparency.
Bob Weaver criticized discrepancies in response times and safety issue
communication in the Santa Teresa district.
Jim Blean spoke on the impact of fire station proximity on insurance rates and
proposed consistent and strategic fire station staffing.
Ron Kirkish criticized Glen Loma developers for delaying a fire station and suggested
stringent council actions to ensure developer compliance.
There being no further speakers, Mayor Blankley closed Public Comment.
Mayor Blankley recessed the Regular Meeting at 8:40 PM.
The City Council reconvened into Closed Session at 8:45 PM.
DRAFTAgenda Item No. 7.1
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The vote to stay in Closed Session was unanimous.
14.1. CONFERENCE WITH LABOR NEGOTIATORS - COLLECTIVE BARGAINING
UNIT Pursuant to GC Section 54957.6 and GCC Section 17A.11 (4);
Collective Bargaining Units: Local 2805, IAFF Fire Unit Representing Gilroy
Fire Fighters
City Negotiators: Jimmy Forbis, City Administrator, LeeAnn McPhillips, HR
Director
Anticipated Issues(s) Under Negotiation: Wages, Hours, Benefits, Working
Conditions; Memorandums of Understanding: City of Gilroy and Gilroy Fire
Fighters Local 2805.
No reportable action.
15. ADJOURN TO OPEN SESSION
Mayor Blankley reported out of the Closed Session, as shown above.
16. ADJOURNMENT
Mayor Blankley adjourned the meeting at 11:02 PM.
I HEREBY CERTIFY that the foregoing minutes were duly and regularly adopted at a regular
meeting of the City Council of the City of Gilroy.
/s/ Thai Nam Pham, MMC, CPMC
City Clerk DRAFTAgenda Item No. 7.1
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7.2. Acceptance of an Office of Traffic Safety Selective Traffic Enforcement
Program Grant in the Amount of $111,000 and Adoption of a Resolution
of the City Council of the City of Gilroy Approving a Fiscal Year 2024
Budget Amendment
Agenda Item No. 7.2
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City of Gilroy
STAFF REPORT
Agenda Item Title:Acceptance of an Office of Traffic Safety Selective
Traffic Enforcement Program Grant in the Amount of
$111,000 and Adoption of a Resolution of the City
Council of the City of Gilroy Approving a Fiscal Year
2024 Budget Amendment
Meeting Date:October 16, 2023
From:Jimmy Forbis, City Administrator
Department:Police
Submitted By:Pedro Espinoza, Police Chief
Prepared By:Patricia Vigil, Management Analyst
STRATEGIC PLAN GOALS Ensure Neighborhood Equity from City Services
RECOMMENDATION
1. Accept the Office of Traffic Safety Selective Traffic Enforcement Program Grant
for $111,000 and authorize the City Administrator to execute all grant
agreements and related documents; and
2. Adopt a resolution of the City Council of the City of Gilroy amending the budget
for Fiscal Year 2024 (FY24) and appropriating proposed expenditure
amendments.
EXECUTIVE SUMMARY
The City of Gilroy has been the recipient of the Office of Traffic Safety Grant for many
years. The Office of Traffic Safety released a solicitation for grant applications for the
"Selective Traffic Enforcement Program" (STEP) grant in January 2023. The Gilroy
Police Department applied for and was tentatively awarded a grant for $111,000. The
objective of the grant is to reduce incidents of fatal and injury collisions involving
vehicles, bicycles, and pedestrians by use of targeted traffic enforcement operations
and enhanced traffic analytics.
Agenda Item No. 7.2
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Acceptance of an Office of Traffic Safety Selective Traffic Enforcement Program Grant in the
Amount of $111,000 and Adoption of a Resolution of the City Council of the City of Gilroy
Approving a FY24 Budget Amendment
City of Gilroy City Council Page 2 of 3 October 16, 2023
BACKGROUND
The California Highway Safety Program is a partnership effort between the National
Highway Traffic Safety Administration and California. The Governor designates the
Office of Traffic Safety to receive federal traffic safety funds for coordinating California’s
highway safety programs. Each year, the Office of Traffic Safety develops a Highway
Safety Plan identifying the key highway safety problems in the State and the most
effective countermeasures to address them. The Office of Traffic Safety then solicits
proposals statewide to address the identified problems and allocates funds to state and
local governmental agencies to implement traffic safety programs and grants.
In July 2023, the Office of Traffic Safety notified the Gilroy Police Department of
tentative approval of our initial grant application for $111,000. The grant cycle is from
October 1, 2023, to September 30, 2024, to expend the funds through their
reimbursement process. As a condition of the award process, the governing body of the
applying jurisdiction must approve the acceptance of the award prior to the final
acceptance and allocation of funds.
Police Officers will conduct 3 DUI checkpoints and 12 DUI saturation patrols provided
by overtime, which the grant will reimburse. Police Officers will also attempt to reduce
injury and fatal collisions by conducting 12 special traffic enforcement operations and
six distracted driver operations. Acceptance of the grant requires the Police Department
to provide training in DUI enforcement to Police Officers and traffic safety training to
members of the community without reimbursement. The Police Department hosts a DUI
training class taught by CHP so Gilroy Police Officers can attend without additional
costs, and the Traffic Unit provides bicycle and pedestrian classes for school children
during their normal workdays.
Another requirement of the grant is that the Police Department participates in several
national campaigns in conjunction with the Office of Traffic Safety such as Distracted
Driver Month, Winter and Summer Anti-DUI campaigns, Pedestrian Safety Month, and
Safe Routes to Schools.
ANALYSIS
In order to continue traffic-related enforcement operations, City Council action is
required to appropriate the grant funds into the FY24 budget. The proposed budget
appropriation is to be made in the Office of Traffic Safety Special Revenue Fund as
follows:
Org/Object Code: 2233010-52610/43120 $111,000.
ALTERNATIVES
The Council may reject approval to appropriate the Office of Traffic Safety Selective
Traffic Enforcement Program Grants funds for $111,000 into the FY24 budget. Staff
Agenda Item No. 7.2
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Acceptance of an Office of Traffic Safety Selective Traffic Enforcement Program Grant in the
Amount of $111,000 and Adoption of a Resolution of the City Council of the City of Gilroy
Approving a FY24 Budget Amendment
City of Gilroy City Council Page 3 of 3 October 16, 2023
does not recommend this option as it would mean alternative funding would have to be
identified.
FISCAL IMPACT/FUNDING SOURCE
Approval of this action would appropriate the grant funding and increase revenue and
expenditure appropriations to the Police Department’s Office of Traffic Safety Grants
Fund (223), by $111,000 in the FY24 budget.
PUBLIC OUTREACH
The Police Department will conduct a public engagement campaign via our digital
media platforms prior to each scheduled DUI checkpoint and participation of national
campaigns in addition to the grant-required “Kickoff” press release.
Attachments:
1. Draft Resolution
Agenda Item No. 7.2
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0
7
3
RESOLUTION NO. 2023-XX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
GILROY AMENDING THE BUDGET FOR THE CITY OF
GILROY FOR FISCAL YEAR 2023-2024 IN THE OFFICE OF
TRAFFIC SAFETY FUND AND APPROPRIATING
PROPOSED EXPENDITURE AMENDMENTS
WHEREAS, the City Administrator prepared and submitted to the City Council a
budget for the City of Gilroy for Fiscal Years 2023-2024 and 2024-2025, and the City
Council carefully examined, considered, and adopted the same on June 5, 2023; and
WHEREAS, City Staff has prepared and submitted to the City Council a proposed
amendment to said budget for Fiscal Year 2023-2024 for the City of Gilroy in the staff
report dated October 16, 2023, for the Office of Traffic Safety Fund, appropriating funding
received from the Office of Traffic Safety and,
WHEREAS, the City Council has carefully examined and considered the same and
is satisfied with said budget amendments.
NOW, THEREFORE, BE IT RESOLVED THAT appropriations in the Office of
Traffic Safety Fund, Fund 223, is hereby increased by $111,000 for Fiscal Year 2023-
2024.
PASSED AND ADOPTED this 16th day of October 2023 by the following roll call
vote:
AYES:COUNCIL MEMBERS:
NOES:COUNCIL MEMBERS:
ABSTAIN:COUNCIL MEMBERS:
ABSENT:COUNCIL MEMBERS:
APPROVED:
Marie Blankley, Mayor
ATTEST:
_______________________
Thai Nam Pham, City Clerk
Agenda Item No. 7.2
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7.3. Acceptance of an Office of Traffic Safety Traffic Records Improvement
Program Grant for $24,800 and Adoption of a Resolution of the City
Council of the City of Gilroy Approving a Fiscal Year 2024 Budget
Amendment
Agenda Item No. 7.3
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Page 1 of 3
City of Gilroy
STAFF REPORT
Agenda Item Title:Acceptance of an Office of Traffic Safety Traffic
Records Improvement Program Grant for $24,800 and
Adoption of a Resolution of the City Council of the
City of Gilroy Approving a Fiscal Year 2024 Budget
Amendment
Meeting Date:October 16, 2023
From:Jimmy Forbis, City Administrator
Department:Police
Submitted By:Pedro Espinoza, Police Chief
Prepared By:Patricia Vigil, Management Analyst
STRATEGIC PLAN GOALS Ensure Neighborhood Equity from City Services
RECOMMENDATION
1. Accept the Office of Traffic Safety Traffic Records Improvement Program Grant for
$24,800; and
2. Adopt a resolution of the City Council of the City of Gilroy amending the budget for
Fiscal Year 2024 and appropriating proposed expenditure amendments.
EXECUTIVE SUMMARY
The Gilroy Police Department (GPD) was awarded a grant for $24,800 to electronically
report traffic data to the California Highway Patrol Statewide Integrated Traffic Records
System (SWITRS).
BACKGROUND
The California Highway Safety Program is a partnership effort between the National
Traffic Safety Administration and California. The Governor of California designates the
Office of Traffic Safety (OTS) to receive federal traffic safety funds for coordinating
California’s highway safety programs. Each year, the OTS develops a Roadway Safety
and Traffic Records Plan to assist law enforcement agencies in submitting reliable traffic
Agenda Item No. 7.3
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Acceptance of Office of Traffic Safety Traffic Records Improvement Program Grant for $24,800
and Adoption of a Resolution of the City Council of the City of Gilroy Approving a Fiscal Year
2024 Budget Amendment
City of Gilroy City Council Page 2 of 3 October 16, 2023
collision data through the purchase of hardware or software tools.
In July, the OTS notified GPD of grant approval for $24,800. The grant cycle is from
October 1, 2023, to September 30, 2024, to expend the funds through a reimbursement
process. As a condition of the award process, the governing body of the applying
jurisdiction must approve the acceptance of the award prior to the final acceptance and
allocation of funds.
ANALYSIS
GPD uses a data-driven approach for the reduction of injury and fatal traffic accidents
using traffic enforcement, education, and collaboration with Public Works engineering
personnel as key components. In 2020, OTS funded the purchase of the Crossroads
software collision database system and analytics to gather collision data as a tool to
determine the cause of injury and fatal traffic accidents.
As with most law enforcement agencies, the Police Department is struggling to fill
vacant Records Unit positions. GPD is authorized for six Record Technician positions
and currently has three of these positions vacant. The Records unit manually sends
traffic accident data to SWITRS, which is a time-consuming process, preventing timely
information to SWITRS.
With the award of the OTS grant, GPD will have the funding necessary to electronically
report traffic collision data from Crossroads directly to SWITRS.
GPD uses data-driven information to focus on the top primary factors involved in most
traffic accidents and fatal accidents. GPD is committed to taking a comprehensive,
inclusive, and equitable approach to delivering education, enforcement, and outreach
programs to save lives. To accomplish the electronic delivery of traffic collision data to
the California Highway Patrol SWITRS system, City Council action is required to
appropriate the grant funds into the FY24 budget. The proposed budget appropriation is
in the Office of Traffic Safety Grant special revenue fund as follows:
Org/Object: 2233010-52610/43120 $24,800.
ALTERNATIVES
Council may reject approval to appropriate the Office of Traffic Safety Traffic Records
Improvement Program Grant funds for $24,800 into the FY24 budget. Staff does not
recommend this option as it would mean alternative funding would have to be identified.
Agenda Item No. 7.3
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Acceptance of Office of Traffic Safety Traffic Records Improvement Program Grant for $24,800
and Adoption of a Resolution of the City Council of the City of Gilroy Approving a Fiscal Year
2024 Budget Amendment
City of Gilroy City Council Page 3 of 3 October 16, 2023
FISCAL IMPACT/FUNDING SOURCE
Approval of this action would appropriate the grant funding and increase revenue and
expenditure appropriations to the Police Department’s Office of Traffic Safety Grants
fund (223) by $24,800 in the FY24 budget.
Attachments:
1. Draft Resolution
Agenda Item No. 7.3
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RESOLUTION NO. 2023-XX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF GILROY AMENDING THE BUDGET FOR THE CITY
OF GILROY FOR FISCAL YEAR 2023-2024 IN THE
OFFICE OF TRAFFIC SAFETY FUND AND
APPROPRIATING PROPOSED EXPENDITURE
AMENDMENTS
WHEREAS, the City Administrator prepared and submitted to the City Council a
budget for the City of Gilroy for Fiscal Years 2023-2024 and 2024-2025, and the City
Council carefully examined, considered, and adopted the same on June 5, 2023; and
WHEREAS, City Staff has prepared and submitted to the City Council a proposed
amendment to said budget for Fiscal Year 2023-2024 for the City of Gilroy in the staff
report dated October 16, 2023, for the Office of Traffic Safety Fund, appropriating funding
received from the Office of Traffic Safety and,
WHEREAS, the City Council has carefully examined and considered the same and
is satisfied with said budget amendments.
NOW, THEREFORE, BE IT RESOLVED THAT appropriations in the Office of
Traffic Safety Fund, Fund 223, is hereby increased by $24,800 for Fiscal Year 2023-2024.
PASSED AND ADOPTED this 16th day of October 2023 by the following roll call
vote:
AYES:COUNCIL MEMBERS:
NOES:COUNCIL MEMBERS:
ABSTAIN:COUNCIL MEMBERS:
ABSENT:COUNCIL MEMBERS:
APPROVED:
Marie Blankley, Mayor
ATTEST:
_______________________
Thai Nam Pham, City Clerk
Agenda Item No. 7.3
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7.4. Acceptance of an Edward Byrne Memorial Justice Assistance Grant for
$19,822 for the Police Department and Adoption of a Resolution of the
City Council of the City of Gilroy Approving a Fiscal Year 2024 Budget
Amendment
Agenda Item No. 7.4
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Page 1 of 3
City of Gilroy
STAFF REPORT
Agenda Item Title:Acceptance of an Edward Byrne Memorial Justice
Assistance Grant for $19,822 for the Police
Department and Adoption of a Resolution of the City
Council of the City of Gilroy Approving a Fiscal Year
2024 Budget Amendment
Meeting Date:October 16, 2023
From:Jimmy Forbis, City Administrator
Department:Police
Submitted By:Pedro Espinoza, Police Chief
Prepared By:Patricia Vigil, Management Analyst
STRATEGIC PLAN GOALS Ensure Neighborhood Equity from City Services
RECOMMENDATION
a) Accept the Edward Byrne Memorial Justice Assistance Grant for $19,822 from the
United States Department of Justice, Bureau of Justice Assistance, and authorize
the City Administrator to execute all grant agreements and related documents; and
b) Adopt a resolution of the City Council of the City of Gilroy amending the budget for
Fiscal Year 2023-2024 (FY24) and appropriating proposed expenditure
amendments.
EXECUTIVE SUMMARY
The City of Gilroy Police Department has been the recipient of the annual Edward Byrne
Memorial Justice Assistance Grant (JAG) for several years. The JAG program is the
leading source of federal justice funding to state and local jurisdictions. The JAG
Program provides local governments with critical funding necessary to support a range
of program areas in law enforcement. The Police Department applied for and was
awarded a grant of $19,822.
Agenda Item No. 7.4
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Acceptance of an Edward Byrne Memorial Justice Assistance Grant for $19,822 for the Police
Department and Adoption of a Resolution of the City Council of the City of Gilroy Approving a
Fiscal Year 2023-2024 Budget Amendment.
City of Gilroy City Council Page 2 of 3 October 16, 2023
BACKGROUND
The United States Department of Justice, Bureau of Justice Assistance (BJA) released
a solicitation for FY24 grant applications. In September 2023, the Police Department
received approval of the grant application for $19,822 to use towards law enforcement
and equipment programs. The grant cycle is from October 1, 2023, to September 30,
2024, to expend the funds through a reimbursement process. As a condition of the
award process, the governing body of the applying jurisdiction must approve the
acceptance of the award prior to the allocation of funds.
The FY24 JAG grant funding would be used towards the technological upgrade of the
Police Department’s community room. This would include the purchase of audio and
visual equipment and other presentation aids for collaborative information sharing.
This grant funding is to support essential technology upgrades because this room
serves as a critical space for various law enforcement and community-related activities,
including training, meetings, briefings, and functioning as a backup Emergency
Operations Center (EOC) during critical incidents. With advancements in technology,
the Department aims to enhance the functionality and overall efficiency of the space.
The improvements will include television monitors, computers, a sound system, and
other presentation aids.
The community room is located within the Police Department and is the location of
numerous trainings throughout the year, including defensive tactics, de-escalation
techniques, first aid/CPR, DUI training, principled policing, and the Community Police
Academy. It is also the venue for community meetings and police operation briefings
hosted by the Anti-Crime Team, SWAT, and Traffic Division.
ANALYSIS
The JAG grant furthers the Police Department’s law enforcement efforts by enhancing
its technology to use in tandem with oral presentations from presenters. The current
technology in the community room is unreliable and has surpassed its useful life since
its implementation in 2012. Purchasing upgraded, reliable equipment will enhance the
ability to disseminate vital information and training material to police personnel.
The JAG grant funding has been a benefit to the City for several years. In prior years,
grant funds have been used towards the purchase of officer vest carriers, ceramic
armor plates, and crisis negotiating equipment.
To receive funding, City Council action is required to appropriate the grant funds into the
FY24 budget. The proposed FY24 budget appropriation is in the Police Grants special
revenue fund, as follows:
Org/Object: 2253000-53120/43110 $19,822.
Agenda Item No. 7.4
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Acceptance of an Edward Byrne Memorial Justice Assistance Grant for $19,822 for the Police
Department and Adoption of a Resolution of the City Council of the City of Gilroy Approving a
Fiscal Year 2023-2024 Budget Amendment.
City of Gilroy City Council Page 3 of 3 October 16, 2023
ALTERNATIVES
The Council may reject approval to appropriate the Edward Byrne Memorial Justice
Assistance Grant funds for $19,822 into the FY24 budget. Staff does not recommend
this option as it would mean alternative funding would have to be identified.
FISCAL IMPACT/FUNDING SOURCE
Approval of this action would increase funding to the Police Department’s Grant Fund,
Fund 225, by $19,822 in the FY24 budget towards upgrading technological equipment
in the Police Department community room. There is no additional financial contribution
required by the City of Gilroy.
Attachments:
1. Draft Resolution
Agenda Item No. 7.4
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RESOLUTION NO. 2023-XX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
GILROY AMENDING THE BUDGET FOR THE CITY OF
GILROY FOR FISCAL YEAR 2023-2024 IN THE POLICE
DEPARTMENT GRANTS FUND AND APPROPRIATING
PROPOSED EXPENDITURE AMENDMENTS
WHEREAS, the City Administrator prepared and submitted to the City Council a
budget for the City of Gilroy for Fiscal Years 2023-2024 and 2024-2025, and the City
Council carefully examined, considered, and adopted the same on June 5, 2023; and
WHEREAS, City Staff has prepared and submitted to the City Council a proposed
amendment to said budget for Fiscal Year 2023-2024 for the City of Gilroy in the staff
report dated October 16, 2023, for the Police Department Grants Fund, appropriating
funding received from the United States Department of Justice, Bureau of Justice
Assistance and,
WHEREAS, the City Council has carefully examined and considered the same and
is satisfied with said budget amendments.
NOW, THEREFORE, BE IT RESOLVED THAT appropriations in the Police
Department Grants Fund, Fund 225, is hereby increased by $19,822 for Fiscal Year 2023-
2024.
PASSED AND ADOPTED this 16th day of October 2023 by the following roll call
vote:
AYES:COUNCIL MEMBERS:
NOES:COUNCIL MEMBERS:
ABSTAIN:COUNCIL MEMBERS:
ABSENT:COUNCIL MEMBERS:
APPROVED:
Marie Blankley, Mayor
ATTEST:
_______________________
Thai Nam Pham, City Clerk
Agenda Item No. 7.4
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7.5. Approval of a Notice of Acceptance of Completion for the Gilroy Sports
Park Playground Surface Repair Project No. 23-PW-276 and Approval of
a Final Contract Amount with Itech Solution of $144,098.78
Agenda Item No. 7.5
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Page 1 of 2
City of Gilroy
STAFF REPORT
Agenda Item Title:Approval of a Notice of Acceptance of Completion for
the Gilroy Sports Park Playground Surface Repair
Project No. 23-PW-276 and Approval of a Final
Contract Amount with Itech Solution of $144,098.78
Meeting Date:October 16, 2023
From:Jimmy Forbis, City Administrator
Department:Public Works
Submitted By:Karl Bjarke, Interim Public Works Director
Prepared By:Susana Ramirez, Engineer I
STRATEGIC PLAN GOALS Maintain and Improve City Infrastructure
RECOMMENDATION
a) Approve a notice of acceptance of completion for the Gilroy Sports Park Playground
Surface Repair Project No. 23-PW-276; and
b) Approve a final contract amount of $144,098.78 with Itech Solution for the Gilroy
Sports Park Playground Surface Repair Project No. 23-PW-276.
EXECUTIVE SUMMARY
The Public Works Department has completed the construction of the Gilroy Sports Park
Playground Surface Repair Project and has reviewed and approved all project
documentation. The project consisted of the removal and replacement of the rubberized
playground surface at the Gilroy Sports Park. The total construction cost of the project
was $144,098.78.
Staff recommends the City Council’s approval of the Notice of Acceptance of
Completion for the Gilroy Sports Park Playground Surface Repair Project No. 23-PW-
276 and approve the final contract amount of $144,098.78.
Agenda Item No. 7.5
Packet Page 29 of 199
Approval of a Notice of Acceptance of Completion for the Gilroy Sports Park Playground
Surface Repair Project No. 23-PW-276 and Approval of a Final Contract with Itech Solution in the
Amount of $144,098.78
City of Gilroy City Council Page 2 of 2 October 16, 2023
BACKGROUND
The City received grant funding from the State of California Department of Parks and
Recreation, Office of Grants and Local Services (OGALS) under the Proposition 68
General Per Capita Grant Program in the amount of $78,750 for this project. This
funding is allocated to cities and counties based on population for eligible projects
improving park and recreation services.
On February 27, 2023, the City Council awarded a contract to Itech Solution for the
construction of the Gilroy Sports Park Playground Surface Repair Project in the amount
of $134,140 with a project contingency of $13,414 (10%) for a maximum project
expenditure of $147,554 and authorized the City Administrator to execute the contract
and associated documents. The project funding was drawn from the Landscaping
Operating Budget of the General Fund (Fund 100), and the City will be reimbursed
$78,750 from OGALS.
ANALYSIS
The project scope of work included the removal and replacement of approximately
6,400 square feet of protective playground rubber safety surface material at the Gilroy
Sports Park. The project was completed with a total construction cost of $144,098.78.
The repairs took a total of 13 working days to complete. A certificate of substantial
completion was issued on August 21, 2023.
Project documentation has been completed, and the contractor has addressed all punch
list items. The repairs were inspected and approved by OGALS’ Project Officer on
August 29, 2023. Staff recommends the City Council approve the Notice of Acceptance
of Completion for the Gilroy Sports Park Playground Surface Repair Project No. 23-PW-
276, as well as the final contract amount of $144,098.78.
FISCAL IMPACT/FUNDING SOURCE
The total project construction cost was $144,098.78, which represents a savings of
$3,455.22 from the awarded contract total of $147,554, which included $13,414 (10%)
in contingency.
Construction of this project was funded through the State of California Department of
Parks and Recreation under Proposition 68 Per Capita Grant and through the City’s
Landscaping Operating Budget in the General Fund (Fund 100). The General Fund will
be reimbursed $78,750 from OGALS grant funding.
Attachments:
1. NOC 2023 Gilroy Sports Park 23-PW-276
Agenda Item No. 7.5
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Agenda Item No. 7.5
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Agenda Item No. 7.5
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Agenda Item No. 7.5
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9.1. Public Hearing Regarding the Proposed Water and Wastewater Rate
Increases
1. Staff Report:
2. Open Public Hearing
3. Close Public Hearing
4. Possible Action:
1. Adopt as final the August 2023 Comprehensive Water and Wastewater
Utility Rate Study Report prepared by NBS.
2. Adopt a resolution approving water and wastewater rate adjustments.
Agenda Item No. 9.1
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Page 1 of 5
City of Gilroy
STAFF REPORT
Agenda Item Title:Public Hearing Regarding the Proposed Water and
Wastewater Rate Increases
Meeting Date:October 16, 2023
From:Jimmy Forbis, City Administrator
Department:Finance
Submitted By:Harjot Sangha, Finance Director
Prepared By:Harjot Sangha, Finance Director
STRATEGIC PLAN GOALS Develop a Financially Resilient Organization
Maintain and Improve City Infrastructure
RECOMMENDATION
1. Adopt as final the August 2023 Comprehensive Water and Wastewater Utility Rate
Study Report prepared by NBS.
2. Adopt a resolution approving water and wastewater rate adjustments.
EXECUTIVE SUMMARY
The City engaged a consultant, NBS Government Finance Group, to conduct a
Comprehensive Water and Wastewater Rate Study (Rate Study) with several
objectives, including meeting revenue requirements, reviewing rising costs of providing
services, funding capital improvements and change in costs, and complying with
specific legal requirements, such as Proposition 218 which requires that rates not
exceed the cost of providing the service and be proportionate to the cost of providing
service to all customers. The Rate Study yielded that both utilities must establish multi-
year rate adjustments to continue investing in the critical infrastructure and keep pace
with rising operating costs. The overall rate adjustments (as a percentage) necessary
for both utilities for a five-year period are as follows:
Agenda Item No. 9.1
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Public Hearing Regarding the Proposed Water and Wastewater Rate Increases
City of Gilroy City Council Page 2 of 5 October 16, 2023
FY24*FY25 FY26 FY27 FY28
Water 8%8%6%4%4%
Wastewater 4%4%4%4%4%
*First-year adjustments will vary for each customer based on their customer classification, as the cost-of-service analysis has been
updated to reallocate costs recovered between customer classes.
On August 21, 2023, the City Council received a presentation on the Rate Study and
the proposed rate adjustments. City Council also adopted a resolution declaring intent
to adjust the water and wastewater rates, commencing the Proposition 218 noticing
process and setting October 16, 2023, as the date for the Public Hearing to adopt the
proposed water and wastewater rates. The August 21st staff report is included as an
attachment to this report.
The City has completed the required noticing and is now at the final step of the
Proposition 218 process, which is to conduct the Public Hearing and adopt the rates. As
of writing this report, the City has received 26 protest letters opposing the rate
adjustments, which is substantially below the required majority (50% plus one) needed
of approximately 15,000 customers opposing the proposed rate adjustments to not
institute the adjustments.
Staff recommends the City Council conduct the Public Hearing, accept the final
submission or withdrawals of protest letters, and adopt a resolution approving the water
and wastewater rate adjustments.
ANALYSIS
The Rate Study was prepared in accordance with industry standards and included three
primary components: 1) development of a financial plan which compared the current
sources and uses of the funds and determined the revenue needed from the rates and
project rate adjustments; 2) cost of service analysis which classified the expenses and
allocated costs to different customer classes in a fair and equitable manner; and 3) rate
design analysis which considered relationship between fixed (personnel, debt service,
etc.) and variable costs (purchased water, electricity, etc.) to be recovered. The Rate
Study is attached to this staff report.
Water Rates Adjustments
The table below outlines the current and proposed water rates for FY24 through FY28.
It is important to note that since the last rate study in 2015, factors such as the number
of meters and consumption of each customer class have changed. The cost-of-service
analysis rebalances the allocation based on these factors, including the shift to 40%
fixed and 60% variable proportions. As a result, there is an uneven adjustment in the
first year. In subsequent years, the proposed charges are adjusted by the proposed
percentage increases in total rate revenue needed for the net revenue requirement.
Agenda Item No. 9.1
Packet Page 36 of 199
Public Hearing Regarding the Proposed Water and Wastewater Rate Increases
City of Gilroy City Council Page 3 of 5 October 16, 2023
Note: The proposed rates for FY24 will be implemented on January 1, 2024, and annually on January 1 for subsequent fiscal years
thereafter
Wastewater Rates Adjustments
The table below outlines the current and proposed wastewater rates for FY24 through
FY28. Like the water rates, the first year’s rates reflect the cost-of-service adjustments
that occur based on changes in customer classes, consumption, and other factors. The
projected rates for subsequent years are adjusted by the proposed 4% annual
increases.
Note: The proposed rates for FY24 will be implemented on January 1, 2024, and annually on January 1 for subsequent fiscal years
thereafter
Public Hearing
The Public Hearing is the final step of the Proposition 218 process to adopt the water
and wastewater rate adjustments, which is being conducted after the minimum of 45
days from the mailing of the notification of proposed rate adjustments. As of the writing
of this report (October 10, 2023), 26 written protest letters have been received regarding
the rate adjustments, which is substantially below the required majority (50% plus one)
needed from approximately 15,000 customers opposing the proposed rate adjustments
to not institute the adjustments. The Council is required to accept all written protests
Agenda Item No. 9.1
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Public Hearing Regarding the Proposed Water and Wastewater Rate Increases
City of Gilroy City Council Page 4 of 5 October 16, 2023
received before the close of the Public Hearing. Provided a majority protest is not
received, Staff recommends the City Council approve the recommended rate
adjustments by adopting the resolution. The first of the approved increases would
become effective on January 1, 2024, and annually on January 1st for subsequent fiscal
years.
ALTERNATIVES
Council could elect not to adopt the resolution approving the rate adjustments. This is
not recommended as both water and wastewater utility rates have not been adjusted
since 2019, and it is vital for the City to continue investing in critical utilities’
infrastructure and keep pace with rising operational costs.
FISCAL IMPACT/FUNDING SOURCE
The fiscal and resource impact of preparing the report is included in the staff’s annual
workplan. The total cost for the comprehensive water and wastewater rate study is
$72,325, which was budgeted and funded by the Water (705) and Wastewater (700)
Funds.
The new rates would generate an average of $2.7 million annually for the water utility
and an average of $1.8 million for the wastewater utility over the next five-year period.
PUBLIC OUTREACH
The public outreach process commenced in early August, ahead of the Rate Study
presentation to the City Council and included the City’s communication channels such
as social media posts, weekly Email Express, and monthly utility bills with links to the
dedicated utility rate adjustment webpage on the City’s website with relevant information
and notices available in both the English and Spanish language. City staff also
conducted a community meeting on September 6, 2023, which was attended by several
community members. The outreach resulted in increased customer service inquiries to
the utility billing function via phone, email and in person where staff provided pertinent
rate adjustment information.
NEXT STEPS
Provided Council adopts the resolution approving the new rates, staff will begin a
communication campaign advising customers of the upcoming rate adjustments which
will be implemented on January 1, 2024.
Staff will conduct similar notification annually thereafter for subsequent rate adjustments
in the five-year period.
Agenda Item No. 9.1
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Public Hearing Regarding the Proposed Water and Wastewater Rate Increases
City of Gilroy City Council Page 5 of 5 October 16, 2023
Attachments:
1. Draft Resolution
2. August 21, 2023 – Staff Report
3. Rate Study
Agenda Item No. 9.1
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RESOLUTION NO. 2023-XX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GILROY
ESTABLISHING THE CITY’S WATER AND WASTEWATER UTILITY
SERVICE RATES EFFECTIVE JANUARY 1, 2024, AND ADJUSTED
ANNUAL ON JANUARY 1 FOR EACH SUBSEQUENT FISCAL YEAR
THEREAFTER THROUGH FISCAL YEAR 2027-28
WHEREAS, the City of Gilroy has identified ongoing operational and capital needs
associated with the City’s water and wastewater utility system; and
WHEREAS, in order to fund the identified water and wastewater system’s
operational and capital costs, it is necessary to adjust the City’s current water and
wastewater rates; and
WHEREAS, the City of Gilroy engaged NBS Government Finance Group, a firm
with expertise in the analysis of costs relating to utilities, to conduct a rate study of the
City’s water and wastewater utilities; and
WHEREAS, the City Council received the report prepared by NBS Government
Finance Group at the August 21st, 2023, City Council meeting and heard from staff on
this matter; and
WHEREAS, on November 5, 1996, California voters approved Proposition 218,
requiring specific procedures be followed with regard to “property-related” fee increases,
including the need to provide written notice at least 45 days in advance of a public hearing;
and
WHEREAS, pursuant to California Constitution Article XIIID, which is commonly
known as Proposition 218, the City gave at least 45 days’ notice of the time and place of
the public hearing set before the City Council by causing to be mailed the said notice with
instructions on the proper method for submitting a protest, postage prepaid, to all owners
of property subject to the City's water and wastewater utilities system rate schedule, and
to all water and wastewater utility customers on August 28, 2023; and
WHEREAS, on August 21, 2023, the City Council adopted Resolution 2023-49
setting October 16, 2023, as the date for the public hearing for consideration of the water
and wastewater rate adjustments.
WHEREAS, pursuant to law, if a majority of the owners of property subject to the
proposed water and wastewater utilities system rates file valid protests to the
proposed rate, then the City Council may not adopt the new rate; and
WHEREAS, the City Council has received and duly considered all written and
verbal comments provided to it by staff and the public, which comments are hereby
incorporated into the record on this matter; and
WHEREAS, the number of protests compared to the number of parcels currently
receiving water and wastewater services from the City is less than 50%.
Agenda Item No. 9.1
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Resolution No. 2023-XX
Adjust Water and Wastewater Rates with Proposition 218 Hearing and Notice Authorization
City Council Regular Meeting | August 21, 2023
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NOW, THEREFORE THE CITY COUNCIL OF THE CITY OF GILROY DOES
RESOLVE AS FOLLOWS:
1. The purposes of the fees and reserves set forth herein are to finance the water
and wastewater utilities system costs.
2. The facts and evidence presented to the City Council establish that the cost
determinations set forth in the NBS rate study are reasonable and proportional,
and the fees expected to be generated will not exceed those reasonable and
proportional costs.
3. The City Council hereby adopts the adjusted water and wastewater rate schedule,
the reserve fund targets, and the rate study report. The rates are show in Exhibit
“A”, which is attached hereto and incorporated by reference to be effective for each
monthly cycle beginning on or after January 1, 2024, January 1, 2025, January 1,
2026, January 1, 2027, and January 1, 2028, as described in the Exhibit “A”.
PASSED AND ADOPTED at a Regular Meeting of the City Council on this 16th
day of October 2023 by the following vote:
AYES:COUNCIL MEMBERS:
NOES:COUNCIL MEMBERS:
ABSTAIN:COUNCIL MEMBERS:
ABSENT:COUNCIL MEMBERS:
APPROVED:
Marie Blankley, Mayor
ATTEST:
_______________________
Thai Nam Pham, City Clerk
Agenda Item No. 9.1
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Resolution No. 2023-XX
Adjust Water and Wastewater Rates with Proposition 218 Hearing and Notice Authorization
City Council Regular Meeting | August 21, 2023
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EXHIBIT A
Wastewater Rates
Wastewater revenues pay for the operations and maintenance of the collection system (pipes and pump
stations that transport the wastewater from homes and businesses to the wastewater treatment plant)
and the administrative and regulatory costs to run the system. The treatment plant is operated by the
South County Regional Wastewater Authority (SCRWA), a Joint Powers Authority (JPA) whose members
are the cities of Gilroy and Morgan Hill. A portion of the wastewater revenues collected by the City is used
for payments to SCRWA. In addition, wastewater rates support infrastructure investments, such as
necessary system repairs and renovations to meet new regulations.
The residential wastewater service rates consist of fixed monthly charges. The non-residential wastewater
service rates are comprised of two components: 1) a fixed monthly charge for non-residential wastewater
monitoring and pretreatment program charges and 2) a volumetric monthly charge with four wastewater
strength categories.
The current and proposed wastewater rates charges for the next five years are presented in the Table 1
below:
Table 1 – Current and Proposed Wastewater Rates
Note: Revenue from rate increases assumes an implementation date of January 1, 2024 for new rates. For each fiscal year
thereafter, the assumption is that new rates will also be implemented on January 1st of each year.
Water Rates
Water revenues pay for the operations and maintenance of infrastructure required to deliver water to the
residential and non-residential customers of the City of Gilroy. A portion of these rates fund charges from
the Santa Clara Valley Water District (SCVWD), known as Valley Water, for ground water production and
management, as 100% of the City’s water is pumped from the ground.
The City currently charges residential and non-residential customers a monthly fixed water charge, also
known as base charge, based on meter size. In addition to a fixed monthly charge, all customers pay a
variable charge, also known as volumetric rate, per 1,000 gallons consumed consisting of two rate tiers of
consumption (under and above 30,000 gallons) and three different pump pressure zones. The proposed
water rate design eliminates the two tiers and proposes a uniform tier for all customers.
The current and proposed water rate charges for the next five years are presented in detail on Table 2
below:
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Fixed Charge
Residential (100% Fixed)
Single-Family Residence $46.64 $51.07 $53.11 $55.24 $57.45 $59.74
Multi-Family Residence $33.13 $34.39 $35.77 $37.20 $38.69 $40.23
Non-Residential Volumetric Rates
Low Strength $7.41 $8.36 $8.69 $9.04 $9.40 $9.78
Domestic Strength $9.21 $9.51 $9.89 $10.29 $10.70 $11.12
Medium Strength $12.08 $13.15 $13.67 $14.22 $14.79 $15.38
High Strength $18.63 $21.56 $22.42 $23.32 $24.25 $25.22
Non-Residential - Monitoring & Pretreatment Program Base Rate Monthly Charges
Significant/Categorical $240.95 $287.19 $298.68 $310.63 $323.05 $335.98
Non-Significant/Categorical $95.22 $114.64 $119.22 $123.99 $128.95 $134.11
Other Non-Residential $11.47 $15.47 $16.09 $16.73 $17.40 $18.09
Sewer Rate Schedule Current
Rates
Proposed Sewer Rates
Agenda Item No. 9.1
Packet Page 42 of 199
Resolution No. 2023-XX
Adjust Water and Wastewater Rates with Proposition 218 Hearing and Notice Authorization
City Council Regular Meeting | August 21, 2023
Page 4 of 4
1
1
4
2
Table 2 – Current and Proposed Water Rates
Note: Revenue from rate increases assumes an implementation date of January 1, 2024 for new rates. For each fiscal year
thereafter, the assumption is that new rates will also be implemented on January 1st of each year.
Valley Water Passthrough Rate Increase for Groundwater
Valley Water charges the City a ground production charge for 100% of the City’s water that is pumped
from the ground. In the event that Valley Water imposes additional charges associated with the pumping
of groundwater, the City will implement a passthrough adjustment to customer’s bills no earlier than
thirty (30) days after the adjustment has been enacted by Valley Water and noticed to all City customers.
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Fixed Service Charges
Meter Size
3/4 inch $11.53 $20.67 $22.32 $23.66 $24.61 $25.59
1 inch $19.24 $29.05 $31.38 $33.26 $34.59 $35.98
1 1/2 inch $38.47 $50.02 $54.02 $57.26 $59.55 $61.93
2 inch $61.55 $75.17 $81.18 $86.05 $89.50 $93.08
3 inch $115.39 $142.24 $153.62 $162.84 $169.36 $176.13
4 inch $192.30 $217.70 $235.12 $249.23 $259.20 $269.57
6 inch $384.62 $427.32 $461.50 $489.19 $508.76 $529.11
8 inch $615.37 $678.85 $733.16 $777.15 $808.23 $840.56
10 inch $884.50 $1,768.83 $1,910.34 $2,024.96 $2,105.95 $2,190.19
Residential Customers - Tiered Volumetric Rates
Tier 1 - Zone 1 $4.39 $4.00 $4.32 $4.58 $4.77 $4.96
Tier 1 - Zone 2 $4.93 $4.37 $4.72 $5.00 $5.20 $5.41
Tier 1 - Zone 3 $5.52 $4.73 $5.11 $5.41 $5.63 $5.85
Tier 2 ( more than 30 TG)
Tier 2 - Zone 1 $4.93 N.A. N.A. N.A. N.A. N.A.
Tier 2 - Zone 2 $5.47 N.A. N.A. N.A. N.A. N.A.
Tier 2 - Zone 3 $6.06 N.A. N.A. N.A. N.A. N.A.
Note: The City recently transitioned from July1-June 30 fiscal years to calendar years (January to December).
Current
Rates
Proposed RatesWater Rate Schedule
Variable Charges for All Water Consumed ($/1,000 gallons (or TG))
Uniform Vol. Rates
Agenda Item No. 9.1
Packet Page 43 of 199
Page 1 of 10
City of Gilroy
STAFF REPORT
Agenda Item Title:Presentation of the Comprehensive Water and
Wastewater Utilities Rate Study; Adoption of a
Resolution Commencing the Proposition 218 Noticing
Process, and Setting October 16, 2023, as the Date for
the Public Hearing to Adopt Water and Wastewater
Rates
Meeting Date:August 21, 2023
From:Jimmy Forbis, City Administrator
Department:Finance
Submitted By:Harjot Sangha, Finance Director
Prepared By:Harjot Sangha, Finance Director
STRATEGIC PLAN GOALS Develop a Financially Resilient Organization
Maintain and Improve City Infrastructure
RECOMMENDATION
1. Receive report; and
2. Adopt a resolution:
a. declaring intent to adjust water and wastewater rates;
b. commencing the Proposition 218 noticing process; and
c. Setting October 16, 2023, as the date for the Public Hearing to adopt the new
proposed water and wastewater rates.
EXECUTIVE SUMMARY
The City engaged a consultant, NBS Government Finance Group, to conduct a
Comprehensive Water and Wastewater Rate Study (Rate Study) with several
objectives, including meeting revenue requirements, reviewing rising costs of providing
services, funding capital improvements and change in costs, and complying with
specific legal requirements, such as Proposition 218 which requires that rates not
exceed the cost of providing the service and be proportionate to the cost of providing
service to all customers. The City’s goal is to ensure both utilities maintain adequate
Agenda Item No. 9.1
Packet Page 44 of 199
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a
Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as
the Date for the Public Hearing to Adopt Water and Wastewater Rates
City of Gilroy City Council Page 2 of 10 August 21, 2023
funding for operational and capital costs, reasonable reserves, and revenue stability in
the utility rates. The Rate Study has yielded that both utilities will need to establish
multi-year rate adjustments to continue investing in the critical infrastructure and keep
pace with the rising operating costs. The overall rate adjustments (as a percentage)
necessary for both utilities for a five-year period are as follows:
FY24*FY25 FY26 FY27 FY28
Water 8%8%6%4%4%
Wastewater 4%4%4%4%4%
*First-year adjustments will vary for each customer based on their customer classification, as the cost-of-service analysis has been
updated to reallocate costs recovered between customer classes.
Staff recommend the City Council accept the Rate Study report, authorize the
commencement of the required Proposition 218 Noticing requirements, and set October
16, 2023, as the date for the Public Hearing to adopt the new proposed water and
wastewater rates. If approved, the proposed rates for FY24 will become effective on
January 1, 2024, and annually on January 1 for subsequent fiscal years thereafter.
BACKGROUND
As a full-service City, Gilroy owns and operates its own water and wastewater utilities,
providing services to over 15,000 customers and growing. To ensure both utilities
collect revenue sufficient to meet the growing demand, keep pace with the rising
operational costs, and fund the multi-year capital improvement plans, the City has
conducted a utilities' rate study. The last utility rate study was completed in 2015, and
the City has kept its water and wastewater rates the same since 2019.
The City's operational costs for the water utility continue to increase due to inflationary
cost increases for materials/services, electricity, and continued increases in water
extraction charges from Valley Water. Statewide conservation efforts enacted in recent
years due to the droughts also impacted the revenues collected as the City was
mandated to reduce water consumption. In 2021, the City issued wastewater revenue
bonds to finance the City's share (approximately $50 million) of the $86 million
expansion of the South County Regional Wastewater Authority (SCRWA) plant due to
be complete in 2025. In addition to the annual debt payment requirements, the City's
cost for the wastewater utility is also expected to increase for its share of the treatment
plant expense as the expansion becomes operational and state mandates require
additional compliance.
In April 2023, the City approved the updated Water and Wastewater Master Plans. The
Plans assess utility systems against the desired level of service and identify
infrastructure improvements needed to fix existing systems' deficiencies and service
growth. The plans collectively identified over $50.3 million in new improvements, of
which $21.7 million is for existing users (ratepayers) and $28.6 million for future
developments.
Agenda Item No. 9.1
Packet Page 45 of 199
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a
Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as
the Date for the Public Hearing to Adopt Water and Wastewater Rates
City of Gilroy City Council Page 3 of 10 August 21, 2023
For the City to continue investing in critical utilities' infrastructure and keep pace with
rising operational costs, the City needs to establish multi-year rate adjustments.
ANALYSIS
A comprehensive rate study, such as the one City initiated, typically includes three
components and is intended to follow industry standards:
1. Financial Plan – compares the current sources and uses of the funds and
determines the revenue needed from rates and project rate adjustments. The net
revenue requirement is the amount of rate revenue required to fund operations,
capital improvement (including debt service), and reserves. As current rates fall
short of that net revenue requirement, rate adjustments are typically warranted.
2. Cost-of-Service Analysis – An analysis that classifies expenses and allocates
costs to different customer classes in a fair and equitable manner. These
classifications include commodity, capacity, and customer service-related costs.
3. Rate Design Analysis – An analysis of the rate structure which considers the
relationship between fixed (personnel, debt service, etc.) and variable costs
(purchased water, electricity, etc.) to be recovered. Most rate structures contain a
fixed, or a minimum, charge in combination with a volumetric charge. Ideally,
utilities should recover all their fixed costs from fixed charges and all their
variable costs from volumetric charges.
The Rate Study is attached to this staff report. The below sections highlight notable
changes within respective utilities and the recommended rate adjustments for the next
five-year period.
Water Utility and Rates
Financial Plan
•The Rate Study determined that the projected net revenue requirements for the
water system range annually from $15.9 million in Fiscal Year 2023-24 (FY24) to
$18.8 million in FY28. Without rate adjustments, the water utility is projected to
have a gap in the net revenue requirement of approximately $2.0 million in FY24,
increasing to $3.9 million by FY28.
•Reserves:
o The operating reserve is recommended to equal six months of operating
and maintenance expenses, which is approximately $8.2 million in FY24.
An operating reserve is intended to promote financial viability in the event
of any short-term fluctuation in revenues and/or expenditures, such as
those caused by weather patterns and variability in demand-based
revenues (volumetric charges).
o The capital rehabilitation/replacement reserve is recommended to be
equal to 50% of the average annual capital improvement costs over the
five-year period. The five-year average is approximately $8.2 million, with
Agenda Item No. 9.1
Packet Page 46 of 199
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a
Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as
the Date for the Public Hearing to Adopt Water and Wastewater Rates
City of Gilroy City Council Page 4 of 10 August 21, 2023
the recommended annual reserve being approximately $4.1 million. This
reserve is intended to be a cash resource set aside to address long-term
capital system replacement and rehabilitation needs.
o The water utility is projected to meet the total recommended operating and
capital reserve target during the five-year period, FY24 through FY28.
•Capital improvement Projects: The water system has approximately $41 million
in planned capital expenditures over the next five years, an average of $8.2
million annually. The City has accumulated fund balances programmed to be
utilized for the capital improvement program. The Rate Study assumes the City
will need to issue approximately $16 million in revenue bonds in the latter years
of the five-year period. However, whether the new debt will be required will
depend on the actual delivery of capital projects (i.e., the timing and costs) in the
current budget cycle.
Cost-of-Service and Rate Design Analysis
•The City currently charges residential and non‐residential customers a monthly
fixed water charge, also known as a base charge, based on meter size. In
addition to a fixed monthly charge, all customers pay a variable charge, also
known as volumetric rate, per 1,000 gallons consumed, consisting of two rate
tiers of consumption (under and above 30,000 gallons) and three different pump
pressure zones.
•The City’s current rates collect revenue in proportions of approximately 30% fixed
and 70% variable. The cost-of-service analysis determined the actual cost
distribution of the fixed and variable costs to approximately 40% fixed and 60%
variable. The current rate design is not reflective of the actual cost distribution;
thus, a change in the water utility rate structure is recommended to align with the
actual distribution. For comparison purposes, the Rate Study also evaluated the
current rate structure (30%/70%), and it is presented as an alternative 2 in the
study.
•The City’s current variable (volumetric) charge consists of two rate tiers of
consumption (under and above 30,000 gallons) and three different pump
pressure zones. Given that the City receives its water supply from a single
source, it is recommended that the City transition to a uniform tier for all
customers.
Water Rate Adjustments
The table below outlines the current and proposed water rates for FY24 through FY28.
It is important to note that since the last rate study in 2015, factors such as the number
of meters and consumption of each customer class have changed. The cost-of-service
analysis rebalances the allocation based on these factors, including the shift to 40%
fixed and 60% variable proportions. As a result, there is an uneven adjustment in the
first year. In subsequent years, the proposed charges are adjusted by the proposed
percentage increases in total rate revenue needed for the net revenue requirement.
Agenda Item No. 9.1
Packet Page 47 of 199
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a
Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as
the Date for the Public Hearing to Adopt Water and Wastewater Rates
City of Gilroy City Council Page 5 of 10 August 21, 2023
Note: The proposed rates for FY23/24 will be implemented on January 1, 2024, and annually on January 1 for subsequent fiscal
years thereafter
Impact on Water Bills
The Rate Study also compares the current and proposed water rates on the customer
bills. The following two charts illustrate a five-year comparison of the average monthly
water bill impact for a single-family residential and commercial customer.
Based on an average of 8,300 gallons monthly consumption for single-family residential,
the water bill will increase from the current $55.68/month to $62.29/month in the first
year and $77.12/month by FY28.
Agenda Item No. 9.1
Packet Page 48 of 199
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a
Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as
the Date for the Public Hearing to Adopt Water and Wastewater Rates
City of Gilroy City Council Page 6 of 10 August 21, 2023
Based on an average of 32,000 gallons of monthly consumption for commercial
customers, the water bill will decrease from the current $152.01/month to
$148.80/month in the first year and subsequently increase annually to $184.24/month
by FY28. The change in the first year is attributed to the shift in rate design to align with
the actual 60% fixed and 40% variable distribution.
Wastewater Utility and Rates
Financial Plan
•The Rate Study determined that the projected net revenue requirements for the
wastewater system range annually from $13.1 million in Fiscal Year 2023-24
(FY24) to $17.1 million in FY28. Without rate adjustments, the wastewater utility
is projected to have a gap in the net revenue requirement of approximately $0.3
million in FY24, increasing to $2.7 million by FY28, and would struggle to meet its
debt service coverage requirements on the existing 2021A sewer revenue bonds.
•Reserves:
o The operating reserve is recommended to equal six months of operating
and maintenance expenses, which is approximately $6.8 million in FY24.
An operating reserve is intended to promote financial viability in the event
of any short-term fluctuation in revenues and/or expenditures, such as
those caused by weather patterns and variability in demand-based
revenues (volumetric charges) or costs of wastewater treatment.
o The capital rehabilitation/replacement reserve is recommended to be
equal to 50% of the average annual capital improvement costs over the
five-year period. The five-year average is approximately $8.8 million, with
Agenda Item No. 9.1
Packet Page 49 of 199
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a
Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as
the Date for the Public Hearing to Adopt Water and Wastewater Rates
City of Gilroy City Council Page 7 of 10 August 21, 2023
the recommended annual reserve being approximately $4.4 million. This
reserve is intended to be a cash resource set aside to address long-term
capital system replacement and rehabilitation needs.
o The wastewater utility is projected to meet the total recommended
operating and capital reserve target during the five-year period, FY24
through FY28, as well as the debt service coverage ratio required by the
2021A bond covenants.
•Capital improvement Projects: The wastewater system has an average of $8.8
million annually in planned capital expenditures over the next five years. The City
has accumulated fund balances and bond proceeds (SCRWA Expansion Project)
that are programmed to be utilized for the capital improvement program. Thus,
the rate increases required for the wastewater utility are less than those needed
for the water utility.
Cost-of-Service and Rate Design Analysis
•Currently, the wastewater utility’s residential customers are charged a fixed
monthly charge, and non-residential customers are charged a fixed monthly
charge and a volumetric charge. The non-residential fixed monthly charge is
based on City’s wastewater monitoring and pretreatment program costs and is
determined by the use of the facility. Similarly, the non-residential variable charge
is based on the strength category (low to high), also determined by the use of the
facility, which takes into account the biochemical oxygen demand (BOD) and
total suspended solids (TSS) in accordance with industry standards.
o Low Strength (example: offices, schools, retail, and department stores)
o Domestic Strength (example: hotel/motel, auto dealers, service stations,
and beauty shops)
o Medium Strength (example: commercial laundries, multi-use facilities, and
hotels with restaurants)
o High Strength (example: food processors/manufacturers, restaurants,
grocery stores, etc.)
•It is recommended that the wastewater utility maintain the existing rate design,
which utilizes the wastewater strengths for various customer types based on
State Water Resources Control Boards’ guidelines, and it provides consistency
and continuity for the customers.
Wastewater Rate Adjustments
The table below outlines the current and proposed wastewater rates for FY24 through
FY28. Like the water rates, the first year’s rates reflect the cost-of-service adjustments
that occur based on changes in customer classes, consumption, and other factors. The
projected rates for subsequent years are adjusted by the proposed 4% annual
increases.
Agenda Item No. 9.1
Packet Page 50 of 199
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a
Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as
the Date for the Public Hearing to Adopt Water and Wastewater Rates
City of Gilroy City Council Page 8 of 10 August 21, 2023
Note: The proposed rates for FY23/24 will be implemented on January 1, 2024, and annually on January 1 for subsequent fiscal
years thereafter
Impact on Wastewater Bills
The Rate Study compares the current and proposed wastewater rates on the customer
bills. The following two charts illustrate a five-year comparison of the average monthly
wastewater bill impact for a single-family residential and commercial customer.
For single-family residential, the average monthly will increase from the current
$46.64/month to $51.07/month in the first year and increase to $59.74/month by FY28.
For non-residential customers, the average monthly will increase from the current
$106.31/month to $119.92/month in the first year and increase to $140.29/month by
FY28. Bill comparisons for other strength categories are included in the Rate Study.
Agenda Item No. 9.1
Packet Page 51 of 199
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a
Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as
the Date for the Public Hearing to Adopt Water and Wastewater Rates
City of Gilroy City Council Page 9 of 10 August 21, 2023
Next Steps
In order to implement the fee adjustments, the City is required to follow Proposition 218
majority protest proceedings. Proposition 218 requires specific procedures to be
followed with regard to property-related fee increases. The California Constitution
requires local governments to give mailed notice of any property-related proposed fee
changes at least 45 days before holding a public hearing where the City Council may
adopt or reject the changes. Those opposed to the proposed rate adjustments can
submit written protests to the City. If a majority (50% plus one) of customers oppose the
proposed rate adjustments, City Council cannot implement the proposed increases.
This process includes the following steps:
•Schedule a public hearing requiring 45 days’ of mailed public notice to adopt the
rate adjustments. Draft of the 45-day Proposition 218 Public Notice is included as
attachment 3.
•Mail the Public Notice describing the proposed rate adjustments to all property
owners and occupants subject to the rate adjustments.
•During the 45 days following the Public Notice, the City will accept any eligible
written protests from property owners and occupants subject to the rate
adjustments (protests can be received until the end of the public hearing).
•Only one rate protest per property will be counted. For example, if the property
owner and their tenant file a protest, only one will be counted for that property.
Agenda Item No. 9.1
Packet Page 52 of 199
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a
Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as
the Date for the Public Hearing to Adopt Water and Wastewater Rates
City of Gilroy City Council Page 10 of 10 August 21, 2023
•After the public hearing, and assuming a majority of protests (50% plus one) is
not received, conduct a vote of the City Council to adopt the rate adjustments.
•The proposed rate adjustments will become effective on January 1, 2024, after
the public hearing and annually on January 1 of each subsequent fiscal year
through FY28.
Staff recommends the City Council adopt a resolution (attachment 2) declaring intent to
adjust the water and wastewater rates, authorizing the staff to commence the
Proposition 218 noticing process, and setting October 16, 2023, as the date of the
public hearing where Council will consider adoption of the rates.
ALTERNATIVES
Council could elect not to adopt the resolution of intent to adjust the water and
wastewater rates. This is not recommended as the water and wastewater utility rates
have not been adjusted since 2019, and it is vital for the City to continue investing in
critical utilities' infrastructure and keep pace with rising operational costs.
FISCAL IMPACT/FUNDING SOURCE
The fiscal and resource impact of preparing the report is included in the staff’s annual
workplan. The total cost for the comprehensive water and wastewater rate study is
$72,325, which was budgeted and funded by the Water (705) and Wastewater (700)
Funds.
The cost of printing/mailing the Proposition 218 notices is estimated at $15,000 and will
be funded by the Water and Wastewater Funds.
If the Proposition 218 process concludes without the majority protest, and the water and
wastewater rates are adopted as presented, the new rates would generate an average
of $2.7 million annually for the water utility and an average of $1.8 million for the
wastewater utility, over the next five-year period.
PUBLIC OUTREACH
Each property owner will receive a mailed Proposition 218 public hearing notice. In
addition, the notice will also be included with the monthly utility bills for the September
statements to notify all current customers. Staff will also conduct a community meeting
in September 2023, a date to be determined, to present the Rate Study.
Attachments:
1. Utilities Rate Study
2. Draft Resolution
3. Draft Proposition 218 Notice
Agenda Item No. 9.1
Packet Page 53 of 199
Draft Report for:
Comprehensive Water and
Wastewater Utility Rate Study
Aerial view of City of Gilroy
via Google Earth
nbsgov.com
August 2023
I
Agenda Item No. 9.1
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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study
Prepared by NBS – August 2023
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Agenda Item No. 9.1
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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study
Prepared by NBS – August 2023 TOC
TABLE OF CONTENTS
A. PURPOSE .................................................................................................................... 1
B. OVERVIEW OF THE STUDY .......................................................................................... 1
A. KEY WATER RATE STUDY ISSUES ................................................................................. 6
B. FINANCIAL PLAN ......................................................................................................... 6
C. COST-OF-SERVICE ANALYSIS ....................................................................................... 9
D. CHARACTERISTICS OF WATER CUSTOMERS BY CUSTOMER CLASS ........................... 11
E. RATE DESIGN ANALYSIS ............................................................................................ 12
F. PROPOSED WATER RATES ........................................................................................ 14
G. COMPARISON OF CURRENT AND PROPOSED WATER BILLS ..................................... 15
A. KEY WASTEWATER RATE STUDY ISSUES ................................................................... 20
B. FINANCIAL PLAN ....................................................................................................... 20
C. COST-OF-SERVICE ANALYSIS ..................................................................................... 22
D. RATE DESIGN ANALYSIS ............................................................................................ 24
E. PROPOSED WASTEWATER RATES ............................................................................. 25
F. COMPARISON OF CURRENT AND PROPOSED WASTEWATER BILLS .......................... 26
A. CONSULTANT RECOMMENDATIONS ........................................................................ 31
B. NEXT STEPS ............................................................................................................... 31
C. NBS’ PRINCIPAL ASSUMPTIONS AND CONSIDERATIONS .......................................... 31
Agenda Item No. 9.1
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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study
Prepared by NBS – August 2023 TOF
TABLE OF FIGURES
Figure 1. Primary Components of a Rate Study ............................................................................. 1
Figure 2. Summary of Water Revenue Requirements ................................................................... 8
Figure 3. Summary of Primary Water Reserve Funds .................................................................... 9
Figure 4. Allocation Percentages of Revenue Requirements ....................................................... 10
Figure 5. Allocated Net Revenue Requirements – Preferred Rate Alternative ............................ 10
Figure 6. Water Consumption by Customer Class ....................................................................... 11
Figure 7. Peaking Factors by Customer Class .............................................................................. 11
Figure 8. Number of Meters by Customer Class .......................................................................... 12
Figure 9. Hydraulic Capacity Factors ........................................................................................... 13
Figure 10. Equivalent Meters ...................................................................................................... 13
Figure 11. Calculation of Fixed Service Charges .......................................................................... 14
Figure 12. Uniform Tier Rates for FY 2023/24 ............................................................................. 14
Figure 13. Current and Proposed Water Rates ............................................................................ 15
Figure 14. Monthly Water Bill Comparison for Residential Customers ....................................... 16
Figure 15. Monthly Water Bill Comparison for Commercial Customers ...................................... 17
Figure 16. Residential Water Bills – 5-Years ................................................................................ 17
Figure 17. Commercial Water Bills – 5-Years ............................................................................... 18
Figure 18. Residential Bills Comparison for Similar Communities ............................................... 19
Figure 19. Summary of Wastewater Revenue Requirements ...................................................... 21
Figure 20. Summary of Wastewater Reserve Funds .................................................................... 21
Figure 21. Development of the Flow Allocation Factor ............................................................... 22
Figure 22. Development of the Strength Allocation Factor ......................................................... 23
Figure 23. Development of the Customer Allocation Factor ....................................................... 23
Figure 24. Allocation of Revenue Requirements by Customer Class ........................................... 24
Figure 25. Development of Fixed and Variable Charges .............................................................. 25
Figure 26. Current vs. Proposed Wastewater Rates .................................................................... 26
Figure 27. Single-Family Residential Wastewater Bill Comparison .............................................. 26
Figure 28. Multi-Family Residential Wastewater Bill Comparison ............................................... 27
Figure 29. Non-Residential Low Strength Wastewater Bill Comparison ...................................... 28
Figure 30. Non-Residential Domestic Strength Wastewater Bill Comparison ............................. 28
Figure 31. Non-Residential Medium Strength Wastewater Bill Comparison ............................... 29
Figure 32. Non-Residential High Strength Wastewater Bill Comparison ..................................... 29
Figure 33. Non-Residential High Strength Wastewater Bill Comparison ..................................... 30
Agenda Item No. 9.1
Packet Page 57 of 199
City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study
Prepared by NBS – August 2023 1
Section 1. Purpose and Overview of the Study
A. Purpose
The City of Gilroy (City) retained NBS to conduct a comprehensive utility rate study for its water and
wastewater enterprise funds. The City had several objectives and goals in mind for this study including
meeting revenue requirements, reviewing the rising costs of providing services, funding capital
improvements and changes in costs, and complying with certain legal requirements (e.g., California
Constitution Article XIII D, Section 6, which is commonly referred to as Proposition 218 [Prop 218]). The
City’s broader objectives in this study include ensuring adequate funding for operating and capital costs,
maintaining reasonable reserves, ensuring revenue stability in utility rates. The rates resulting from this
study were developed in a manner that is consistent with industry standard cost-of-service principles. In
addition to documenting the rate study methodology, this report is provided with the intent to assist the
City in its continuing effort to maintain transparent communications with the residents and community
it serves.
In developing new rates for the City’s enterprise funds, NBS worked cooperatively with City staff and the
City Council (Council) in selecting the appropriate rate alternatives that address the City’s goals and
objectives. Based on input provided by City staff, NBS proposes the rates summarized in this report. The
Council has the final decision regarding the adoption of the proposed rates and whether to proceed with
the Prop 218 approval process.
B. Overview of the Study
Comprehensive rate studies, such as this one, typically include three components: (1) preparation of a
financial plan that identifies the net revenue requirements for the utility; (2) analysis of the cost to serve
each customer class, and (3) the rate structure design. These steps are shown in Figure 1 and are
intended to follow industry standards and reflect the fundamental principles of cost-of-service rate
making embodied in the American Water Works Association’s (AWWA) Principles of Water Rates, Fees,
and Charges,1 also referred to as Manual M1, and the Water Environment Federation’s Financing and
Charges for Wastewater Systems (Manual of Practice No. 27).2
Rate studies also address requirements under Prop 218 that rates not exceed the cost of providing the
service and be proportionate to the cost of providing service for all customers. In terms of the
chronology of the study, the three steps shown in Figure 1 represent the order in which they were
performed in this study.
Figure 1. Primary Components of a Rate Study
1 Principles of Water Rates, Fees, and Charges, Manual of Water Supply Practices, Manual M1, American Water Works
Association (AWWA), 7th Edition, 2017.
2 Financing and Charges for Wastewater Systems, Manual of Practice No. 27, Water Environment Federation, Fourth Edition,
2018.
Agenda Item No. 9.1
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1 FINANCIAL
PLAN
2 COST-OF-
SERVICE
ANALYSIS
3 RATE DESIGN
ANALYSIS
Compares current sources and
uses of funds and determines the
revenue needed from rates and
projects rate adjustments.
Proportionally allocates revenue
requirements to the customer
classes in compliance with industry
standards and State Law.
Considers the rate structure that
best meets the City’s need to collect
rate revenue from various types of
customers.
NBS projected revenues and expenditures, developed net revenue requirements, performed cost-of-
service rate analyses, and developed new water and wastewater rates for the City using this approach.
The following sections in this report present an overview of the methodologies, assumptions, and data
used along with the financial plans and rates developed. Detailed tables and figures documenting the
development of the proposed rates are provided in the Appendices.
The City provided NBS with the data necessary to conduct the study, including historical, current, and
projected revenues and expenditures, number of customer accounts, and water consumption data along
with other operational and capital cost information.
FINANCIAL PLAN
As a part of the rate study, NBS projected revenues and expenditures on a cash-flow basis for the next
five (5) years. The amount of rate revenue required, that will allow reserves to be maintained at the
recommended levels, is known as the net revenue requirement. As current rate revenue falls short of
the net revenue requirement, rate adjustments – or more accurately, adjustments in the total revenue
collected from rates – are recommended. This report presents an overview of the methodologies,
assumptions, and data used along with the financial plan and proposed rates developed in this study.3
COST-OF-SERVICE ANALYSIS
The basic purpose of the cost-of-service analysis (COSA) is to fairly and equitably allocate costs to
customer classes. The cost-of-service analysis consists of two major components: (1) the classification of
expenses, and (2) the allocation of costs to customer classes. For example, a key task is the
“classification” of the water revenue requirements into the following categories:
• Commodity related costs
• Capacity related costs
• Customer service related costs
For the sewer utility, the normal classification of sewer revenue requirements uses the following
categories:
• Commodity related costs
3 The complete financial plans are available in the Appendices.
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• Capacity related costs
• Customer service related costs
However, a unique aspect of the City’s sewer rates is the use of separate fixed charges to recover the
costs of the monitoring, sampling, and pretreatment program costs.4 These costs are significantly
different between various non-residential customers, who have been placed into one of three
categories:
• Significant/Categorical
• Non-Significant/Categorical
• Other Non-Residential
Because these costs are allocated directly to these three classes of non-residential customers, they are
allocated directly to these classes; this adds a fourth classification category (i.e., monitoring, sampling,
and pretreatment program costs). Together, these four allocation factors represent the cost allocation
classifications used in the cost of service analysis. Further details are discussed below and documented
in the Appendices.
RATE DESIGN ANALYSIS
During the rate design phase of the study, NBS and City staff worked together to develop rate
alternatives that will meet the City’s objectives. It is important for the City to send proper price signals
to its customers about the actual cost of providing service. This objective is typically addressed through
both the magnitude of the rate adjustments and the rate structure design. In other words, both the
amount of revenue collected and the way in which the revenue is collected from customers are
important.
Several criteria are typically considered in setting rates and developing sound rate structures. The
fundamentals of this process have been well documented in several rate-setting manuals, such as
AWWA’s Manual M1. The foundation for evaluating rate structures is generally credited to James C.
Bonbright in Principles of Public Utility Rates,5 which outlines pricing policies, theories, and economic
concepts along with various rate designs. The following is a simplified list of the attributes of a sound
rate structure:
• Rates should be easy to understand from the customer’s perspective.
• Rates should be easy to administer from the utility’s perspective.
• Rates should be equitable and non-discriminating (i.e., cost-based).
• Rates should promote the efficient allocation of the resource.
• There should be continuity in the rate making philosophy over time.
• Rates should address other utility policies (e.g., conservation and economic development).
• Rates should provide month-to-month and year-to-year revenue stability.
4 This methodology for recovering these program costs was first established in the City’s 2015 rate study, and the City has decided
to continue with this approach.
5 James C. Bonbright, Albert L. Danielsen, and David R. Kamerschen, Principles of Public Utility Rates, Arlington, VA: Public Utilities
Report, Inc., Second Edition, 1988, pp. 383-384.
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RATE STRUCTURE TERMINOLOGY
This section covers basic rate design criteria that NBS and City staff considered as a part of their review
of the rate structure alternatives. One of the most fundamental points in considering rate structures is
the relationship between fixed and variable costs. Fixed costs, such as debt service and personnel costs,
typically do not vary with the amount of water consumed. In contrast, variable costs, such as the cost of
purchased water, chemicals, and electricity, tend to change with the quantity of water sold. Most rate
structures contain a fixed, or minimum, charge in combination with a volumetric charge.
Fixed Charges – Fixed charges can be called base charges, minimum monthly charges, customer
charges, fixed meter charges, etc. Fixed charges for water utilities typically increase by meter
size. For example, a customer with a 2-inch meter has a fixed meter charge that is more than
five times greater than the typical residential customer based on the safe operating capacity of
the meter.6 Since a large portion of utility costs are typically related to meeting capacity
requirements, individual capacity demands are important in establishing equitable rates for
customers.
Variable (Consumption-Based) Charges – In contrast to fixed charges, variable costs, such as
purchased water, groundwater replenishment costs, and the cost of electricity used in pumping
water and chemicals for treatment, tend to change with the quantity of water produced. For a
water utility, variable charges are calculated based on a metered consumption per unit price
(e.g., per 100 cubic feet, or HCF).
Uniform (Single-Tier) Water Rates – There are significant variations in the basic philosophy of
variable charge rate structure alternatives. Under a uniform (single tier) rate structure, the cost
per unit does not change with consumption and, therefore, provides a simple and
straightforward approach from the customer’s perspective and in terms of the City’s rate
administration.
Zonal Water Rates – The City has chosen to reflect the cost variations due to pumping costs for
moving water to the three elevation zones in the City. This is based on the higher costs for
pumping-related energy costs and additional infrastructure for more pumping stations.
However, the City has decided to only include the actual energy costs in the zonal water rates.
Tiered Water Charges – The 2015 San Juan Capistrano court decision held that water agencies
may only charge tiered rates if they can show that the tiered rates are proportionate to the
agency’s higher costs to serve those customers, meaning that caution must be used to ensure
that customers are appropriately allocated costs that meet legal requirements. Although the
City’s current rates include two tiers for all water customers, tiered water rates have been
discontinued because source of supply data and costs do not lend themselves to using tiered
6 Principles of Water Rates, Fees, and Charges, Manual of Water Supply Practices, Manual M1, AWWA, 7th Edition, 2017, pp.
151-152.
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rates for the City’s water customers and they would be difficult to defend under Prop 218 from
a legal standpoint.
KEY FINANCIAL ASSUMPTIONS
The following is a summary of the key financial assumptions used in the analyses. The following capital
and operational fund targets reflect input from City staff to meet specific utility objectives:
Funding of Capital Projects – The capital improvement costs will be funded with a combination
of cash in reserves and the additional revenue generated from the proposed rate increases. The
capital projects listed in the financial plan are from the City’s capital improvement program. The
analysis assumes:
• Capital costs attributable to existing customers are funded using rate revenue.
• Capital costs attributable to growth are funded by revenue from the impact fee
reserves.
Reserve Targets – For each utility (i.e., water and wastewater), the City maintains reserves for
operations, capital, and other specific needs. The details of each utility’s reserve targets are
covered in their respective section of this report.
Inflation and Growth Projections – Assumptions were made in the analysis regarding cost
inflation to project future revenues and expenses for the study period. The following inflation
factors were used in the analysis:
• Customer growth is estimated at 1.50% per year.
• General cost inflation is set at 3.07% annually.
• Labor cost inflation is set at 3.50% annually.
• Energy cost inflation is set at 7.44% annually.
• Fuel & Utilities cost inflation is set at 5.24% annually.
• Water purchases inflation factor is set at 5.0% annually.
These inflation factors are based on long-term trends; therefore, the City should re-examine these
factors in another year to assess the impacts on utility costs and whether projected rate increases will
be sufficient for the remainder for the rate adoption period.
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Section 2. Water Rate Study
A. Key Water Rate Study Issues
The City’s water rate analysis was undertaken with a few specific objectives, including:
• Generating sufficient revenue to meet anticipated operating and maintenance costs and fund
necessary capital improvement projects for the next five years.
• Continuing with a rate design that promotes revenue stability.
• Verifying the cost-of-service linkage between the current rate structure and the proposed
water rates, including the zonal water rates.
• Maintaining adequate reserve levels to ensure continuity in operations.
• Complying with the legal requirements of Prop 218 to ensure the cost of providing service is
properly allocated amongst user classifications. This was the basis for eliminating tiered water
rates.
NBS developed various water rate alternatives as requested by City staff over the course of this study. All
rate structure alternatives relied on industry standards and cost-of-service principles. The rate alternative
that will ultimately be implemented is the decision of the City Council. The fixed and volume-based charges
were calculated based on the net revenue requirements, number of customer accounts, water
consumption and estimated water discharge, and other relevant data provided by the City.
The following are the basic components included in this analysis:
Developing Cost Allocations – The water revenue requirements were “functionalized” into three
categories: (1) commodity (or volume-based) costs; (2) fixed capacity costs; and (3) customer
service costs. These functionalized costs were then used to develop unit costs based on various
factors, such as water consumption, peaking factors, and number of accounts by meter size.
Determining Revenue Requirements by Customer Class – The total revenue that needs to be
collected from each customer class was determined using the functional costs and allocation
factors. For example, customer costs are allocated based on the number of meters, while volume-
related costs are allocated based on the water consumption of each customer class. Once the costs
are allocated and the net revenue requirement for each customer class is determined, collecting
the revenue requirements from each customer class is addressed within the rate design.
Evaluating Rate Design (Fixed vs. Variable Charges) – The revenue requirements for each
customer class are collected through a combination of fixed monthly service charges and
volumetric rates. Based on direction from City staff, the rates proposed in this report will collect
40% of the rate revenue from the fixed charge and 60% from the variable charges.
B. Financial Plan
It is important for municipal utilities to not only collect sufficient revenues every year, but to also maintain
reasonable reserves to handle emergencies, fund working capital, maintain a good credit rating, and
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generally follow sound financial management practices. Rate adjustments are governed by the need to
meet operating and capital costs as well as maintain reasonable reserve levels. The current state of the
City’s water utility, regarding these objectives, is as follows:
Meeting Net Revenue Requirements: For FY 2023/24 through FY 2027/28, the projected net
revenue requirement (that is, total annual expenses plus debt service and rate-funded capital costs,
less non-rate revenues) for the water system averages $15.9 - $18.8 million annually. If no rate
adjustments are implemented, the City is projected to run an annual deficit of approximately $2
million in FY 2023/24, increasing to more than $3.9 million by FY 2027/28, and will be unable to
meet its debt service coverage requirements in FY 2026/27 and FY 2027/28 when new debt service
payments begin on the assumed bond issuance.
Maintaining Reserve Funds: Reserve funds provide a basis for a utility to cope with fiscal
emergencies, such as revenue shortfalls, asset failure, and natural disasters, among other events.
Reserve policies provide guidelines for sound financial management, with an overall long-range
perspective to maintain financial solvency and mitigate financial risks associated with revenue
instability, volatile capital costs, and unexpected emergencies.
The City’s existing reserves are healthy and the challenge is to meet future revenue requirements
and still maintain adequate reserves. NBS together with City staff have chosen to set the
following reserve targets:
• Operating Reserve equal to 6 months of operating and maintenance expenses, or
approximately $8.2 million in FY 2023/24. An operating reserve is intended to promote
financial viability in the event of any short-term fluctuation in revenues and/or
expenditures, such as those caused by weather patterns, the natural inflow and outflow of
cash during billing cycles, natural variability in demand-based revenue streams (e.g.,
volumetric charges), and – particularly in periods of economic distress – changes or trends
in the age of receivables. NBS considers a 6-month operating reserve to be a very
conservative reserve fund target (i.e., most municipal water utilities use a 3- month target
for the operating reserve).
• Capital Rehabilitation & Replacement Reserve equal to 50% of the average capital
improvement costs over the 5-year rate adoption period; the five-year average is
approximately $8.2 million, so the target reserve is $4.1 million. This reserve is intended to
be a cash resource set aside to address long-term capital system replacement and
rehabilitation needs. NBS considers a 50% capital reserve target to be at the higher end of
what most utilities aim for. Many utilities aim for 3% to 6% of net assets, which in the City’s
case would be $1.8 to $3.6 million.
Funding Capital Improvement Projects: The City must fund necessary capital improvements to
maintain current service levels. City staff has identified roughly $41 million in expected capital
expenditures over the next five years (FY 2023/24 through FY 2027/28) which is an average of $8.2
million in capital expenditures annually. This rate study assumes the City will be issuing $16 million
in revenue bonds in FY 2025/26 through FY 2027/28. Proceeds from these revenue bonds along
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with the recommended rate increases, enable the City to fund these capital expenditures without
exhausting the existing reserves, although reserves will decrease significantly over the next five
years, they are projected to end at about the target reserve level.
Inflation and Growth Projections: Cost inflation and growth assumptions are necessary to project
future revenues and expenses for the study period. Customer growth is expected to be nearly 1.5%
annually. This factor was used in the analysis for rate revenues while inflation factors, including the
Consumer Price Index,7 were used in projecting expenses.
Maintaining Adequate Bond Coverage: Although the water utility currently has no outstanding
debt, this analysis assumes that the City will be issuing $16 million in new debt to fund capital
projects. However, whether new debt will be needed will depend on the actual delivery of capital
projects (i.e., the timing and costs). The rate covenants of the new revenue bonds include a
minimum debt service coverage ratio of 1.25. The benefit of maintaining a higher coverage ratio is
that it strengthens the City’s credit rating which can help lower interest rates for debt-funded
capital projects and, in turn, reduce annual debt service payments.
Figure 2 summarizes the sources and uses of funds, net revenue requirements, and the annual percent
adjustments in total rate revenue recommended for the next 5 years.
Figure 2. Summary of Water Revenue Requirements
Figure 3 summarizes the projected reserve fund balances and reserve targets for the City’s unrestricted
funds. A detailed version of the proposed 5-year financial plan is included in Appendix A . The tables in the
appendix include the revenue requirement, reserve funds, revenue sources, capital improvement costs,
and the proposed rate adjustments needed to meet the City’s funding requirements.
7 Consumer Price Index for all urban consumers in the San Francisco area. Source: Website: https://www.bls.gov/cpi/.
Budget
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Sources of Water Funds
User Fees 13,665,000$ 13,939,000$ 14,218,000$ 14,431,270$ 14,647,739$ 14,867,455$
Other Revenue 105,000 110,000 112,000 113,680 115,385 117,116
Bank Interest 488,737 499,621 509,514 5,075 5,151 5,228
Total Sources of Funds 14,258,737$ 14,548,621$ 14,839,514$ 14,550,025$ 14,768,275$ 14,989,800$
Uses of Water Funds
Water Administration 2,759,176$ 3,460,721$ 3,533,818$ 3,636,249$ 3,748,440$ 3,864,096$
Finance Water Utility Billing 873,507 1,047,309 1,077,076 1,095,995 1,133,828 1,172,968
Water Operations 4,983,992 6,952,444 6,568,972 6,810,814 7,061,889 7,322,564
Valley Water 3,293,972 4,641,000 4,873,050 5,116,703 5,372,538 5,641,165
Additional Capital Expenditures - 404,450 404,450 - - -
Debt Service - - - - 453,067 906,134
Rate-Funded Capital Expenses - - - - - -
Total Use of Funds 11,910,647$ 16,505,924$ 16,457,366$ 16,659,760$ 17,769,761$ 18,906,927$
Surplus (Deficiency) before Rate Increase 2,348,090$ (1,957,303)$ (1,617,852)$ (2,109,735)$ (3,001,486)$ (3,917,128)$
Additional Revenue from Rate Increases 1 - 557,560 1,745,841 2,900,027 3,817,967 4,624,944
Net Revenue Requirement2 11,316,910$ 15,896,303$ 15,835,852$ 16,541,005$ 17,649,225$ 18,784,583$
Surplus (Deficiency) after Rate Increase 2,348,090$ (1,399,743)$ 127,988$ 790,292$ 816,481$ 707,816$
Projected Annual Rate Increase 0.00% 8.00% 8.00% 6.00% 4.00% 4.00%
Debt Coverage After Rate Increase N/A N/A N/A N/A 2.80 1.78
1. Revenue from rate increases assumes an implementation date of January 1, 2024 for new rates. For each year thereafter, the assumption is that new
rates will also be implemented on January 1st of each year.
2. This is the annual amount needed from water rates. [Net Revenue Requirement = Total Use of Funds - (Non-Rate Revenues + Bank Interest)].
Summary of Sources and Uses of Funds and
Net Revenue Requirements
5-Year Projected Rate Period
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Figure 3. Summary of Primary Water Reserve Funds
C. Cost-of-Service Analysis
Once the net revenue requirements are determined, the cost-of-service analysis (COSA) proportionately
distributes the revenue requirements to each of the customer classes. The COSA consists of two major
components: (1) the classification of expenses, and (2) the allocation of costs to each customer class. Costs
are classified according to the function they serve. All costs in the City’s budget are allocated to each
component of the rate structure in proportion to the level of service required by customers.
The level of service is related to the volume and strength of the water treated, infrastructure capacity, and
customer service. These costs are based on allocation factors, such as water consumption, number of
meters, and customer class. Ultimately, a COSA is intended to result in rates that are proportional to the
cost of providing service to each customer class.
FUNCTIONALIZATION AND CLASSIFICATION OF COSTS
Most costs are not typically allocated just to fixed or variable categories but rather allocated to multiple
functions of water service. The functionalization and classification process provides the basis for allocating
costs to various customer classes based on the cost causation (classification) components described below:
• Commodity related costs are costs associated with the change in the volume of water produced
and delivered. These commonly include the costs of water quality testing, energy related to
pumping for transmission and distribution, and source of supply.
• Capacity related costs are costs associated with sizing facilities to meet the maximum, or peak,
demand. This includes both operating costs and capital infrastructure costs incurred to
accommodate peak system capacity events.
• Customer related costs are costs associated with having a customer connected to the water
system, such as meter reading, postage, billing, and other administrative duties.
The City’s budgeted costs were reviewed and allocated to these cost causation components which
are used as the basis for establishing new water rates and translated into fixed and variable
charges. Tables in the Appendices show how the City’s expenses were classified and allocated
to these cost causation components. In the analysis, these cost causation components are also
considered to be either fixed or variable.
Budget
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Operating Reserve
Ending Balance 5,955,000$ 4,555,257$ 4,683,245$ 5,473,537$ 6,290,019$ 6,997,835$
Recommended Minimum Target 5,955,000 8,253,000 8,229,000 8,330,000 8,658,000 9,000,000
Capital Rehabilitation & Replacement Reserve
Ending Balance 25,382,158$ 22,643,278$ 8,114,397$ 7,583,609$ 7,583,609$ 7,217,830$
Recommended Minimum Target 4,140,000 4,140,000 4,140,000 4,140,000 4,140,000 4,140,000
Total Ending Balance 31,337,158$ 27,198,535$ 12,797,642$ 13,057,146$ 13,873,627$ 14,215,665$
Total Recommended Minimum Target 10,095,000$ 12,393,000$ 12,369,000$ 12,470,000$ 12,798,000$ 13,140,000$
Beginning Reserve Fund Balances and
Recommended Reserve Targets
Projected
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FIXED AND VARIABLE COSTS
Ideally, utilities should recover all of their fixed costs from fixed charges and all of their variable costs from
volumetric charges. When this is the case, fluctuations in water sales revenues would be directly offset by
reductions or increases in variable expenses, which provides greater revenue stability for the utility.
However, other factors are often considered when designing water rates, such as community values, water
conservation goals, ease of understanding, and ease of administration.8
NBS functionalized the City’s costs into categories that represent fixed and variable costs. This analysis
resulted in a cost distribution that is approximately 40% fixed and 60% variable (i.e., volumetric). However,
the City’s current rates collect revenue from customers in proportions of approximately 30% fixed and 70%
variable. City staff agrees with NBS that the current rate design is not reflective of the actual cost
distribution ad determined by the cost of service analysis. Therefore, the proposed new rates are based on
the 40% fixed and 60% variable allocations. NBS also evaluated the current 30% fixed/70% variable rate
structure and compares the results below.
Figure 4 summarizes how costs are allocated to each cost component and used to establish new water
rates. Figure 5 shows the resulting cost allocation to each cost classification component.
Figure 4. Allocation Percentages of Revenue Requirements
Figure 5. Allocated Net Revenue Requirements – Preferred Rate Alternative
8 Principles of Water Rates, Fees, and Charges, Manual of Water Supply Practices, Manual M1, AWWA, 7th Edition, 2017, pp. 6 and
96.
Commodity-Related Costs 9,032,472$ 60.0%10,537,884$ 70.0%
Capacity-Related Costs 4,516,236 30.0%3,161,365 21.0%
Customer-Related Costs 1,505,412 10.0%1,354,871 9.0%
Net Revenue Requirement 15,054,120$ 100.0%15,054,120$ 100.0%
Classification Components Net Rev. Reqts
(FY 2023/24)
ALT. 2
(30% Fixed / 70% Variable)
ALT. 1 (Preferred)
(40% Fixed / 60% Variable)
Net Rev. Reqts
(FY 2023/24)
VARIABLE
Residential 5,470,437$ 2,758,274$ 1,312,941$ 9,541,651$
Multi-Family 1,053,245 426,815 50,558 1,530,618
Commercial/Industrial 1,354,175 561,903 83,348 1,999,425
Institutional 155,983 103,540 3,302 262,825
Landscape 937,767 611,068 50,019 1,598,854
City Account 239 98 3,399 3,737
Hydrant 60,626 54,538 1,845 117,010
Total Net Revenue Requirement 9,032,472$ 4,516,236$ 1,505,412$ 15,054,120$
Customer-
Related Costs
Commodity-
Related Costs
Capacity-
Related
Cost s
Cost of Service
Net Revenue
Requirements
Customer Classes
FIXED
Classification Components
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D. Characteristics of Water Customers by Customer Class
Customer classes are typically determined by grouping customers with similar demand characteristics
into categories that reflect the cost differentials to serve each type of customer. C ustomer classes are
most often identified as single-family, multi-family, commercial, landscape, etc., and the City follows this
common methodology. The rates proposed in this report follow a similar structure where the fixed
charges within each customer class vary by meter size while all customers are charged a uniform
volumetric rate based on zones.
The amount of consumption, the peaking factors, and the number of meters by size are used to allocate
costs as a part of COSA to allocate costs to customer classes and determine the appropriate rate structures
for each. These components of the COSA are presented in the following figures.
Commodity related costs are costs associated with the total annual consumption of water by customer
class. Figure 6 below summarizes the most recent consumption data by customer class and represents the
expected percent of consumption over the 5-year rate period.
Figure 6. Water Consumption by Customer Class
Figure 7 shows the peaking factors for each customer class. A “peaking factor” is the relationship between
the average use by meter size to its peak use.
Figure 7. Peaking Factors by Customer Class
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Both operating costs and capital infrastructure costs incurred to accommodate peak system capacity events
are generally allocated to each meter size according to its contribution to peak capacity events. These
peaking factors are used to allocate the capacity-related costs to each customer class and are described in
more detail later in this study.
Figure 8 shows the number of meters for each customer class. The percentage of total customers by
customer class is then used to develop the customer allocation factors to allocate customer costs.
Customer costs are those costs associated with having customers connected to the water system and
include costs related to meter reading, postage, and billing.
Figure 8. Number of Meters by Customer Class
E. Rate Design Analysis
Evaluating the water rate structure includes reviewing rate-design objectives and policies, including
continuity of rate design, revenue stability, equity among customers, and water conservation. NBS
discussed the 40%/60% (preferred) and 30%/70% rate designs with City staff over the course of this study.
Ultimately, City staff selected the 40%/60% rate alternative, as it is closest to the actual cost of service
based on NBS’ analysis. Also, because of the difficulty meeting Prop 218 legal requirements of
demonstrating the cost basis for tiered rates given the City’s water supply costs, the preferred rate
structure proposes a uniform tier for all customers rather than the existing two-tiers. The following section
describe how the proposed water rates were determined.
DEVELOPMENT OF PROPOSED RATES
Fixed Service Charges
The fixed meter charge recognizes that the water utility incurs fixed costs regardless of whether customers
use water. There are two components that comprise the fixed meter charge: (1) the capacity component,
and (2) the customer component. The capacity component recovers costs associated with sizing the water
system to ensure there is sufficient capacity in the system to meet peak demand. A user class with a higher
peaking ratio is allocated a proportionately higher share of the capacity-related costs compared to
customer classes with lower peaking ratios. The customer component includes those costs related to
reading and maintaining meters, customer billing and collection, and other customer service-related costs.
Customer Class No. of Meters
FY 2021/221 Percent of Total
Residential 13,518 87.2%
Multi-Family 521 3.4%
Commercial/Industrial 858 5.5%
Institutional 34 0.2%
Landscape 515 3.3%
City Account 35 0.2%
Hydrant 19 0.1%
Total 15,500 100.0%
1. Meter count data is based on the City's billing data for June 2022.
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Fixed charges also vary based on meter sizes because larger meters have higher capacity requirements and
reflect their potential to use more of the system’s capacity.9 The potential capacity demands (peaking) is
proportional to the maximum hydraulic flow through each meter size based on the hydraulic capacity ratios
established by AWWA.10 The AWWA capacity ratios used for this report are shown in Figure 9.
Figure 9. Hydraulic Capacity Factors
The actual number of meters by size is multiplied by the corresponding capacity ratios to calculate
“equivalent” meters. The number of equivalent meters is used as a proxy for the potential demand that
each customer can place on the water system. Figure 10 summarizes the number of meters, the hydraulic
capacity factors, and the number of equivalent meters (i.e., the number of meters multiplied by the
hydraulic capacity factor) by customer class and meter size.
Figure 10. Equivalent Meters
Using the costs allocated to each customer class from Figure 5, Figure 11 shows the calculation of the fixed
monthly service charges for all customer classes based on meter size. As previously mentioned, the
customer service charge is calculated by dividing the customer service-related costs by the total number of
9 System capacity is the system’s ability to supply water to all delivery points at the time when demanded.
10 Principles of Water Rates, Fees and Charges, Manual of Water Supply Practices, Manual M1, AWWA, 7th Edition, 2017, p. 386.
Water Meters – Selection, Installation, Testing and Maintenance, Manual M6, AWWA, 5th Edition, 2012, pp. 63-65.
3/4 inch 30 1.00
1 inch 50 1.67
1 1/2 inch 100 3.33
2 inch 160 5.33
3 inch 320 10.67
4 inch 500 16.67
6 inch 1,000 33.33
8 inch 1,600 53.33
10 inch 4,200 140.00
1. Per AWWA M-1, Table B-1.
Compound Class I Meters
Turbine Class II Meters
Meter Capacity
(gpm)1
Displacement Meters
Meter Size Equivalency
to 1-inch
Standard Meters
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meters, whereas the fixed capacity charge is calculated by dividing the capacity-related costs by the total
number of equivalent meters for each meter size.
Figure 11. Calculation of Fixed Service Charges
Volumetric Rates
Currently, the City uses a 2-tier rate structure for all customers; however, the proposed rates are based on
a uniform, or single tier, volumetric rate. Given the single source of water supply, a uniform volumetric rate
is more feasible from a Prop 218 perspective.
Figure 12 shows the calculation of the uniform tier rate per unit of water for all customers, including the
basic commodity rate (without pumping costs) and rates for each zone (including pumping costs).
Figure 12. Uniform Tier Rates for FY 2023/24
F. Proposed Water Rates
The City’s previous rate study was completed eight years ago in 2015. Since then, the underlying cost
factors (e.g., consumption by class, number of meters, peaking factors) have changed. The cost-of-service
analysis by nature “re-balances” how costs are allocated between customer classes and, as a result, there
3/4 inch 1 inch 1 1/2 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch
Residential 4,445 8,273 172 459 167 2 0 0 0 13,518
Multi-Family 137 203 84 56 24 17 0 0 0 521
Commercial/Industrial 251 330 0 249 10 14 3 0 1 858
Institutional 0 1 0 15 8 9 1 0 0 34
Landscape 34 182 79 212 4 4 0 0 0 515
City Account 5 7 1 19 2 1 0 0 0 35
Hydrant 0 0 0 0 19 0 0 0 0 19
Total Meters/Accounts 4,872 8,996 336 1,010 234 47 4 0 1 15,500
Hydraulic Capacity Factor 2 1.00 1.67 3.33 5.33 10.67 16.67 33.33 53.33 140.00
Total Equivalent Meters 4,872 14,993 1,120 5,387 2,496 783 133 0 140 29,925
Monthly Fixed Service Charges
Customer Costs ($/Acct/month)3 $8.09 $8.09 $8.09 $8.09 $8.09 $8.09 $8.09 $8.09 $8.09
Capacity Costs ($/Acct/month)4 $12.58 $20.96 $41.92 $67.08 $134.15 $209.61 $419.22 $670.76 $1,760.74
Total Monthly Meter Charge $20.67 $29.05 $50.02 $75.17 $142.24 $217.70 $427.32 $678.85 $1,768.83
Annual Fixed Costs Allocated to Monthly Meter Charges
Customer Costs $ 1,505,412
Capacity Costs 4,516,236
Total Fixed Meter Costs 6,021,648$
Annual Revenue from Monthly Meter Charges
Customer Charges 473,185$ 873,722$ 32,633$ 98,095$ 22,727$ 4,565$ 388$ -$ 97$ 1,505,412$
Capacity Charges 735,283$ 2,262,797$ 169,031$ 812,957$ 376,697$ 118,221$ 20,123$ -$ 21,129$ 4,516,236$
Total Rev. from Mo. Meter Charges 1,208,468$ 3,136,518$ 201,664$ 911,051$ 399,424$ 122,786$ 20,511$ -$ 21,226$ 6,021,648$
1. Meter by Class and Size are based on June 2022 customer billing data.
2. Source: AWWA Manual M1, "Principles of Water Rates, Fees, and Charges", Table B-1
3. Customer costs are allocated to each customer by dividing the total customer costs by the total number of customers.
4. Capacity costs are allocated by meter size and the hydraulic capacity of the meter.
Total FY2023/24Number of Meters by Class and Size1
Zone 1 Zone 2 Zone 3
Residential - Tier 1 1,348,786 60.6%4,912,312$ $3.64 $4.00 $4.37 $4.73
Multi-Family 259,687 11.7%945,787 $3.64 $4.00 $4.37 $4.73
Commercial/Industrial 333,884 15.0%1,216,014 $3.64 $4.00 $4.37 $4.73
Institutional 38,459 1.7%140,069 $3.64 $4.00 $4.37 $4.73
Landscape 231,215 10.4%842,091 $3.64 $4.00 $4.37 $4.73
City Account 59 0.0%215 $3.64 $4.00 $4.37 $4.73
Hydrant 14,948 0.7%54,441 $3.64 $4.00 $4.37 $4.73
Total Potable Water 2,227,038 39.4%8,110,929$
Pumping Costs 921,543
Total Volumetric Reve. Reqts.9,032,472$
Uniform Commodity Rates Including
Pumping Costs ($/TG)Water Use
(TG/yr.)1
Total Vol. Rev.
Reqts. (Excl.
Pumping)
Customer Classes % of Total
Water Use
Uniform
Commodity
Rates ($/TG)
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are uneven adjustments in the first year of the 5-year rate adoption period. In contrast, in the subsequent
four years of the rate planning period, proposed charges are simply adjusted by the proposed adjustment
in total rate revenue needed to meet projected revenue requirements.
Figure 13 provides a comparison of the current and proposed water rates for FY 2023/24 through 2027/28
for each customer class and meter size. Projected rates for each fiscal year 11 reflect adjustments based on
the cost-of-service analysis, the 40% fixed/60% variable rate design structure, and the recommended
percent increases in rate revenue planned for each year. More detailed tables on the development of the
proposed water rates are documented in Appendix A.
Figure 13. Current and Proposed Water Rates
Note: The proposed rates for FY23/24 will be implemented January 1, 2024, and annually on January 1 for subsequent fiscal years
thereafter
G. Comparison of Current and Proposed Water Bills
Figure 14 and Figure 15 compare a range of monthly water bills under the current and proposed water
rates for residential and commercial customers, including the bills for Alternative 2, the 70% fixed/30%
variable option. These monthly bills are based on typical meter sizes and highlight the average
consumption levels for each customer.
These bill comparisons assume that financial plan projections remain accurate. However, some costs that
are outside of the City’s control could change, such as the cost of water purchased from Valley Water.
11 All rate adjustments are scheduled to be effective on January 1, 2024.
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Fixed Service Charges
Meter Size
3/4 inch $11.53 $20.67 $22.32 $23.66 $24.61 $25.59
1 inch $19.24 $29.05 $31.38 $33.26 $34.59 $35.98
1 1/2 inch $38.47 $50.02 $54.02 $57.26 $59.55 $61.93
2 inch $61.55 $75.17 $81.18 $86.05 $89.50 $93.08
3 inch $115.39 $142.24 $153.62 $162.84 $169.36 $176.13
4 inch $192.30 $217.70 $235.12 $249.23 $259.20 $269.57
6 inch $384.62 $427.32 $461.50 $489.19 $508.76 $529.11
8 inch $615.37 $678.85 $733.16 $777.15 $808.23 $840.56
10 inch $884.50 $1,768.83 $1,910.34 $2,024.96 $2,105.95 $2,190.19
Residential Customers - Tiered Volumetric Rates
Tier 1 - Zone 1 $4.39 $4.00 $4.32 $4.58 $4.77 $4.96
Tier 1 - Zone 2 $4.93 $4.37 $4.72 $5.00 $5.20 $5.41
Tier 1 - Zone 3 $5.52 $4.73 $5.11 $5.41 $5.63 $5.85
Tier 2 ( more than 20 TG)
Tier 2 - Zone 1 $4.93 N.A. N.A. N.A. N.A. N.A.
Tier 2 - Zone 2 $5.47 N.A. N.A. N.A. N.A. N.A.
Tier 2 - Zone 3 $6.06 N.A. N.A. N.A. N.A. N.A.
Current
Rates
Proposed RatesWater Rate Schedule
Variable Charges for All Water Consumed ($/1,000 gallons (or TG))
Uniform Vol. Rates
Agenda Item No. 9.1
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There is a “pass-through” provision that allows the City to make adjustments to water rates if these types
of costs exceed those in the City’s projections.
Figure 14. Monthly Water Bill Comparison for Residential Customers
$32.41$41.19$45.58$55.68$67.53$85.09$107.04$41.07$49.07$53.08$62.29$73.10$89.11$109.13$36.00$45.36$50.04$60.80$73.44$92.16$115.55$0
$25
$50
$75
$100
$125
3 5 6 8.3 11 15 20Monthly BillMonthly Water Consumption (TG)
Single-Family Residential Water Bill Comparison
Current vs. Proposed FY'23/24 Rates (1" Meter)
Residential Bill - Current Rates
Residential Bill 60/40 V/F
Residential Bill 70/30 V/F
Average
ANNUAL Bill
(8.3 TG/mo.)Average
WINTER Bill
(6 TG/mo.)
Average
SUMMER Bill
(11 TG/mo.)
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Figure 15. Monthly Water Bill Comparison for Commercial Customers
Figure 16 and Figure 17 compare the single-family and commercial water bills for the five-year rate adoption
period assuming average consumption levels.
Figure 16. Residential Water Bills – 5-Years $55.43$99.33$134.45$152.01$178.35$252.98$340.78$60.71$100.75$132.78$148.80$172.82$240.89$320.96$62.89$109.69$147.12$165.84$193.92$273.48$367.08$0
$50
$100
$150
$200
$250
$300
$350
$400
10 20 28 32 38 55 75Monthly BillMonthly Water Consumption (TG)
Commercial Water Bill Comparison
Current vs. Proposed FY'23/24 Rates (< 1" Meter)
Commercial Bill - Current Rates
Commercial Bill 60/40 V/F
Commercial Bill 70/30 V/F
Average
WINTER Bill
(28 TG/mo.)
Average
ANNUAL Bill
(32 TG/mo.)
Average
SUMMER Bill
(38 TG/mo.)
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Figure 17. Commercial Water Bills – 5-Years
Figure 18 presents a comparison of residential water rates for similar communities. $62.29$67.27$71.31$74.16$77.12$55.68$60.80$65.66$69.60$72.39$75.28$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28Monthly BillMonthly Water Consumption (TG)
Residential Water Bill Comparison
5-Year Projection (1" Meter)
Resid. - 5-Year Rates (60/40 V/F)
Resid. - 5-Year Rates (70/30 V/F)
Average Monthly Water Use -8.3 TG
$152.01
$148.80$160.70$170.34$177.15$184.24$165.84$179.11$189.86$197.45$205.35$0
$50
$100
$150
$200
$250
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28Monthly BillMonthly Water Consumption (TG)
Commercial Water Bill Comparison
5-Year Projection (1" Meter)
Commercial - 5-Year Rates (60/40 V/F)
Commercial - 5-Year Rates (70/30 V/F)
Annual Monthly Water Use -32 TG
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Figure 18. Residential Bills Comparison for Similar Communities
$56.21 $60.16 $62.39
$73.43 $73.89 $77.76
$99.81 $103.67 $111.46
$134.52
$0
$25
$50
$75
$100
$125
$150
City of
Hollister
City of Gilroy
(Current Rates)
City of Morgan
Hill
Alternative #1
- 40F/60V
Alternative #2
- 30F/70V
City of
Sunnyvale
City of Santa
Clara
City of Milpitas City of Santa
Cruz
San Jose
Municipal
Water
Regional Water Bill Comparion -SFR Customer
Assumes 1" Meter, 14 hcf monthly consumption
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Section 3. Wastewater Rate study
A. Key Wastewater Rate Study Issues
The City’s wastewater rate analysis was undertaken with a few specific objectives, including:
• Ensuring equity among customer classes by collecting rate revenue through the cost-of-service
process based on both fixed monthly charges and volumetric rates.
• Maintain adequate reserve levels to ensure continuity in operations.
• Ensure adequate funding for the utility’s capital projects, due to the level of capital investment
planned over the next five years.
• Comply with Prop 218 requirements to ensure costs are properly allocated between user
classifications.
B. Financial Plan
Like the water utility, it is important for the wastewater utility to ensure rates provide sufficient funding to
cover operating and maintenance costs, planned capital expenditures, and maintain reasonable reserves.
The wastewater utility’s rate increases are governed by these needs, and the current state of the City’s
wastewater utility is as follows:
Meeting Net Revenue Requirements: For FY 2023/24 through FY 2027/28, the projected net
revenue requirements (that is, total operating expenses plus rate-funded capital costs less non-rate
revenues) for the City averages approximately $13.1 million to $17.1 million annually. If no rate
increases are implemented, the City is projected to run an annual deficit of approximately $280,000
beginning in FY 2024/25 but increasing to $2.7 million by FY 2027/28, and the utility would struggle
to meet its debt service coverage requirements.
Maintaining Reserve Funds: Reserve funds provide a basis for a utility to cope with fiscal
emergencies such as revenue shortfalls, asset failure, and natural disasters, among other events.
Reserve policies provide guidelines for sound financial management, with an overall long-range
perspective to maintain financial solvency and mitigate financial risks associated with revenue
instability, volatile capital costs, and emergencies. The reserve funds for the wastewater utility are
considered unrestricted reserves and consist of the following:
• Operating Reserve: The target ending fund balance for the operating reserve is equal to six
months of operating expenses, or approximately $6.8 million in FY 2023/24. An operating
reserve is intended to promote financial viability in the event of any short-term fluctuation in
revenues and/or expenditures. Fluctuations in revenue can be caused by weather patterns, the
natural inflow and outflow of cash during billing cycles, natural variability in demand-based
revenue streams (such as volumetric charges), and – particularly in periods of economic
distress – changes or trends in age of receivables.
• Capital Rehabilitation & Replacement Reserve equal to 50% of the average capital
improvement costs over the 5-year rate adoption period which is approximately $4.4 million.
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This reserve is set aside to address long-term capital system replacement and rehabilitation
needs.
Maintaining Adequate Bond Coverage: The City is required by the rate covenants of the 2021A
Wastewater Revenue Bonds to maintain a minimum debt service coverage ratio of 1.25. The
benefit of maintaining a coverage ratio higher than 1.25 is that it strengthens the City credit rating
which helps lower interest rates for debt-funded capital projects and can reduce annual debt
service payments. With the recommended rate increases, the City is projected to meet the debt
coverage requirement for the five-year rate adoption period ending in FY 2027/28.
The recommended rate revenue increases are 4% annually throughout the 5-year rate adoption period.
Figure 19 summarizes the sources and uses of funds, net revenue requirements, and the recommended
annual increases in wastewater rate revenue proposed for the next 5 years. Figure 20 summarizes the
projected reserve fund balances and reserve targets for the wastewater utility’s unrestricted funds.
Figure 19. Summary of Wastewater Revenue Requirements
Figure 20. Summary of Wastewater Reserve Funds
Proj. Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Sources of Sewer Funds
User Fees 13,247,000$ 13,512,000$ 13,782,000$ 13,988,730$ 14,198,561$ 14,411,539$
Interfund Transfer In 1,533,500 2,244,000 2,244,000 2,244,000 2,244,000 2,244,000
Misc. Revenue & Interest Earnings2 992,066 649,871 397,017 15,619 15,853 16,091
Total: Sources of Funds 15,772,566$ 16,405,871$ 16,423,017$ 16,248,349$ 16,458,414$ 16,671,630$
Uses of Sewer Funds
7500 - Sewer Administration 3,606,254$ 2,143,559$ 2,202,325$ 2,339,468$ 2,481,991$ 2,625,123$
7510 - Finance Sewer Utility Billing 921,605 1,037,477 1,083,341 1,120,978 1,159,924 1,200,226
7520 - Sewer Operations 2,758,341 4,362,836 4,320,125 4,464,460 4,613,637 4,767,818
SCWRA Oper. Costs (less Monit., Sampl., Pre-Tr.Cost 5,715,995 6,146,815 6,517,038 6,781,500 6,989,600 7,207,300
Monitoring, Sampling, Pretreatment (Non-Resid. Cos N.A.365,700 440,200 388,500 400,400 412,700
Subtotal: Operating Expenses 13,002,195$ 13,690,686$ 14,122,829$ 14,706,406$ 15,245,153$ 15,800,467$
Debt Service 1,533,500$ 2,244,000$ 2,244,400$ 2,243,600$ 2,241,600$ 2,243,300$
Rate-Funded Capital Expenses - 75,401 335,906 211,300 755,038 1,334,115
Total: Use of Funds 14,535,695$ 16,010,087$ 16,703,135$ 17,161,306$ 18,241,791$ 19,377,882$
Surplus (Deficiency) before Rate Increase 1,236,871$ 395,784$ (280,118)$ (912,957)$ (1,783,377)$ (2,706,252)$
Additional Revenue from Rate Increases 1 -$ 540,480$ 1,121,811$ 1,743,733$ 2,408,627$ 3,119,008$
Surplus (Deficiency) after Rate Increase 1,236,871$ 936,264$ 841,693$ 830,775$ 625,250$ 412,756$
Projected Annual Rate Increase 0.00%4.00%4.00%4.00%4.00%4.00%
Debt Coverage After Rate Increase (1.25 required)1.81 1.45 1.52 1.46 1.62 1.78
Net Revenue Requirement2 12,010,129$ 13,116,216$ 14,062,118$ 14,901,687$ 15,981,938$ 17,117,791$
1. Revenue from rate increases assumes an implementation date of Jnnuary 1, 2024 for new rates. For each year thereafter, the assumption is that new rates will be
implemented on July 1st of each year.
2. This is the annual amount needed from water rates. [Net Revenue Requirement = Total Use of Funds - (Non-Rate Revenues + Bank Interest)].
Summary of Sources and Uses of Funds and
Net Revenue Requirements
5-Year Projected Rate Period
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Unrestricted Reserves
Operating Reserve
Ending Balance 6,501,000$ 6,845,000$ 7,061,000$ 7,353,000$ 7,623,000$ 7,900,000$
Recommended Minimum Target 6,501,000 6,845,000 7,061,000 7,353,000 7,623,000 7,900,000
Capital Rehabilitation & Replacement Reserve
Ending Balance 12,942,049$ 13,495,633$ 11,271,248$ 8,151,561$ 6,946,887$ 5,648,582$
Recommended Minimum Target 4,420,000 4,420,000 4,420,000 4,420,000 4,420,000 4,420,000
Total Ending Balance 19,443,049$ 20,340,633$ 18,332,248$ 15,504,561$ 14,569,887$ 13,548,582$
Total Recommended Minimum Target 10,921,000$ 11,265,000$ 11,481,000$ 11,773,000$ 12,043,000$ 12,320,000$
5-Year Projected Rate PeriodBeginning Reserve Fund Balances and
Recommended Reserve Targets
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A more detailed version of the utility’s proposed 5-year financial plan is included in Appendix B. The
appendix tables include revenue requirements, reserve funds, revenue sources, proposed rate increases,
and the City’s capital improvement program.
C. Cost-of-Service Analysis
Once the net revenue requirements are determined, the cost-of-service analysis (COSA) proportionately
distributes the revenue requirements to each of the customer classes. The COSA consists of the
classification of expenses and then the allocation of those expenses to customer classes based on allocation
factors, such as water consumption and number of equivalent dwelling units (EDUs), or accounts.
Ultimately, a COSA is intended to result in rates that are proportional to the cost of providing service to
each customer class.
CUSTOMER CLASSES AND ALLOCATION FACTORS
Customer classes are determined by combining customers with similar demand characteristics and types of
use into categories that reflect the cost differentials to serve each type of customer. The most recent water
consumption data was the basis for estimating the amount of flow that each customer class sends to the
treatment plant.
Figure 21 shows the development of the flow/volume allocation factors by customer class calculated by
taking the lowest consecutive 3-month water usage for FY 2021/22 for residential customers, annualizing
that usage, and using the annual consumption for non-residential customer classes.
Figure 21. Development of the Flow Allocation Factor
Volumetric charges for non-residential customer classes were based on the annual consumption and their
estimated effluent strengths (Residential customers do not have volumetric charges, just fixed monthly
charges). Figure 22 summarizes the development of the strength allocation factors by customer class.
These strength-related percentages were used to allocate strength-related costs. (Note: Although
residential customers do not have volumetric charges, their strengths, and their estimated pounds of BOD
and TSS, are used to allocate capacity-related costs to single- and multi-family customers.)
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Figure 22. Development of the Strength Allocation Factor
Figure 23 summarizes the development of the customer allocation factor.
Figure 23. Development of the Customer Allocation Factor
CLASSIFICATION AND ALLOCATION OF COSTS
As previously noted, costs are classified into the following four categories: (1) flow-related costs, (2)
strength-related costs (BOD and TSS), (3) customer-related costs, and (4) direct allocation costs for
monitoring, sampling, and pretreatment program costs. Most costs are typically allocated to more than one
of these categories except for this last category in which costs, as implied by its name, are directly allocated
to the three categories of non-residential customers (i.e., Significant/Categorical, Non-
Significant/Categorical, and Other Non-Residential).
The City’s budgeted costs were allocated to these four categories which serve as the basis for calculating
the fixed and variable charges. Tables in Appendix B show how the City’s expenses were classified and
allocated to these cost-causation components.
Customer Class
Number of
Dwelling Units /
Accounts
Percent
of Total
Residential Customers
Single-Family Residence 12,330 66.2%
Multi-Family Residence 4,585 24.6%
Non-Residential Customers - Strength Classes
Low Strength 427 2.29%
Domestic Strength 253 1.36%
Medium Strength 55 0.30%
High Strength 128 0.69%
Non-Residential Customers - Categorical Classes
Significant/Categorical 6 0.03%
Non-Significant/Categorical 458 2.46%
Other Non-Residential 387 2.08%
Total: 18,628 100.0%
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Although the analysis of the classification of costs indicated that 44% of cost should be collected from
volumetric charges and 56% from fixed charges 12, these percentages don’t really apply in the City’s case
because:
• Residential classes do not have a volumetric charge.
• Non-residential customers do not have a typical fixed charge that recovers system capacity and
related fixed costs, just a volumetric charge based on their strength category.
• As mentioned above, non-residential classes do have a separate fixed charge for monitoring,
sampling, and pretreatment program costs, but this is only for these directly allocated costs,
not system capacity costs.
Figure 24 summarizes the allocation of the net revenue requirements to each cost causation component
for the proposed rates.
Figure 24. Allocation of Revenue Requirements by Customer Class
D. Rate Design Analysis
During this rate study, NBS discussed with City staff various rate alternatives that collected revenue
differently from fixed vs. variable charges. Ultimately, the rate alternative selected by City staff is one
similar to the existing rate design. The reasons for selecting this alternative are (1) it maintains the existing
rate design developed during the last study which utilize wastewater strengths for various customers types
based on values in the State water Resources Control Board guidelines,13 (2) it provides continuity for
sewer customers, and (3) it is easy to understand from a customer’s perspective and easy to administrate
from City staff’s perspective.
FIXED CHARGES
The fixed charge recognizes that the wastewater utility incurs fixed costs regardless of whether customers
send any wastewater into the City’s collection system. There are three factors used to develop the fixed
charge: 1) the number of dwelling units for residential customers, 2) the number of accounts for non-
12 FY 2021/22 data indicate sewer rates currently collect 75% of rate revenue from fixed charges and 25% from volumetric charges.
13 The City’s previous rate study showed domestic customer strengths for BOD and TSS of 200 to 225 mg/l (Table 1, page 5). Residential
strength factors used here are the 205 mg/l shown in Table 22.
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residential customers, and 3) the annual revenue requirement. The monthly fixed charge is calculated by
taking 100% of total revenue requirements for residential customer classes and dividing by the number of
accounts (for single-family) and by the number of dwelling units (for multi-family).
Non-residential fixed charges are based on the directly allocated monitoring, sampling, and pretreatment
program costs and divided by the number of accounts in the three non-residential categorical customer
classes (i.e., Non-Significant/Categorical, Significant/Categorical, and Other Non-Residential).
VARIABLE CHARGES
The variable charges are calculated by dividing 100% of the annual net revenue requirements for the non-
residential strength-related customer classes by the annual consumption.
The residential and non-residential fixed and variable charge calculations are summarized in Figure 25. The
typical single-family residential customer has an average winter flow of 5.4 TG/month and strength factors
of 205 mg/l for both BOD and TSS. Multi-family customers have an average winter flow of 3.6 TG/month
and the same strength factors as single-family customers.
Figure 25. Development of Fixed and Variable Charges
E. Proposed Wastewater Rates
The proposed wastewater rates are similar to existing rates in terms of the rate design and rate
methodology. Figure 26 compares the current and proposed rates for FY 2023/24 through FY 2027/28 by
customer class. While proposed rates in the first year (FY 2023/24) reflect the cost-of-service adjustments
that often occur when they have not been updated in eight years, the projected rates for future years are
strictly tied to annual rate increase in an “across-the-board” adjustment. More detailed tables on the
development of the proposed rates are documented in Appendix B.
Agenda Item No. 9.1
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Figure 26. Current vs. Proposed Wastewater Rates
Note: The proposed rates for FY23/24 will be implemented on January 1, 2024, and annually on January 1 for subsequent fiscal
years thereafter
F. Comparison of Current and Proposed Wastewater Bills
The following figures compare monthly wastewater bills under current and proposed rates for various
customers over the 5-year rate period. These bill comparisons are calculated at typical levels of
consumption. The last figure presents a comparison of residential sewer rates for similar communities.
Figure 27. Single-Family Residential Wastewater Bill Comparison
$46.64 $46.64 $46.64 $46.64 $46.64
$51.07 $53.11 $55.24 $57.45 $59.74
$0
$10
$20
$30
$40
$50
$60
$70
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28Monthly BillMonthly Water Consumption (HCF)
SFR -Sewer Bill Comparison
Current vs. Proposed Rates
SFR Bill - Current Rates
SFR Bill - Proposed Rates
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Figure 28. Multi-Family Residential Wastewater Bill Comparison
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Figure 29. Non-Residential Low Strength Wastewater Bill Comparison
Figure 30. Non-Residential Domestic Strength Wastewater Bill Comparison
$106.31 $106.31 $106.31 $106.31 $106.31
$119.92 $124.72 $129.71 $134.90 $140.29
$0
$20
$40
$60
$80
$100
$120
$140
$160
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28Monthly BillMonthly Water Consumption (HCF)
Low-Strength Commercial Sewer Bill Comparison
Current vs. Proposed Rates (28 TG/Mo.)
Current Rates Proposed Rates
$260.83 $260.83 $260.83 $260.83 $260.83$269.31 $280.09 $291.29 $302.94 $315.06
$0
$50
$100
$150
$200
$250
$300
$350
$400
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28Monthly BillMonthly Water Consumption (HCF)
Domestic-Strength Commercial Sewer Bill Comparison
Current vs. Proposed Rates (28 TG/Mo.)
Current Rates Proposed Rates
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Figure 31. Non-Residential Medium Strength Wastewater Bill Comparison
Figure 32. Non-Residential High Strength Wastewater Bill Comparison
$812.78 $812.78 $812.78 $812.78 $812.78
$940.48 $978.10 $1,017.22 $1,057.91 $1,100.23
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28Monthly BillMonthly Water Consumption (HCF)
High-Strength Commercial Sewer Bill Comparison
Current vs. Proposed Rates (43 TG/Mo.)
Current Rates Proposed Rates
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Figure 33. Residential Bills Comparison for Similar Communities
$38.90
$46.06 $46.64
$51.07
$61.30
$72.97
$80.38
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
San Jose Watsonville Gilroy,
Current
Gilroy,
Proposed
Santa Cruz Morgan Hill Hollister
Regional Sewer Bill Comparion -SFR Customer
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Section 4. Recommendations and Next Steps
A. Consultant Recommendations
NBS recommends the City take the following actions:
• Approve and Accept this Study: NBS recommends the City Council formally approve and adopt this
Study and its recommendations and proceed with the next steps outlined below to implement the
proposed rates. This will provide documentation of the rate study analyses and the basis for analyzing
potential changes to future rates.
• Implement Recommended Levels of Rate Increases and Proposed Rates: Based on successfully
meeting the Prop 218 procedural requirements, the City should proceed with implementing the 5-year
schedule of proposed rates and rate increases previously shown in Figure 13 and Figure 26. This will
help ensure the continued financial health of City’s utilities.
B. Next steps
Annually Review Rates and Revenue – Any time an agency adopts new utility rates or rate structures,
those new rates should be closely monitored over the next several years to ensure the revenue generated
is sufficient to meet the annual revenue requirements. Changing economic and water consumption
patterns underscore the need for this review, as well as potential and unseen changing revenue
requirements — particularly those related to environmental regulations that can significantly affect capital
improvements and repair and replacement costs.
Note: The attached Technical Appendices provide more detailed information on the analysis of the financial
plan, revenue requirements, cost-of-service, and the rate design analyses that have been summarized in this
report.
C. NBS’ Principal Assumptions and Considerations
In preparing this report and the opinions and recommendations included herein, NBS has relied on several
principal assumptions and considerations regarding financial matters, conditions, and events that may
occur in the future. This information and these assumptions, including the City’s budgets, capital
improvement costs, customer accounts and consumption, and information from City staff were provided by
sources we believe to be reliable, although NBS has not independently verified this data.
While we believe NBS’ use of such information and assumptions is reasonable for the purpose of this report
and its recommendations, some assumptions will invariably not materialize as stated herein and may vary
significantly due to unanticipated events and circumstances. Therefore, the actual results can be expected
to vary from those projected to the extent that actual future conditions differ from those assumed by us or
provided to us by others.
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Technical Appendices
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Appendix A. Water Rate Study Tables and Figures
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CITY OF GILROY Financial Plan & Reserve Summary
WATER RATE STUDY
Financial Plan and Reserve Projections
TABLE 1 :FINANCIAL PLAN AND SUMMARY OF REVENUE REQUIREMENTS
Budget
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Sources of Water Funds
Rate Revenue:1
User Fees 13,665,000$ 13,939,000$ 14,218,000$ 14,431,270$ 14,647,739$ 14,867,455$
Other Revenue:
Connect/Install Charges 105,000 110,000 112,000 113,680 115,385 117,116
Bank Interest & Misc.2 488,737 499,621 509,514 5,075 5,151 5,228
Total Sources of Funds 14,258,737$ 14,548,621$ 14,839,514$ 14,550,025$ 14,768,275$ 14,989,800$
Uses of Water Funds
Operating Expenses:1
Water Administration $ 2,759,176 $ 3,460,721 $ 3,533,818 $ 3,636,249 $ 3,748,440 $ 3,864,096
Finance Water Utility Billing 873,507 1,047,309 1,077,076 1,095,995 1,133,828 1,172,968
Water Operations 4,983,992 6,952,444 6,568,972 6,810,814 7,061,889 7,322,564
Valley Water 3,293,972 4,641,000 4,873,050 5,116,703 5,372,538 5,641,165
Additional Capital Expenditures - 404,450 404,450 - - -
Subtotal: Operating Expenses 11,910,647$ 16,505,924$ 16,457,366$ 16,659,760$ 17,316,694$ 18,000,793$
Other Expenditures:
New Debt Service -$ -$ -$ -$ 453,067$ 906,134$
Rate-Funded Capital Expenses - - - - - -
Subtotal: Other Expenditures -$ -$ -$ -$ 453,067$ 906,134$
Total Uses of Water Funds 11,910,647$ 16,505,924$ 16,457,366$ 16,659,760$ 17,769,761$ 18,906,927$
plus: Revenue from Rate Increases3 - 557,560 1,745,841 2,900,027 3,817,967 4,624,944
Annual Surplus/(Deficit) After Rate Increases 2,348,090$ (1,399,743)$ 127,988$ 790,292$ 816,481$ 707,816$
Net Revenue Req't. (Total Uses less Non-Rate Revenue)11,316,910$ 15,896,303$ 15,835,852$ 16,541,005$ 17,649,225$ 18,784,583$
Total Rate Revenue After Rate Increases 13,665,000$ 14,496,560$ 15,963,841$ 17,331,297$ 18,465,706$ 19,492,400$
Projected Annual Rate Revenue Increase 0.00%8.00%8.00%6.00%4.00%4.00%
Cumulative Increase from Annual Revenue Increases 0.00%8.00%16.64%23.64%28.58%33.73%
Debt Coverage After Rate Increase N/A N/A N/A N/A 2.80 1.78
1. Revenue and expenses for FY 2022/23 provided by the City. Revenues and expenses for all other years are escalated based on the forecasting assumptions in Table 9
(See Exhibit 1 (O&M) Tab). Source file: FY23 Budgets.xlsx .
2. Interest income for FY FY 2022/23 is from the City's Budget. For all other years, it is calculated based on historical LAIF returns.
3. Revenue from rate increases assumes an implementation date of April 1, 2023 for new rates. For each year thereafter, the assumption is that new rates will be
implemented on July 1st of each year.
3 <-- Select Financial Plan Scenario Here
Financial Plan Alternatives FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
1 Alt 1 - No Annual Rate Increases/No New Debt 0.00%0.00%0.00%0.00%0.00%0.00%
2 Alt 2 - Gen. Infl. Rate Increases/New Rev. Bonds 0.00%3.50%3.50%3.50%3.50%3.50%
3 Alt 3 - Custom Rate Increases/New Rev. Bonds 0.00%8.00%8.00%6.00%4.00%4.00%
4 Alt 4 - Full CIP/No New Debt 0.00%12.00%12.00%12.00%8.00%6.00%
CIP Funding Plan:
2 85% Funding of CIP, at actual cost & timing
RATE REVENUE REQUIREMENTS SUMMARY 5-Year Projected Rate Period
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CITY OF GILROY Financial Plan & Reserve Summary
WATER RATE STUDY
Financial Plan and Reserve Projections
TABLE 2 :RESERVE FUND SUMMARY
Budget
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Unrestricted Reserve:
Total Beginning Cash1 29,603,445$
Operating Reserve
Beginning Reserve Balance2 6,000,000$ 5,955,000$ 4,555,257$ 4,683,245$ 5,473,537$ 6,290,019$
Plus: Net Cash Flow (After Rate Increases)2,348,090 (1,399,743) 127,988 790,292 816,481 707,816
Less: Transfer out to Capital and Infrastructure Reserve (2,393,090) - - - - -
Ending Operating Reserve Balance 5,955,000$ 4,555,257$ 4,683,245$ 5,473,537$ 6,290,019$ 6,997,835$
Target Ending Balance (6 Months of O&M)2 5,955,000$ 8,253,000$ 8,229,000$ 8,330,000$ 8,658,000$ 9,000,000$
Capital Rehabilitation & Replacement Reserve
Beginning Reserve Balance 23,603,445$ 25,382,158$ 22,643,278$ 8,114,397$ 7,583,609$ 7,583,609$
Plus: Transfer of Operating Reserve Surplus 2,393,090 - - - - -
Less: Use of Reserves for Capital Projects (614,378) (2,738,879) (14,528,882) (530,788) - (365,779)
Ending Capital and Infrastructure Reserve Balance 25,382,158$ 22,643,278$ 8,114,397$ 7,583,609$ 7,583,609$ 7,217,830$
Target Ending Balance (50% of Avg. CIP Costs)3 4,140,000$ 4,140,000$ 4,140,000$ 4,140,000$ 4,140,000$ 4,140,000$
Ending Balance - Unrestricted Reserves 31,337,158$ 27,198,535$ 12,797,642$ 13,057,146$ 13,873,627$ 14,215,665$
Min. Target Ending Balance -Excl. Restricted Reserves 10,095,000$ 12,393,000$ 12,369,000$ 12,470,000$ 12,798,000$ 13,140,000$
Ending Surplus/(Deficit) Compared to Reserve Targets 21,242,158$ 14,805,535$ 428,642$ 587,146$ 1,075,627$ 1,075,665$
1. Beginning cash balances provided by City staff for Fund 705 - Water Operations. Source file: Account Trial Balance FY22 - 430-435-700-705.pdf .
2. The target ending balance is set equal to 6 months of O&M expenses.
3. The target ending balance is set equal to 50% of average CIP costs for the 5-year rate adoption period. See Exhibit 2 (CIP) for details.
TABLE 3 :RESERVE FUND SUMMARY, cont.
Budget
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Restricted Reserve:1
Water Impact Fee Reserve (provided for informational purposes only)
Beginning Reserve Balance 6,053,344$ 5,887,790$ 2,632,956$ 4,254,889$ 5,195,043$ 5,540,615$
Plus: Interest Earnings & Misc.99,508 107,507 109,421 47,557 48,451 49,368
Plus: Capacity Fee Revenue 319,569 478,204 1,512,512 892,597 297,121 363,752
Less: Use of Reserves for Capital Projects (584,631) (3,840,545) - - - -
Ending Connection Fee Fund Balance 5,887,790$ 2,632,956$ 4,254,889$ 5,195,043$ 5,540,615$ 5,953,735$
Debt Reserve
Beginning Reserve Balance -$ -$ -$ -$ -$ 453,067$
Plus: Reserve Funding from New Debt Obligations - - - - 453,067 453,067
Plus: Interest Earnings - - - - - 3,838
Ending Debt Reserve Balance -$ -$ -$ -$ 453,067$ 909,972$
Target Ending Balance -$ -$ -$ -$ 453,067$ 906,134$
Annual Interest Earnings Rate 2 0.85%0.85%0.85%0.85%0.85%0.85%
1. The beginning cash balances provided by the City. Source file: Account Trial Balance FY22 - 430-435-700-705.pdf .
2. Historical interest earning rates are per the average annual yields for funds invested in LAIF (2018-2022). The source is the California State Treasurer's website:
https://www.treasurer.ca.gov/pmia-laif/historical/annual.asp .
SUMMARY OF CASH ACTIVITY 5-Year Projected Rate Period
SUMMARY OF CASH ACTIVITY 5-Year Projected Rate Period
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CITY OF GILROY Charts & Tables
WATER RATE STUDY
Rate Adjustment Charts and Report Tables
CHART 1
$.0 Mil.
$5.0 Mil.
$10.0 Mil.
$15.0 Mil.
$20.0 Mil.
$25.0 Mil.
$30.0 Mil.
$35.0 Mil.
2023 2024 2025 2026 2027 2028Annual ObligationsFiscal Year Ending June 30
Water Revenue Requirements vs.
Revenue Under Existing and Increased Rates
Cash Funded Capital Expenses
O&M Expenses
Revenues under Existing Rates
Revenues under Increased Rates
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CITY OF GILROY Charts & Tables
WATER RATE STUDY
Rate Adjustment Charts and Report Tables
CHART 2
$.0 Mil.
$5.0 Mil.
$10.0 Mil.
$15.0 Mil.
$20.0 Mil.
$25.0 Mil.
$30.0 Mil.
$35.0 Mil.
2023 2024 2025 2026 2027 2028
Fiscal Year Ending June 30
Ending Unrestricted Reserve vs.
Minimum Reserve Targets
Ending Cash Balance (Unrestricted Reserves)
Minimum Target Reserve Balance
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CITY OF GILROY Exhibit 1
WATER RATE STUDY
Operating Revenue and Expenses
TABLE 4 :REVENUE FORECAST1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Rate Revenue
705 8000 705 -80-8000-000-45120 User Fees 1 13,665,000$ 13,939,000$ 14,218,000$ 14,431,270$ 14,647,739$ 14,867,455$
Other Revenue
705 8000 705 -80-8000-000-45140 Connect/Install Charges 1 105,000 110,000 112,000 113,680 115,385 117,116
705 8000 705 -80-8000-000-45145 Overhead Revenue 1 - - - - - -
705 8000 705 -80-8000-000-46110 Bank Interest See FP 483,737 494,621 504,514 - - -
705 8000 705 -80-8000-000-47810 Miscellaneous Revenues 1 5,000 5,000 5,000 5,075 5,151 5,228
Subtotal - Other Revenue 593,737 609,621 621,514 118,755 120,536 122,344
Water Impact Fee Revenue
435 5500 435 -55-5500-000-45150 Developer's Impact Fee 1 319,569 478,204 1,512,512 892,597 297,121 363,752
435 5500 435 -55-5500-000-46110 Bank Interest 1 93,615 95,721 97,635 35,771 36,665 37,582
435 5500 435 -55-5500-000-48110 Interfund Transfer In 7 5,893 11,786 11,786 11,786 11,786 11,786
TOTAL: REVENUE 14,677,814$ 15,134,332$ 16,461,447$ 15,490,179$ 15,113,847$ 15,402,920$
DIVISION Basis
5-Year Projected Rate PeriodFUNDACCOUNTDESCRIPTION
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CITY OF GILROY Exhibit 1
WATER RATE STUDY
Operating Revenue and Expenses
TABLE 5 :OPERATING EXPENSE FORECAST1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Fund 705 - Water Operations
8000 - Water Administration
705 8000 705 -80-8000-000-50120 Wages/Part Time 3 43,597$ 125,000$ 125,000$ 129,375$ 133,903$ 138,590$
705 8000 705 -80-8000-000-50215 Retirement (Part Time) 3 632 2,813 2,813 2,911 3,013 3,119
705 8000 705 -80-8000-000-50220 Medicare 3 705 1,813 1,813 1,876 1,942 2,010
705 8000 705 -80-8000-000-51510 Professional Support 3 - 26,000 26,000 26,910 27,852 28,827
705 8000 705 -80-8000-000-51620 Audit Services 2 8,700 - - - - -
705 8000 705 -80-8000-000-51630 Contractual Services 2 - 6,500 6,400
705 8000 706 -80-8000-000-54110 Interfund Transfer Out 2 13,796
705 8000 705 -80-8000-000-54130 Fleet Service Charge 2 75,931 98,943 100,692 103,779 106,961 110,241
705 8000 705 -80-8000-000-54140 Facility Service Charge 2 124,543 294,076 316,145 325,838 335,829 346,126
705 8000 705 -80-8000-000-54145 Info Tech Service Charge 2 454,960 606,926 558,596 575,723 593,376 611,570
705 8000 705 -80-8000-000-54150 Overhead Charges 2 1,558,875 1,779,498 1,854,574 1,911,438 1,970,045 2,030,450
705 8000 705 -80-8000-000-54155 Liability Insurance Charges 2 401,933 430,902 452,735 466,617 480,924 495,669
705 8000 705 -80-8000-000-57145 Water Conservation 2 60,504 72,500 72,500 74,723 77,014 79,375
705 8000 705 -80-8000-000-58130 Claims 2 15,000 15,750 16,550 17,057 17,580 18,119
Subtotal - Water Administration 2,759,176$ 3,460,721$ 3,533,818$ 3,636,249$ 3,748,440$ 3,864,096$
8010 - Finance Water Utility Billing
705 8010 705 -80-8010-000-50110 Salaries 3 455,813$ 580,139$ 620,284$ 641,994$ 664,464$ 687,720$
705 8010 705-80-8020-000-50110 Utility Billing Sup/Sen. Acct.3 - - - - - -
705 8010 705 -80-8010-000-50114 Earned Leave Cashout 3 5,519 - - - - -
705 8010 705 -80-8010-000-50120 Wages/Part Time 3 23,048 33,750 21,788 22,551 23,340 24,157
705 8010 705 -80-8010-000-50130 Overtime 3 14,000 10,000 10,000
705 8010 705 -80-8010-000-50150 Overtime Meals 3 30 - -
705 8010 705 -80-8010-000-50205 Workers Comp 3 2,023 2,411 2,521 2,610 2,701 2,796
705 8010 705 -80-8010-000-50210 Retirement (Full Time)3 48,749 69,133 71,870 74,385 76,989 79,683
705 8010 705 -80-8010-000-50212 Deferred Compensation 3 1,176 2,016 2,016 2,087 2,160 2,235
705 8010 705 -80-8010-000-50213 UAL Retirement 3 82,911 88,913 95,465 98,806 102,264 105,843
705 8010 705 -80-8010-000-50215 Retirement (Part Time)3 18 759 490 507 525 544
705 8010 705 -80-8010-000-50220 Medicare 3 7,467 9,053 9,466 9,797 10,140 10,495
705 8010 705 -80-8010-000-50225 Health Insurance Benefits 3 105,332 113,442 113,594 117,570 121,685 125,944
705 8010 705 -80-8010-000-50230 Life Insurance Benefits 3 778 757 779 806 834 863
705 8010 705 -80-8010-000-50235 Employee Assistance Prog 3 935 1,087 1,109 1,148 1,188 1,230
705 8010 705 -80-8010-000-50240 Unemployment Insurance 3 805 912 959 992 1,027 1,063
705 8010 705 -80-8010-000-50255 Misc Disability Insurance 3 984 1,260 1,260 1,304 1,350 1,397
705 8010 705 -80-8010-000-50260 Retiree Medical 3 - 900 900
705 8010 705 -80-8010-000-51110 Employee Training 2 - 3,400 3,400
705 8010 705 -80-8010-000-51120 Employee Travel, Food,Lodge 2 669 1,250 1,250
705 8010 705 -80-8010-000-51430 Postage 2 50 100 100
705 8010 705 -80-8010-000-50510 Professional Support 2 2,200 - -
705 8010 705 -80-8010-000-51630 Contractual Services 2 119,000 126,025 117,825 121,438 125,161 128,999
705 8010 705 -80-8010-000-52110 Office/Computer Supplies 2 2,000 2,000 2,000
Subtotal - Finance Water Utility Billing 873,507$ 1,047,309$ 1,077,076$ 1,095,995$ 1,133,828$ 1,172,968$
DIVISION 5-Year Projected Rate Period
BasisACCOUNTFUNDDESCRIPTION
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CITY OF GILROY Exhibit 1
WATER RATE STUDY
Operating Revenue and Expenses
TABLE 6 :OPERATING EXPENSE FORECAST, cont.1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Fund 705 - Water Operations
8020 - Water Operations
705 8020 705 -80-8020-000-50110 Salaries 3 1,463,012$ 2,269,298$ 2,432,834$ 2,517,983$ 2,606,113$ 2,697,327$
705 8020 705-80-8020-000-50110 FT Engineer I/II (Water)3 - - - - - -
705 8020 705 -80-8020-000-50110 Employee Training 3 - 25,000 25,000 25,875 26,781 27,718
705 8020 705 -80-8020-000-50120 Employee Travel, Food, Lodging 3 - 5,000 5,000 5,175 5,356 5,544
705 8020 705 -80-8020-000-50114 Earned Leave Cashout 3 9,000 - - - - -
705 8020 705 -80-8020-000-50120 Wages/Part Time 3 37,812 - - - - -
705 8020 705 -80-8020-000-50130 Overtime 3 63,051 73,710 77,395 80,104 82,907 85,809
705 8020 705 -80-8020-000-50150 Overtime Meals 3 - 2,000 2,000 2,070 2,142 2,217
705 8020 705 -80-8020-000-50205 Workers Comp 3 77,758 101,497 106,072 109,785 113,627 117,604
705 8020 705 -80-8020-000-50210 Retirement (Full Time)3 152,220 271,399 282,934 292,837 303,086 313,694
705 8020 705 -80-8020-000-50212 Deferred Compensation 3 3,772 7,326 7,326 7,582 7,848 8,122
705 8020 705 -80-8020-000-50213 UAL Retirement 3 293,133 353,639 383,140 396,550 410,429 424,794
705 8020 705 -80-8020-000-50215 Retirement (Part Time)3 521 - - - - -
705 8020 705 -80-8020-000-50220 Medicare 3 24,353 33,996 36,422 37,697 39,016 40,382
705 8020 705 -80-8020-000-50225 Health Insurance Benefits 3 313,426 460,498 461,940 478,108 494,842 512,161
705 8020 705 -80-8020-000-50230 Life Insurance Benefits 3 2,448 3,144 3,243 3,356 3,474 3,595
705 8020 705 -80-8020-000-50235 Employee Assistance Prog 3 2,911 4,262 4,347 4,499 4,657 4,820
705 8020 705 -80-8020-000-50240 Unemployment Insurance 3 2,794 3,620 3,816 3,950 4,088 4,231
705 8020 705 -80-8020-000-50255 Misc Disability Insurance 3 2,999 4,964 4,964 5,138 5,318 5,504
705 8020 705 -80-8020-000-50260 Retiree Medical 3 2,400 2,400 - - - -
705 8020 705 -80-8020-000-50310 Apparel, Boots, Ppe 2 22,291 30,000 30,000 30,920 31,868 32,845
705 8020 705 -80-8020-000-51410 Utilities 5 921,543 1,013,698 1,064,382 1,120,163 1,178,868 1,240,648
705 8020 705 -80-8020-000-51420 Telecommunications 2 50,000 8,100 8,100 8,348 8,604 8,868
705 8020 705 -80-8020-000-51510 Professional Support 2 2,153 5,000 5,000 5,153 5,311 5,474
705 8020 705 -80-8020-000-51630 Contractual Services 2 376,939 1,128,400 450,000 463,798 478,018 492,675
705 8020 705 -80-8020-000-52110 Office/Computer Supplies 2 4,026 15,000 15,000 15,460 15,934 16,423
705 8020 705 -80-8020-000-52150 Department Supplies 2 51,494 60,000 60,000 61,840 63,736 65,690
705 8020 705 -80-8020-000-52210 Repairs & Maintenance 2 147,625 250,000 250,000 257,665 265,566 273,708
705 8020 705 -80-8020-000-52220 Well System Maintenance 2 27,642 150,000 150,000 154,599 159,339 164,225
705 8020 705 -80-8020-000-52310 Equipment Rental 2 33 10,000 10,000 10,307 10,623 10,948
705 8020 705 -80-8020-000-52710 Permits 2 1,973 10,000 10,000 10,307 10,623 10,948
705 8020 705 -80-8020-000-53120 Equipment/Furniture 2 84,337 75,000 75,000 77,300 79,670 82,113
705 8020 705 -80-8020-000-53135 Improvements 2 365,770 - - - - -
705 8020 705 -80-8020-000-53142 Capital Improvement Plan See Exh 2 - - - - - -
705 8020 705 -80-8020-000-54110 Interfund Transfer Out 2 342,000 433,788 458,181 472,229 486,709 501,632
705 8020 705 -80-8020-000-57150 Valley Water 6 3,293,972 4,641,000 4,873,050 5,116,703 5,372,538 5,641,165
Subtotal - Water Operations 8,143,407$ 11,451,740$ 11,295,146$ 11,775,500$ 12,277,089$ 12,800,885$
DIVISION 5-Year Projected Rate PeriodFUNDACCOUNTDESCRIPTIONBasis
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WATER RATE STUDY
Operating Revenue and Expenses
TABLE 7 :OPERATING EXPENSE FORECAST, cont.1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Fund 705 - Water Operations
8030 - Water Backflow Prevention
705 8030 705 -80-8030-000-50110 Salaries 3 79,465$ 74,991$ 79,074$ 81,842$ 84,706$ 87,671$
705 8030 705 -80-8030-000-50130 Earned Leave Cashout 3 - - - - - -
705 8030 705 -80-8030-000-50205 Wages/Part Time 3 - - - - - -
705 8030 705 -80-8030-000-50210 Overtime 3 6,460 7,500 7,500 7,763 8,034 8,315
705 8030 705 -80-8030-000-50212 Overtime Meals 3 - - - - - -
705 8030 705 -80-8030-000-50213 Compensated Absences 3 - - - - - -
705 8030 705 -80-8030-000-50220 Workers Comp 3 5,789 4,450 4,590 4,751 4,917 5,089
705 8030 705 -80-8030-000-50225 Retirement (Full Time)3 8,537 9,005 9,233 9,556 9,891 10,237
705 8030 705 -80-8030-000-50230 Deferred Compensation 3 249 - - - - -
705 8030 705 -80-8030-000-50235 Ual Retirement 3 16,763 11,703 12,455 12,891 13,342 13,809
705 8030 705 -80-8030-000-50240 Retirement (Part Time)3 - - - - - -
705 8030 705 -80-8030-000-50255 Medicare 3 1,340 1,197 1,256 1,300 1,345 1,393
705 8030 705 -80-8030-000-51430 Health Insurance Benefits 3 14,085 12,312 12,312 12,743 13,189 13,651
705 8030 705 -80-8030-000-51510 Life Insurance Benefits 3 104 90 92 95 99 102
705 8030 705 -80-8030-000-51630 Employee Assistance Prog 3 137 116 119 123 127 132
705 8030 705 -80-8030-000-52110 Unemployment Insurance 3 157 117 122 126 131 135
705 8030 705 -80-8030-000-50255 Misc Disability Insurance 3 141 123 123 127 132 136
705 8030 705 -80-8030-000-51110 Employee Training 3 - 1,000 1,000 1,035 1,071 1,109
705 8030 705 -80-8030-000-51120 Employee Travel, Food,Lodge 3 - 1,000 1,000 1,035 1,071 1,109
705 8030 705 -80-8030-000-51430 Postage 3 - 100 - - - -
705 8030 705 -80-8030-000-51510 Professional Support 3 1,331 1,000 1,000 1,035 1,071 1,109
705 8030 705 -80-8030-000-51630 Contractual Services 3 - 6,000 6,000 6,210 6,427 6,652
705 8030 705 -80-8030-000-52110 Office/Computer Supplies 3 - 1,000 1,000 1,035 1,071 1,109
705 8030 705 -80-8030-000-52210 Repairs & Maintenance 3 - 10,000 10,000 10,350 10,712 11,087
Subtotal - Water Backflow Prevention 134,558$ 141,704$ 146,876$ 152,017$ 157,337$ 162,844$
DIVISION ACCOUNT DESCRIPTION Basis
5-Year Projected Rate PeriodFUND
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WATER RATE STUDY
Operating Revenue and Expenses
TABLE 8 :OPERATING EXPENSE FORECAST, cont.1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Fund 705 - Water Operations
Additional Capital Expenditures
705 8020 705-80-8020-000-53120 One-time Vehicles One-Time - 404,450 404,450 - - -
Subtotal - Additional Expenditures -$ 404,450$ 404,450$ -$ -$ -$
TOTAL: WATER OPERATIONS EXPENSES 11,910,647$ 16,505,924$ 16,457,366$ 16,659,760$ 17,316,694$ 18,000,793$
TABLE 9 :FORECASTING ASSUMPTIONS
Basis 2023 2024 2025 2026 2027 2028
Customer Growth3 1 --1.50%1.50%1.50%1.50%1.50%
General Cost Inflation4 2 --3.07%3.07%3.07%3.07%3.07%
Labor Cost Inflation5 3 --3.50%3.50%3.50%3.50%3.50%
Electricty6 4 --5.64%5.64%5.64%5.64%5.64%
Fuel & Utilities7 5 --5.24%5.24%5.24%5.24%5.24%
Water Purchases8 6 --5.00%5.00%5.00%5.00%5.00%
No Escalation 7 --0.00%0.00%0.00%0.00%0.00%
1. Revenue and expenses for FY 2022/23 provided by the City. Revenues and expenses for all other years are escalated based on the forecasting assumptions in Table 9. Source file: FY23 Budgets.xlsx .
2. Expenses are inflated each year by the following annual inflation factor categories.
3. Customer growth is based on estimated service area population growth through FY 2044/45. Source file: Gilroy 2020 UWMP.pdf , page 3-9.
4. General cost inflation is based on the 5-year average annual change in the Consumer Price Index for all Urban Consumers in the San Francisco-Oakland-Hayward, CA area.
5. Labor cost inflation is based on the 5-year average annual change in the Quarterly Census of Employment and Wages for San Francisco County, CA.
6. Electricity cost inflation is based on the 5-year average change in the Consumer Price Index for San Francisco County.
7. Fuel & Utilities cost inflation is based on the 5-year average annual change in the Consumer Price Index - Average Price Data for Fuels and related products and power. This factor is used for
utility costs other than electricity.
8. The growth for water purchases is estimated at 4% annually and calculated using the City's budgets for FY 2021/22 and FY 2022/23. Source file: FY23 Budgets.xlsx .
5-Year Projected Rate PeriodFUNDDIVISIONACCOUNTDESCRIPTIONBasis
INFLATION FACTORS2
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WATER RATE STUDY
Capital Improvement Plan Expenditures
TABLE 10 :CAPITAL FUNDING SUMMARY
CAPITAL FUNDING FORECAST Budget
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Grants -$ -$ -$ -$ -$ -$
Use of Capacity Fee Reserves 584,631 3,840,545 - - - -
SRF Loan Funding - - - - - -
Use of New Revenue Bond Proceeds - - - 6,000,000 6,000,000 4,000,000
Use of Capital Rehabilitation and Replacement Reserve 614,378 2,738,879 14,528,882 530,788 - 365,779
Rate Revenue - - - - - -
Total Sources of Capital Funds 1,199,009$ 6,579,425$ 14,528,882$ 6,530,788$ 6,000,000$ 4,365,779$
Uses of Capital Funds:
Total Project Costs 1,199,009$ 6,579,425$ 14,528,882$ 6,530,788$ 3,199,919$ 4,365,779$
Capital Funding Surplus (Deficiency)-$ -$ -$ -$ 2,800,082$ -$
SRF Loan Funding -$ -$ -$ -$ -$ -$
New Revenue Bond Proceeds -$ -$ -$ 6,000,000$ 6,000,000$ 4,000,000$
Financial Plan Scenario:
3 Alt 3 - Custom Rate Increases/New Rev. Bonds
CAPITAL IMPROVEMENT PROGRAM FUNDING OPTIONS
2
Policy Choice 2023 2024 2025 2026 2027 2028
1 Full Funding of CIP, at actual cost & timing 1,410,599$ 7,740,500$ 17,092,802$ 7,683,280$ 3,764,610$ 5,136,210$
2 85% Funding of CIP, at actual cost & timing 1,199,009$ 6,579,425$ 14,528,882$ 6,530,788$ 3,199,919$ 4,365,779$
3 60% Funding of CIP, at actual cost & timing 846,359$ 4,644,300$ 10,255,681$ 4,609,968$ 2,258,766$ 3,081,726$
Capital Improvement Program Funding Choice 2023 2024 2025 2026 2027 2028
Effective Annual Funding Amount 1,199,009$ 6,579,425$ 14,528,882$ 6,530,788$ 3,199,919$ 4,365,779$
5-Year Projected Rate Period
Insert policy choice in box to right, based on options listed below:
Funding Sources:
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WATER RATE STUDY
Capital Improvement Plan Expenditures
CAPITAL IMPROVEMENT PROGRAM
TABLE 11 :CAPITAL IMPROVEMENT PROGRAM COSTS (in Current-Year Dollars )
Project No.Description 2023 2024 2025 2026 2 2027 2028
Capital Improvement Program - Fiscal Year 2023 to Fiscal Year 2028
800250 Casey and Swanston Water Line Replacement -$ 466,707$ 2,825,800$ -$ -$ -$
800310 Automated Flexnet Water Meter Installation 794,200 612,700 612,700 - - -
800590 Broadway and Sargent Water Line Replacement - - 185,295 877,600 - -
800600 Church and Gurries Water Line Replacement - 86,966 314,600 - - -
800610 Church Street - Welburn to First Water Line Replacement - - 250,335 1,173,400 - -
800620 Forest and Eighth Water Line Replacement - 89,974 369,200 - - -
800630 Steel Water Service Line Replacement Citywide - 104,280 104,280 104,280 104,280 104,280
900740 Monterey-Leavesley to Ronan Water Line Replacement - - 821,473 4,651,900 - -
800640 Monterey and Eighth Water Line Replacement - - 101,325 406,700 - -
800650 Abandon 2" Water Line from 7041 to 7161 Monterey Street - 108,900 847,000 - - -
800660 Murray at Burke Water Line Reroute - - 133,794 469,400 - -
800670 Saint Louise Hospital Large Water Meter Replacement - 63,200 - - - -
800690 Water Reservoirs A and B - Painting - 483,200 - - - -
800700 Water Reservoirs A and B - Retrofit Overflow Piping - 482,000 - - - -
800710 Water Well Nos. 1 and 4 Compliance Improvements - 82,600 - - - -
800720 Water Well Nos. 1, 2, 4 and 6 Upgrade Improvements - 1,025,200 10,527,000 - - -
9000730 Martin and Railroad Water Line - - - - - 1,371,600
Subtotal - Capital Improvement Program 794,200$ 3,605,727$ 17,092,802$ 7,683,280$ 104,280$ 1,475,880$
Water System Master Plan Projects 3
Pipeline Improvements
P1-1 Zone 1 -$ -$ -$ -$ 163,250$ 163,250$
P1-2 Monterey Hwy / Orsetti Rd / Hwy 101 - - - - 244,430 244,430
P1-3 Monterey Hwy - - - - 11,690 11,690
P1-4 Murray Ave - - - - 111,650 111,650
P1-5 Arroyo Cir - - - - 3,580 3,580
P1-6 Lewis St - - - - 8,120 8,120
P1-7 Forest St - - - - 13,550 13,550
P1-8 Gilman Rd / Camino Arroyo - - - - 15,240 15,240
P1-9 Pacheco Pass Hwy - - - - 87,810 87,810
P1-10 Camino Arroyo - - - - 154,290 154,290
P1-11 Cameron Blvd - - - - 106,580 106,580
P1-12 ROW - - - - 82,230 82,230
P1-13 ROW / Cameron Blvd - - - - 230,400 230,400
P1-14 Luchessa Ave - - - - 328,850 328,850
P1-15 Thomas Rd - - - - 155,300 155,300
P1-16 Rossi Ln - - - - 138,560 138,560
P1-17 ROW - - - - 91,860 91,860
P1-18 ROW - - - - 146,670 146,670
P1-19 Garlic Farm Wy / Southside Dr - - - - 234,970 234,970
P1-20 Southside Dr - - - - 33,510 33,510
P1-21 Southside Dr - - - - 152,770 152,770
P1-22 Santa Teresa Blvd - - - - 14,230 14,230
Storage Reservoir Improvements
3H-1 Construct an additional storage at existing 3D site - - - - 20,790 20,790
Groundwater Well Improvements
GW-10 Intersection of San Ysidro Ave and Las Animas Ave - - - - 370,000 370,000
GW-11 Intersection of Camino Arroyo and Renz Lane - - - - 370,000 370,000
GW-12 Intersection of Wren Ave and Vickery Lane - - - - 370,000 370,000
Subtotal - Master Plan Projects -$ -$ -$ -$ 3,660,330$ 3,660,330$
Impact Fee Projects 4
800050 McCarthy Site Well (Well #9)562,145$ 3,550,800$ -$ -$ -$ -$
Subtotal - Impact Fee Projects 562,145$ 3,550,800$ -$ -$ -$ -$
Estimated Future Projects
Future Projects5 -$ -$ -$ -$ -$ -$
Total: CIP Program Costs (Current-Year Dollars)1,356,345$ 7,156,527$ 17,092,802$ 7,683,280$ 3,764,610$ 5,136,210$
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WATER RATE STUDY
Capital Improvement Plan Expenditures
TABLE 12 :CAPITAL IMPROVEMENT PROGRAM COSTS (in Future-Year Dollars )6
Project No.Description 2023 2024 2025 2026 2 2027 2028
Capital Improvement Program - Fiscal Year 2023 to Fiscal Year 2028
800250 Casey and Swanston Water Line Replacement -$ 504,790$ 2,825,800$ -$ -$ -$
800310 Automated Flexnet Water Meter Installation 825,968 662,696 612,700 - - -
800590 Broadway and Sargent Water Line Replacement - - 185,295 877,600 - -
800600 Church and Gurries Water Line Replacement - 94,062 314,600 - - -
800610 Church Street - Welburn to First Water Line Replacement - - 250,335 1,173,400 - -
800620 Forest and Eighth Water Line Replacement - 97,316 369,200 - - -
800630 Steel Water Service Line Replacement Citywide - 112,789 104,280 104,280 104,280 104,280
900740 Monterey-Leavesley to Ronan Water Line Replacement - - 821,473 4,651,900 - -
800640 Monterey and Eighth Water Line Replacement - - 101,325 406,700 - -
800650 Abandon 2" Water Line from 7041 to 7161 Monterey Street - 117,786 847,000 - - -
800660 Murray at Burke Water Line Reroute - - 133,794 469,400 - -
800670 Saint Louise Hospital Large Water Meter Replacement - 68,357 - - - -
800690 Water Reservoirs A and B - Painting - 522,629 - - - -
800700 Water Reservoirs A and B - Retrofit Overflow Piping - 521,331 - - - -
800710 Water Well Nos. 1 and 4 Compliance Improvements - 89,340 - - - -
800720 Water Well Nos. 1, 2, 4 and 6 Upgrade Improvements - 1,108,856 10,527,000 - - -
9000730 Martin and Railroad Water Line - - - - - 1,371,600
Subtotal - Capital Improvement Program 825,968$ 3,899,954$ 17,092,802$ 7,683,280$ 104,280$ 1,475,880$
Water System Master Plan Projects 3
Pipeline Improvements
P1-1 Zone 1 -$ -$ -$ -$ 163,250$ 163,250$
P1-2 Monterey Hwy / Orsetti Rd / Hwy 101 - - - - 244,430 244,430
P1-3 Monterey Hwy - - - - 11,690 11,690
P1-4 Murray Ave - - - - 111,650 111,650
P1-5 Arroyo Cir - - - - 3,580 3,580
P1-6 Lewis St - - - - 8,120 8,120
P1-7 Forest St - - - - 13,550 13,550
P1-8 Gilman Rd / Camino Arroyo - - - - 15,240 15,240
P1-9 Pacheco Pass Hwy - - - - 87,810 87,810
P1-10 Camino Arroyo - - - - 154,290 154,290
P1-11 Cameron Blvd - - - - 106,580 106,580
P1-12 ROW - - - - 82,230 82,230
P1-13 ROW / Cameron Blvd - - - - 230,400 230,400
P1-14 Luchessa Ave - - - - 328,850 328,850
P1-15 Thomas Rd - - - - 155,300 155,300
P1-16 Rossi Ln - - - - 138,560 138,560
P1-17 ROW - - - - 91,860 91,860
P1-18 ROW - - - - 146,670 146,670
P1-19 Garlic Farm Wy / Southside Dr - - - - 234,970 234,970
P1-20 Southside Dr - - - - 33,510 33,510
P1-21 Southside Dr - - - - 152,770 152,770
P1-22 Santa Teresa Blvd - - - - 14,230 14,230
Storage Reservoir Improvements - - - -
3H-1 Construct an additional storage at existing 3D site - - - - 20,790 20,790
Groundwater Well Improvements - - - -
GW-10 Intersection of San Ysidro Ave and Las Animas Ave - - - - 370,000 370,000
GW-11 Intersection of Camino Arroyo and Renz Lane - - - - 370,000 370,000
GW-12 Intersection of Wren Ave and Vickery Lane - - - - 370,000 370,000
Subtotal - Master Plan Projects -$ -$ -$ -$ 3,660,330$ 3,660,330$
Impact Fee Projects 4
800050 McCarthy Site Well (Well #9)584,631$ 3,840,545$ -$ -$ -$ -$
Subtotal - Impact Fee Projects 584,631$ 3,840,545$ -$ -$ -$ -$
Estimated Future Projects
Future Projects5 -$ -$ -$ -$ -$ -$
Total: CIP Program Costs (Future-Year Dollars)1,410,599$ 7,740,500$ 17,092,802$ 7,683,280$ 3,764,610$ 5,136,210$
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WATER RATE STUDY
Capital Improvement Plan Expenditures
TABLE 13 :FORECASTING ASSUMPTIONS
Project No.Description 2023 2024 2025 2026 2 2027 2028
Annual Construction Cost Inflation, Per Engineering News Record7 4.00%4.00%4.00%4.00%4.00%4.00%
Cumulative Construction Cost Multiplier from 2023 1.04 1.08 1.12 1.17 1.22 1.27
1. Capital project costs provided by City Staff. Source file: 11. Adopted-CIP-FY24-28.pdf , pages 43, 80-107.
2. Capital projects beginning in FY 2025/26 are unfunded and identified in the City's Capital Improvement Program. These costs have been allocated over a 5-year period from FY 2025/26
through FY 2029/30. Source: 11. Adopted-CIP-FY21-FY25.pdf , pages 243-246.
3. Capital project costs are from the City's Draft Water System Master Plan (May 2022). Source file: Draft Water Master Plan.pdf , Table 8.2, pages 107-108.
4. Capital project funded by impact fees. Source file: 11. Adopted-CIP-FY21-FY25.pdf , pages 98-99.
5. Future project costs beyond FY 2029/30 were calculated based on the City's 7-year average.
6. The project costs in future-year dollars have been inflated by 4% annually.
7. For reference purposes, the annual Construction Cost Inflation percentage is the 5-year average change in the Construction Cost Index for September 2017-2022 (4.0%). Source: Engineering
News Record website (http://enr.construction.com ).
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CITY OF GILROY Exhibit 3
WATER RATE STUDY
Debt Service *Currently, the City does not have any outstanding revenue bonds or loans.
TABLE 14 :EXISTING DEBT OBLIGATIONS
EXISTING DEBT OBLIGATIONS Budget
Annual Repayment Schedules:FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
SRF Loan/Revenue Bond
Principal Payment -$ -$ -$ -$ -$ -$
Interest Payment - - - - - -
Subtotal: Annual Debt Service -$ -$ -$ -$ -$ -$
Coverage Requirement ($-Amnt above annual payment)-$ -$ -$ -$ -$ -$
Reserve Requirement -$ -$ -$ -$ -$ -$
Grand Total: Existing Annual Debt Service -$ -$ -$ -$ -$ -$
Grand Total: Existing Annual Coverage Requirement -$ -$ -$ -$ -$ -$
Grand Total: Existing Debt Reserve Target -$ -$ -$ -$ -$ -$
TABLE 15 :EXISTING ANNUAL DEBT OBLIGATIONS TO BE SATISFIED BY WATER RATES
Existing Annual Debt Service -$ -$ -$ -$ -$ -$
Existing Annual Coverage Requirement -$ -$ -$ -$ -$ -$
Existing Debt Reserve Target -$ -$ -$ -$ -$ -$
5-Year Projected Rate Period
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WATER RATE STUDY
Projected Water Rates Under Existing Rate Schedule
TABLE 16 : CURRENT WATER RATE SCHEDULE
Current Rates
July 1, 2019
Base Charges
Meter Size
3/4 inch $11.53
1 inch $19.24
1 1/2 inch $38.47
2 inch $61.55
3 inch $115.39
4 inch $192.30
6 inch $384.62
8 inch $615.37
10 inch $884.50
Volumetric Charge for All Water Consumed (in $/1,000 Gallons)
Tier 1 - 1-30,000 Gallons
Zone 1 $4.39
Zone 2 $4.93
Zone 3 $5.52
Tier 2 -30,000+ Gallons
Zone 1 $4.93
Zone 2 $5.47
Zone 3 $6.06
1. Rates available on the City website. Source: https://www.cityofgilroy.org/758/Water-and-Wastewater-Rates .
2. Senior citizens who qualify for PG&E's Care Program may apply for a senior low income discount that
gives them an exemption for the monthly base charge and the first 5,000 gallons per month.
Water Rate Schedule1,2
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CITY OF GILROY
WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 17 :CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS
Classification of Expenses
FY 2023/24 (COM)(CAP)(CA)(COM)(CAP)(CA)
Fund 705 - Water Operations
8000 - Water Administration
Wages/Part Time 125,000$ 31,250$ 31,250$ 62,500$ 25.0%25.0%50.0%
Retirement (Part Time) 2,813 703 703 1,407 25.0%25.0%50.0%
Medicare 1,813 453 453 907 25.0%25.0%50.0%
Professional Support 26,000 6,500 6,500 13,000 25.0%25.0%50.0%
Audit Services - - - - 25.0%25.0%50.0%
Contractual Services 6,500 1,625 1,625 3,250 25.0%25.0%50.0%
Fleet Service Charge 98,943 24,736 24,736 49,472 25.0%25.0%50.0%
Facility Service Charge 294,076 73,519 73,519 147,038 25.0%25.0%50.0%
Info Tech Service Charge 606,926 151,732 151,732 303,463 25.0%25.0%50.0%
Overhead Charges 1,779,498 444,875 444,875 889,749 25.0%25.0%50.0%
Liability Insurance Charges 430,902 107,726 107,726 215,451 25.0%25.0%50.0%
Water Conservation 72,500 18,125 18,125 36,250 25.0%25.0%50.0%
Claims 15,750 3,938 3,938 7,875 25.0%25.0%50.0%
Subtotal - Water Administration 3,460,721$ 865,180$ 865,180$ 1,730,361$ 25.0%25.0%50.0%
8010 - Finance Water Utility Billing
Salaries 580,139$ 232,056$ 290,070$ 58,014$ 40.0%50.0%10.0%
Utility Billing Sup/Sen. Acct.- - - - 40.0%50.0%10.0%
Earned Leave Cashout - - - - 40.0%50.0%10.0%
Wages/Part Time 33,750 13,500 16,875 3,375 40.0%50.0%10.0%
Overtime 10,000 4,000 5,000 1,000 40.0%50.0%10.0%
Overtime Meals - - - - 40.0%50.0%10.0%
Workers Comp 2,411 964 1,206 241 40.0%50.0%10.0%
Retirement (Full Time)69,133 27,653 34,566 6,913 40.0%50.0%10.0%
Deferred Compensation 2,016 806 1,008 202 40.0%50.0%10.0%
Ual Retirement 88,913 35,565 44,456 8,891 40.0%50.0%10.0%
Retirement (Part Time)759 304 380 76 40.0%50.0%10.0%
Medicare 9,053 3,621 4,527 905 40.0%50.0%10.0%
Health Insurance Benefits 113,442 45,377 56,721 11,344 40.0%50.0%10.0%
Life Insurance Benefits 757 303 379 76 40.0%50.0%10.0%
Employee Assistance Prog 1,087 435 544 109 40.0%50.0%10.0%
Unemployment Insurance 912 365 456 91 40.0%50.0%10.0%
Misc Disability Insurance 1,260 504 630 126 40.0%50.0%10.0%
Retiree Medical 900 360 450 90 40.0%50.0%10.0%
Employee Training 3,400 1,360 1,700 340 40.0%50.0%10.0%
Employee Travel, Food,Lodge 1,250 500 625 125 40.0%50.0%10.0%
Postage 100 40 50 10 40.0%50.0%10.0%
Professional Support - - - - 40.0%50.0%10.0%
Contractual Services 126,025 50,410 63,013 12,603 40.0%50.0%10.0%
Office/Computer Supplies 2,000 800 1,000 200 40.0%50.0%10.0%
Subtotal - Finance Water Utility Billing 1,047,309$ 418,923$ 523,654$ 104,731$ 40.0%50.0%10.0%
Budget Categories
Total Revenue
Requirements Commodity Capacity Basis of ClassificationCustomer
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Agenda Item No. 9.1
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CITY OF GILROY
WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 18 :CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS, cont.
Classification of Expenses
FY 2023/24 (COM)(CAP)(CA)(COM)(CAP)(CA)
Fund 705 - Water Operations
8020 - Water Operations
Salaries 2,269,298$ 1,021,184$ 1,134,649$ 113,465$ 45.0%50.0%5.0%
Ft Engineer I/Ii (Water)- - - - 45.0%50.0%5.0%
Employee Training 25,000 11,250 12,500 1,250 45.0%50.0%5.0%
Employee Travel, Food, Lodging 5,000 2,250 2,500 250 45.0%50.0%5.0%
Earned Leave Cashout - - - - 45.0%50.0%5.0%
Wages/Part Time - - - - 45.0%50.0%5.0%
Overtime 73,710 33,170 36,855 3,686 45.0%50.0%5.0%
Overtime Meals 2,000 900 1,000 100 45.0%50.0%5.0%
Workers Comp 101,497 45,674 50,749 5,075 45.0%50.0%5.0%
Retirement (Full Time)271,399 122,130 135,700 13,570 45.0%50.0%5.0%
Deferred Compensation 7,326 3,297 3,663 366 45.0%50.0%5.0%
Ual Retirement 353,639 159,138 176,820 17,682 45.0%50.0%5.0%
Retirement (Part Time)- - - - 45.0%50.0%5.0%
Medicare 33,996 15,298 16,998 1,700 45.0%50.0%5.0%
Health Insurance Benefits 460,498 207,224 230,249 23,025 45.0%50.0%5.0%
Life Insurance Benefits 3,144 1,415 1,572 157 45.0%50.0%5.0%
Employee Assistance Prog 4,262 1,918 2,131 213 45.0%50.0%5.0%
Unemployment Insurance 3,620 1,629 1,810 181 45.0%50.0%5.0%
Misc Disability Insurance 4,964 2,234 2,482 248 45.0%50.0%5.0%
Retiree Medical 2,400 1,080 1,200 120 45.0%50.0%5.0%
Apparel, Boots, Ppe 30,000 13,500 15,000 1,500 45.0%50.0%5.0%
Utilities 1,013,698 456,164 506,849 50,685 45.0%50.0%5.0%
Telecommunications 8,100 3,645 4,050 405 45.0%50.0%5.0%
Professional Support 5,000 2,250 2,500 250 45.0%50.0%5.0%
Contractual Services 1,128,400 507,780 564,200 56,420 45.0%50.0%5.0%
Office/Computer Supplies 15,000 6,750 7,500 750 45.0%50.0%5.0%
Department Supplies 60,000 27,000 30,000 3,000 45.0%50.0%5.0%
Repairs & Maintenance 250,000 112,500 125,000 12,500 45.0%50.0%5.0%
Well System Maintenance 150,000 67,500 75,000 7,500 45.0%50.0%5.0%
Equipment Rental 10,000 4,500 5,000 500 45.0%50.0%5.0%
Permits 10,000 4,500 5,000 500 45.0%50.0%5.0%
Equipment/Furniture 75,000 33,750 37,500 3,750 45.0%50.0%5.0%
Improvements - - - - 45.0%50.0%5.0%
Capital Improvement Plan - - - - 45.0%50.0%5.0%
Interfund Transfer Out 433,788 195,205 216,894 21,689 45.0%50.0%5.0%
Valley Water 4,641,000 4,641,000 - - 100.0%0.0%0.0%
Subtotal - Water Operations 11,451,740$ 7,705,833$ 3,405,370$ 340,537$ 67.3%29.7%3.0%
Budget Categories
Total Revenue
Requirements Commodity Capacity Customer Basis of Classification
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CITY OF GILROY
WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 19 :CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS, cont.
Classification of Expenses
FY 2023/24 (COM)(CAP)(CA)(COM)(CAP)(CA)
Fund 705 - Water Operations
8030 - Water Backflow Prevention
Salaries 74,991$ 33,746$ 37,496$ 3,750$ 45.0%50.0%5.0%
Earned Leave Cashout - - - - 45.0%50.0%5.0%
Wages/Part Time - - - - 45.0%50.0%5.0%
Overtime 7,500 3,375 3,750 375 45.0%50.0%5.0%
Overtime Meals - - - - 45.0%50.0%5.0%
Compensated Absences - - - - 45.0%50.0%5.0%
Workers Comp 4,450 2,003 2,225 223 45.0%50.0%5.0%
Retirement (Full Time)9,005 4,052 4,503 450 45.0%50.0%5.0%
Deferred Compensation - - - - 45.0%50.0%5.0%
Ual Retirement 11,703 5,266 5,852 585 45.0%50.0%5.0%
Retirement (Part Time)- - - - 45.0%50.0%5.0%
Medicare 1,197 539 599 60 45.0%50.0%5.0%
Health Insurance Benefits 12,312 5,540 6,156 616 45.0%50.0%5.0%
Life Insurance Benefits 90 41 45 5 45.0%50.0%5.0%
Employee Assistance Prog 116 52 58 6 45.0%50.0%5.0%
Unemployment Insurance 117 53 59 6 45.0%50.0%5.0%
Misc Disability Insurance 123 55 62 6 45.0%50.0%5.0%
Employee Training 1,000 450 500 50 45.0%50.0%5.0%
Employee Travel, Food,Lodge 1,000 450 500 50 45.0%50.0%5.0%
Postage 100 45 50 5 45.0%50.0%5.0%
Professional Support 1,000 450 500 50 45.0%50.0%5.0%
Contractual Services 6,000 2,700 3,000 300 45.0%50.0%5.0%
Office/Computer Supplies 1,000 450 500 50 45.0%50.0%5.0%
Repairs & Maintenance 10,000 4,500 5,000 500 45.0%50.0%5.0%
Subtotal - Water Backflow Prevention 141,704$ 63,767$ 70,852$ 7,085$ 45.0%50.0%5.0%
Additional Capital Expenditures
One-Time Vehicles -$ -$ -$ -$ 100.0%0.0%0.0%
Subtotal - Additional Expenditures 404,450 404,450 - - 100.0%0.0%0.0%
Subtotal - Additional Expenditures 404,450$ 404,450$ -$ -$ 100.0%0.0%0.0%
Rate-Funded CIP -$ -$ -$ -$ 0.0%100.0%0.0%
TOTAL: WATER OPERATIONS EXPENSES 16,505,924$ 9,458,154$ 4,865,057$ 2,182,714$ 57.3%29.5%13.2%
TABLE 20 :CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS, cont.
Classification of Expenses, continued
FY 2023/24 (COM)(CAP)(CA)(COM)(CAP)(CA)
Debt Service Payments
Outstanding Debt -$ -$ -$ -$ 0.0%100.0%0.0%
New Debt Issue - SRF Loan - - - - 0.0%100.0%0.0%
New Debt Issue - Revenue Bond - - - - 0.0%100.0%0.0%
Total Debt Service Payments -$ -$ -$ -$ 0.0%100.0%0.0%
Capital Expenditures
Rate Funded Capital Expenses -$ -$ -$ -$ 50.0%50.0%0.0%
TOTAL REVENUE REQUIREMENTS 16,505,924$ 9,458,154$ 4,865,057$ 2,182,714$ 57.3%29.5%13.2%
Less: Non-Rate Revenues
Other Revenue
Connect/Install Charges (110,000)$ (63,032)$ (32,422)$ (14,546)$ 57.3%29.5%13.2%
Overhead Revenue - - - - 57.3%29.5%13.2%
Bank Interest (494,621) (283,426) (145,788) (65,408) 57.3%29.5%13.2%
Miscellaneous Revenues (5,000) (2,865) (1,474) (661) 57.3%29.5%13.2%
NET REVENUE REQUIREMENTS 15,896,303$ 9,108,831$ 4,685,373$ 2,102,098$
Allocation of Revenue Requirements 100.0%57.3%29.5%13.2%
Basis of ClassificationBudget Categories
Total Revenue
Requirements
Budget Categories
Total Revenue
Requirements Commodity
Commodity Capacity
Basis of Classification
Customer
CustomerCapacity
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CITY OF GILROY
WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 21 :ADJUSTMENT TO CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS
Classification of Expenses
Adjustment for Current Rate Level:Total (COM)(CAP)(CA)
Test Year (FY 2023/24) Target Rate Rev. After Rate Increases 15,054,120$
Projected Rate Revenue at Current Rates 13,939,000$
Test Year (FY 2023/24) Projected Rate Adjustment 8%
Adjusted Net Revenue Req'ts 15,054,120$ 8,626,247$ 4,437,143$ 1,990,730$
Percent of Revenue 100.0%57.3%29.5%13.2%
TABLE 22 :NET REVENUE REQUIREMENTS PER COSA RESULTS
Total Rate
Revenue
Requirements
FY 2023/24
Commodity
Related Costs
Capacity
Related Costs
Customer
Related Costs
Rate-Design Adjustments to Fixed/Variable %100.0%57.3%29.5%13.2%
Rate-Design Adjustments to Fixed/Variable ($)$15,054,120 $8,626,247 $4,437,143 $1,990,730
TABLE 23 :REVISED NET REVENUE REQUIREMENTS PER COSA RESULTS - ALT. #1
Rate-Design Adjustments to Fixed/Variable %100.0%57.0%30.0%13.0%
Rate-Design Adjustments to Fixed/Variable % (Rounded)100.0%60.0%30.0%10.0%
Rate-Design Adjustments to Fixed/Variable ($)$15,054,120 $9,032,472 $4,516,236 $1,505,412
TABLE 24 :REVISED NET REVENUE REQUIREMENTS - 30% FIXED/70% VOLUMETRIC) - ALT. #2
Rate-Design Adjustments to Fixed/Variable %100.0%70.0%21.0%9.0%
Rate-Design Adjustments to Fixed/Variable ($)1 $15,054,120 $10,537,884 $3,161,365 $1,354,871
TABLE 25 :REVISED NET REVENUE REQUIREMENTS - (50% FIXED/50% VOLUMETRIC) - ALT. #3
Rate-Design Adjustments to Fixed/Variable %102.0%50.0%40.0%12.0%
Rate-Design Adjustments to Fixed/Variable ($)1 $15,054,120 $7,527,060 $6,021,648 $1,806,494
Net Revenue Requirements - Per COSA Results
57% Fixed / 43% Variable
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Agenda Item No. 9.1
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CITY OF GILROY
WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 26 : DEVELOPMENT OF THE COMMODITY ALLOCATION FACTOR
Development of the Volumetric/Variable Allocation Factor1
Customer Class FY 2021/22
(1,000 Gal.yr.)
% Adjustment
for
Conservation
Est. FY 2021/22
Volume
Adjusted for
Conservation
FY 2021/22
% of Total
Volume
(TG/Yr.)
Residential 1,348,786 0.0%1,348,786 60.6%
Multi-Family 259,687 0.0%259,687 11.7%
Commercial/Industrial 333,884 0.0%333,884 15.0%
Institutional 38,459 0.0%38,459 1.7%
Landscape 231,215 0.0%231,215 10.4%
City Account 59 0.0%59 0.0%
Hydrant 14,948 0.0%14,948 0.7%
Total 2,227,038 2,227,038 100%
1. Consumption data is based on the City of Gilroy's billing data.
TABLE 27 : DEVELOPMENT OF THE CAPACITY ALLOCATION FACTORS
Development of the PEAK CAPACITY (MAX MONTH) Allocation Factors
Customer Class
Average
Monthly Use
(TG)
Peak Monthly
Use (TG)
Peak Monthly
Factor
Max Month
Capacity
Factor
Residential 112,399 168,922 1.50 61.1%
Multi-Family 21,641 26,139 1.21 9.5%
Commercial/Industrial 27,824 34,412 1.24 12.4%
Institutional 3,205 6,341 1.98 2.3%
Landscape 19,268 37,423 1.94 13.5%
City Account 5 6 1.22 0.0%
Hydrant 1,246 3,340 2.68 1.2%
Total 185,586 276,583 1.49 100%
1. Based on peak monthly data (peak day data not available).
TABLE 28 : DEVELOPMENT OF THE CUSTOMER ALLOCATION FACTORS
Development of the Customer Allocation Factor
Customer Class No. of Meters
FY 2021/221
Percent of
Total
Residential 13,518 87.2%
Multi-Family 521 3.4%
Commercial/Industrial 858 5.5%
Institutional 34 0.2%
Landscape 515 3.3%
City Account 35 0.2%
Hydrant 19 0.1%
Total 15,500 100.0%
1. Meter count data is based on the City's billing data for June 2022.
Capacity Related Costs: Costs associated with the maximum
demand required at one point in time or the maximum size of
facilities required to meet this demand.
Commodity Related Costs: Costs associated with the total
consumption (flow) of water over a specified period of time
(e.g. annual).
Customer Related Costs: Costs associated with having a
customer on the water system. These costs vary with the
addition or deletion of customers on the system. Examples:
Meter-reading, Postage and billing.
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Agenda Item No. 9.1
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CITY OF GILROY
WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 29 : ALLOCATION OF WATER REVENUE REQUIREMENTS
Commodity-Related Costs 9,032,472$ 60.0%10,537,884$ 70.0%7,527,060$ 49.0%
Capacity-Related Costs 4,516,236 30.0%3,161,365 21.0%6,021,648 39.0%
Customer-Related Costs 1,505,412 10.0%1,354,871 9.0%1,806,494 12.0%
Net Revenue Requirement 15,054,120$ 100.0%15,054,120$ 100.0%15,355,202$ 100.0%
TABLE 30 : COST-OF-SERVICE SUMMARY OF REVENUE REQUIREMENTS
Residential 9,541,651$ 63.4%9,494,615$ 63.1%9,811,925$ 63.9%
Multi-Family 1,530,618 10.2%1,573,058 10.4%1,507,461 9.8%
Commercial/Industrial 1,999,425 13.3%2,048,215 13.6%1,977,699 12.9%
Institutional 262,825 1.7%257,430 1.7%272,002 1.8%
Landscape 1,598,854 10.6%1,566,826 10.4%1,656,253 10.8%
City Account 3,737 0.0%3,407 0.0%4,409 0.0%
Hydrant 117,010 0.8%110,568 0.7%125,454 0.8%
Total 15,054,120$ 100%15,054,120$ 100%15,355,202$ 100%
TABLE 31 : ALLOCATION OF UNADJUSTED NET REVENUE REQUIREMENTS - FY 2023/24
Alt. 1 - 40% Fixed / 60% Variable
VARIABLE
Residential 5,470,437$ 2,758,274$ 1,312,941$ 9,541,651$ 63.4%
Multi-Family 1,053,245 426,815 50,558 1,530,618 10.2%
Commercial/Industrial 1,354,175 561,903 83,348 1,999,425 13.3%
Institutional 155,983 103,540 3,302 262,825 1.7%
Landscape 937,767 611,068 50,019 1,598,854 10.6%
City Account 239 98 3,399 3,737 0.0%
Hydrant 60,626 54,538 1,845 117,010 0.8%
Total Net Revenue Requirement 9,032,472$ 4,516,236$ 1,505,412$ 15,054,120$ 100%
VARIABLE
$9,032,472
% of COS Net
Revenue Req'ts
COSA Allocated Costs
FY 2020/21
2023/24 COS
Rev. Req't
Allocated Costs
FY 2020/21
ALT. 2
(30% Fixed / 70% Variable)
ALT. 1 (Preferred)
(40% Fixed / 60% Variable)
% of COS
Rev. Req't.
2023/24 COS
Rev. Req't
% of COS
Rev. Req't.
% of COS
Rev. Req't.
2023/24 COS
Rev. Req't
Customer Class
Allocated Costs
FY 2020/21
Net Rev. Reqts
(FY 2023/24)
Cost of Service
Net Revenue
Requirements
$15,054,120Total Net Revenue Requirement
by Classification Component
Customer Classes
FIXED
Classification Components
FIXED
$6,021,648
Classification Components
ALTERNATIVE 3
(50% Fixed / 50% Variable)
Cost-of-Service Net Revenue
Requirements (FY 2023/24)1
Net Rev. Reqts
(FY 2023/24)
Customer-
Related Costs
Commodity-
Related Costs
Capacity-Related
Costs
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Agenda Item No. 9.1
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CITY OF GILROY
WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 32 : CALCULATION OF MONTHLY FIXED METER SERVICE CHARGES FOR FY 2023/24 - ALTERNATIVE 2
Alt. 1 - 40% Fixed / 60% Variable
3/4 inch 1 inch 1 1/2 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch
Residential 4,445 8,273 172 459 167 2 0 0 0 13,518
Multi-Family 137 203 84 56 24 17 0 0 0 521
Commercial/Industrial 251 330 0 249 10 14 3 0 1 858
Institutional 0 1 0 15 8 9 1 0 0 34
Landscape 34 182 79 212 4 4 0 0 0 515
City Account 5 7 1 19 2 1 0 0 0 35
Hydrant 0 0 0 0 19 0 0 0 0 19
Total Meters/Accounts 4,872 8,996 336 1,010 234 47 4 0 1 15,500
Hydraulic Capacity Factor 2 1.00 1.67 3.33 5.33 10.67 16.67 33.33 53.33 140.00
Total Equivalent Meters 4,872 14,993 1,120 5,387 2,496 783 133 0 140 29,925
Monthly Fixed Service Charges
Customer Costs ($/Acct/month)3 $8.09 $8.09 $8.09 $8.09 $8.09 $8.09 $8.09 $8.09 $8.09
Capacity Costs ($/Acct/month)4 $12.58 $20.96 $41.92 $67.08 $134.15 $209.61 $419.22 $670.76 $1,760.74
Total Monthly Meter Charge $20.67 $29.05 $50.02 $75.17 $142.24 $217.70 $427.32 $678.85 $1,768.83
Annual Fixed Costs Allocated to Monthly Meter Charges
Customer Costs $ 1,505,412
Capacity Costs 4,516,236
Total Fixed Meter Costs 6,021,648$
Annual Revenue from Monthly Meter Charges
Customer Charges 473,185$ 873,722$ 32,633$ 98,095$ 22,727$ 4,565$ 388$ -$ 97$ 1,505,412$
Capacity Charges 735,283$ 2,262,797$ 169,031$ 812,957$ 376,697$ 118,221$ 20,123$ -$ 21,129$ 4,516,236$
Total Rev. from Mo. Meter Charges 1,208,468$ 3,136,518$ 201,664$ 911,051$ 399,424$ 122,786$ 20,511$ -$ 21,226$ 6,021,648$
1. Meter by Class and Size are based on June 2022 customer billing data.
2. Source: AWWA Manual M1, "Principles of Water Rates, Fees, and Charges", Table B-1
3. Customer costs are allocated to each customer by dividing the total customer costs by the total number of customers.
4. Capacity costs are allocated by meter size and the hydraulic capacity of the meter.
Number of Meters by Class and Size1 Total FY2023/24
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CITY OF GILROY
WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 33 : ALLOCATION OF UNADJUSTED NET REVENUE REQUIREMENTS - FY 2023/24
Alt. 2 - 30% Fixed / 70% Variable
VARIABLE
Residential 6,382,176$ 1,930,792$ 1,181,647$ 9,494,615$ 63.1%
Multi-Family 1,228,786 298,771 45,502 1,573,058 10.4%
Commercial/Industrial 1,579,871 393,332 75,013 2,048,215 13.6%
Institutional 181,980 72,478 2,972 257,430 1.7%
Landscape 1,094,062 427,748 45,017 1,566,826 10.4%
City Account 279 69 3,059 3,407 0.0%
Hydrant 70,731 38,176 1,661 110,568 0.7%
Total Net Revenue Requirement 10,537,884$ 3,161,365$ 1,354,871$ 15,054,120$ 99%
VARIABLE
$10,537,884
TABLE 34 : CALCULATION OF MONTHLY FIXED METER SERVICE CHARGES FOR FY 2023/24 - ALTERNATIVE 1
Alt. 2 - 30% Fixed / 70% Variable
3/4 inch 1 inch 1 1/2 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch
Residential 4,445 8,273 172 459 167 2 0 0 0 13,518
Multi-Family 137 203 84 56 24 17 0 0 0 521
Commercial/Industrial 251 330 0 249 10 14 3 0 1 858
Institutional 0 1 0 15 8 9 1 0 0 34
Landscape 34 182 79 212 4 4 0 0 0 515
City Account 5 7 1 19 2 1 0 0 0 35
Hydrant 0 0 0 0 19 0 0 0 0 19
Total Meters/Accounts 4,872 8,996 336 1,010 234 47 4 0 1 15,500
Hydraulic Capacity Factor 2 1.00 1.67 3.33 5.33 10.67 16.67 33.33 53.33 140.00
Total Equivalent Meters 4,872 14,993 1,120 5,387 2,496 783 133 0 140 29,925
Monthly Fixed Service Charges
Customer Costs ($/Acct/month)3 $7.28 $7.28 $7.28 $7.28 $7.28 $7.28 $7.28 $7.28 $7.28
Capacity Costs ($/Acct/month)4 $8.80 $14.67 $29.35 $46.95 $93.91 $146.73 $293.46 $469.53 $1,232.51
Total Monthly Meter Charge $16.09 $21.96 $36.63 $54.24 $101.19 $154.01 $300.74 $476.81 $1,239.80
Annual Fixed Costs Allocated to Monthly Meter Charges
Customer Costs $ 1,354,871
Capacity Costs 3,161,365
Total Fixed Meter Costs 4,516,236$
Annual Revenue from Monthly Meter Charges
Customer Charges 425,866$ 786,350$ 29,370$ 88,285$ 20,454$ 4,108$ 350$ -$ 87$ 1,354,871$
Capacity Charges 514,698 1,583,958 118,321 569,070 263,688 82,755 14,086 - 14,790 3,161,365
Total Revenue from Monthly Meter Charges 940,565$ 2,370,307$ 147,692$ 657,355$ 284,142$ 86,863$ 14,436$ -$ 14,878$ 4,516,236$
1. Meter by Class and Size are based on June 2022 customer billing data.
2. Source: AWWA Manual M1, "Principles of Water Rates, Fees, and Charges", Table B-1
3. Customer costs are allocated to each customer by dividing the total customer costs by the total number of customers.
4. Capacity costs are allocated by meter size and the hydraulic capacity of the meter.
$15,054,120
Cost of Service
Net Rev. Req'ts
% of COS Net
Revenue Req'tsCustomer Classes Capacity-Related
Costs
Customer-
Related Costs
Classification Components
FIXED
Commodity-
Related Costs
Total Net Revenue Requirement
by Classification Component
Number of Meters by Class and Size1 FY2023/24
FIXED
$4,516,236
Total
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Agenda Item No. 9.1
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CITY OF GILROY
WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 35 : FIXED CHARGES REVENUE CHECK
3/4 inch 1 inch 1 1/2 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch
Residential 4,445 8,273 172 459 167 2 0 0 0 13,518
Multi-Family 137 203 84 56 24 17 0 0 0 521
Commercial/Industrial 251 330 0 249 10 14 3 0 1 858
Institutional 0 1 0 15 8 9 1 0 0 34
Landscape 34 182 79 212 4 4 0 0 0 515
City Account 5 7 1 19 2 1 0 0 0 35
Hydrant 0 0 0 0 19 0 0 0 0 19
Total Meters/Accounts 4,872 8,996 336 1,010 234 47 4 0 1 15,500
TABLE 36 : PROJECTED FIXED REVENUE CHECK Alt. 2 - 30% Fixed / 70% Variable
3/4 inch 1 inch 1 1/2 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch
Charges by Meter Size $16.09 $21.96 $36.63 $54.24 $101.19 $154.01 $300.74 $476.81 $1,239.80
Revenue from Fixed Charges
Residential 858,130$ 2,179,808$ 75,604$ 298,738$ 202,785$ 3,696$ -$ -$ -$ 3,618,762$
Multi-Family 26,449 53,487 36,923 36,447 29,143 31,418 - - - 213,867
Commercial/Industrial 48,457 86,950 - 162,061 12,143 25,874 10,827 - 14,878 361,189
Institutional - 263 - 9,763 9,714 16,633 3,609 - - 39,983
Landscape 6,564 47,954 34,725 137,979 4,857 7,393 - - - 239,472
City Account 965 1,844 440 12,366 2,429 1,848 - - - 19,892
Hydrant - - - - 23,071 - - - - 23,071
Total Revenue - Fixed Charges 4,516,236$
TABLE 37 : PROJECTED FIXED REVENUE CHECK
`
Residential 3,112,439$ 3,618,762$ 506,323$
Multi-Family 344,273 213,867 (130,405)
Commercial/Industrial 468,345 361,189 (107,156)
Institutional 75,450 39,983 (35,467)
Landscape 472,764 239,472 (233,292)
City Account 3,128 19,892 16,764
Hydrant 39,837 23,071 (16,766)
Total 4,516,236$ 4,516,236$ -$
Number of Meters by Class and Size Total FY2023/24
Projected Revenue From Fixed Charges by
Customer Class
FY2023/24
Total
Customer Class
Net Revenue Requirement
(Alternative 1 - 30% Fixed / 70% Variable)
COS
Rev. Req't
Expected
Revenue
Over/(Under)
Collected
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Agenda Item No. 9.1
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CITY OF GILROY
WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 38 : PROJECTED FIXED REVENUE CHECK Alt. 1 - 40% Fixed / 60% Variable
3/4 inch 1 inch 1 1/2 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch
Charges by Meter Size $20.67 $29.05 $50.02 $75.17 $142.24 $217.70 $427.32 $678.85 $1,768.83
Revenue from Fixed Charges
Residential 1,102,554$ 2,884,439$ 103,233$ 414,032$ 285,059$ 5,225$ -$ -$ -$ 4,794,541$
Multi-Family 33,982 70,777 50,416 50,514 40,967 44,412 - - - 291,067
Commercial/Industrial 62,259 115,057 - 224,606 17,069 36,574 15,383 - 21,226 492,175
Institutional - 349 - 13,530 13,656 23,512 5,128 - - 56,175
Landscape 8,433 63,456 47,415 191,231 6,828 10,450 - - - 327,812
City Account 1,240 2,441 600 17,139 3,414 2,612 - - - 27,446
Hydrant - - - - 32,432 - - - - 32,432
Total Revenue - Fixed Charges 6,021,648$
TABLE 39 : PROJECTED FIXED REVENUE CHECK
`
Residential 4,071,215$ 4,794,541$ 723,326$
Multi-Family 477,373 291,067 (186,306)
Commercial/Industrial 645,250 492,175 (153,076)
Institutional 106,842 56,175 (50,668)
Landscape 661,087 327,812 (333,275)
City Account 3,497 27,446 23,949
Hydrant 56,383 32,432 (23,951)
Total 6,021,648$ 6,021,648$ -$
Projected Revenue From Fixed Charges by
Customer Class Total FY2023/24
Customer Class
Net Revenue Requirement
(Alternative 2 (COSA) - 40% Fixed / 60%
Variable)
COS
Rev. Req't
Expected
Revenue
Over/(Under)
Collected
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CITY OF GILROY
WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 40 : PROJECTED FIXED REVENUE CHECK Net Revenue Requirements (Alternative 3 - 50% Fixed / 50% Variable)
3/4 inch 1 inch 1 1/2 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch
Charges by Meter Size $26.48 $37.66 $65.61 $99.15 $188.58 $289.19 $568.68 $904.05 $2,357.36
Revenue from Fixed Charges
Residential 1,412,510$ 3,738,785$ 135,416$ 546,099$ 377,916$ 6,941$ -$ -$ -$ 6,217,667$
Multi-Family 43,535 91,741 66,134 66,626 54,311 58,996 - - - 381,343
Commercial/Industrial 79,762 149,136 - 296,250 22,630 48,585 20,472 - 28,288 645,122
Institutional - 452 - 17,846 18,104 31,233 6,824 - - 74,459
Landscape 10,804 82,251 62,197 252,229 9,052 13,881 - - - 430,414
City Account 1,589 3,163 787 22,605 4,526 3,470 - - - 36,141
Hydrant - - - - 42,996 - - - - 42,996
Total Revenue - Fixed Charges 7,828,142$
TABLE 41 : PROJECTED FIXED REVENUE CHECK
`
Residential 5,253,228$ 6,217,667$ 964,439$
Multi-Family 629,757 381,343 (248,414)
Commercial/Industrial 849,221 645,122 (204,099)
Institutional 142,016 74,459 (67,557)
Landscape 874,780 430,414 (444,366)
City Account 4,210 36,141 31,932
Hydrant 74,931 42,996 (31,935)
Total 7,828,142$ 7,828,142$ -$
Projected Revenue From Fixed Charges by
Customer Class
FY2023/24 Total
Customer Class
Net Revenue Requirement
(Alternative 3 - 40% Fixed / 60% Variable)
COS
Rev. Req't
Expected
Revenue
Over/(Under)
Collected
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Agenda Item No. 9.1
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CITY OF GILROY
WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 42 : PROPOSED VOLUMETRIC CHARGES FOR FY 2022/23
Alt. 1 - 40% Fixed / 60% Variable
Zone 1 Zone 2 Zone 3
Residential - Tier 1 1,348,786 60.6%4,912,312$ $3.64 $4.00 $4.37 $4.73
Multi-Family 259,687 11.7%945,787 $3.64 $4.00 $4.37 $4.73
Commercial/Industrial 333,884 15.0%1,216,014 $3.64 $4.00 $4.37 $4.73
Institutional 38,459 1.7%140,069 $3.64 $4.00 $4.37 $4.73
Landscape 231,215 10.4%842,091 $3.64 $4.00 $4.37 $4.73
City Account 59 0.0%215 $3.64 $4.00 $4.37 $4.73
Hydrant 14,948 0.7%54,441 $3.64 $4.00 $4.37 $4.73
Total Potable Water 2,227,038 39.4%8,110,929$
Pumping Costs 921,543
Total Volumetric Reve. Reqts.9,032,472$
1. Water consumption is actual consumption for FY 2021/22 and includes an adjustment for conservation.
2. Total volumetric revenue requirements based on rate alternative less supply costs and pumping costs.
TABLE 43 : CONSUMPTION BY ZONE FOR FY 2021/22
Zone 1 Zone 2 Zone 3
Residential 1,110,987 198,886 38,913 1,348,786
Multi-Family 259,459 0 228 259,687
Comm/Industrial 333,140 744 0 333,884
Institutional 38,459 0 0 38,459
Landscape 202,531 28,638 46 231,215
City Account 59 0 0 59
Hydrant 7,654 1,737 5,557 14,948
Total 1,952,289 230,005 44,744 2,227,038
TABLE 44 : PUMPING BY ZONE FOR FY 2021/22
Zone 1 Zone 2 Zone 3
Residential 1,348,786 237,799 38,913 1,625,498
Multi-Family 259,687 228 228 260,143
Comm/Industrial 333,884 744 0 334,628
Institutional 38,459 0 0 38,459
Landscape 231,215 28,684 46 259,945
City Account 59 0 0 59
Hydrant 14,948 7,294 5,557 27,799
Total 2,227,038 274,749 44,744 2,546,531
1. Includes water in Zone 3 pumped throuhg Zones 1 and 2, etc.
Total Pumping
Uniform Commodity Rates
Including Pumping Costs ($/TG)Water Use
(TG/yr.)1
Total Vol. Rev.
Reqts. (Excl.
Pumping)
Alt. 1 - 40% Fixed / 60% Variable - CONSUMPTION by Zone
Customer Class CONSUMPTION by Zone and by Class (TG/Yr.)Total
Consumption
Customer Classes % of Total
Water Use
Uniform
Commodity
Rates ($/TG)
Alt. 1 - 40% Fixed / 60% Variable - PUMPING by Zone
Customer Class PUMPING by Zone and by Class (TG/Yr.)1
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CITY OF GILROY
WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 45 : ESTIMATED ZONAL PUMPING COSTS AND RATES BY CUSTOMER CLASS AND ZONE
Zone 1 Zone 2 Zone 3
Residential $488,101 $86,055 $14,082 $588,238
Multi-Family $93,976 $83 $83 $94,141
Comm/Industrial $120,827 $269 $0 $121,096
Institutional $13,918 $0 $0 $13,918
Landscape $83,672 $10,380 $17 $94,069
City Account $21 $0 $0 $21
Hydrant $5,409 $2,640 $2,011 $10,060
Total $805,924 $99,427 $16,192 $921,543
Pumping by Zone (TG/Yr.)2,227,038 274,749 44,744
Zonal Pumping Rate ($/TG)$0.362 $0.362 $0.362
TABLE 46 : VOLUMETRIC RATES BY CUSTOMER CLASS AND ZONE
Alt. 1 (40% Fixed/60% Vol.) - Cumulative Zonal Vol. Rates by Zone
Zone 1 Zone 2 Zone 3
Residential $3.64 $4.004 $4.366 $4.728
Multi-Family 3.64 $4.004 $4.366 $4.728
Comm/Industrial 3.64 $4.004 $4.366 $4.728
Institutional 3.64 $4.004 $4.366 $4.728
Landscape 3.64 $4.004 $4.366 $4.728
City Account 3.64 $4.004 $4.366 $4.728
Hydrant 3.64 $4.004 $4.366 $4.728
TABLE 47 : ESTIMATED VOLUMETRIC REVENUE BY CUSTOMER CLASS AND ZONE
Zone 1 Zone 2 Zone 3
Residential $4,448,288 $868,294 $183,968 $5,500,550
Multi-Family 1,038,850 0 1,078 1,039,928
Comm/Industrial 1,333,862 3,248 0 1,337,110
Institutional 153,986 0 0 153,986
Landscape 810,915 125,027 217 936,160
City Account 236 0 0 236
Hydrant 30,646 7,583 26,272 64,501
Grand Total $7,816,784 $1,004,153 $211,535 $9,032,472
Customer Class
Volumetric Revenue by Zone ($/Yr.)Total
Volumetric
Rate Revenue
Customer Class Zonal Pumping Costs ($/Yr.)Zonal Costs by
Class ($/Yr.)
Customer Class Volumetric
Rates
Cumulative Vol. Rates by Zone ($/TG)
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Agenda Item No. 9.1
Packet Page 118 of 199
CITY OF GILROY
WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
CURRENT VS. PROPOSED WATER RATES Alt. 1 - 40% Fixed / 60% Variable
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Fixed Service Charges
Meter Size
3/4 inch $11.53 $20.67 $22.32 $23.66 $24.61 $25.59
1 inch $19.24 $29.05 $31.38 $33.26 $34.59 $35.98
1 1/2 inch $38.47 $50.02 $54.02 $57.26 $59.55 $61.93
2 inch $61.55 $75.17 $81.18 $86.05 $89.50 $93.08
3 inch $115.39 $142.24 $153.62 $162.84 $169.36 $176.13
4 inch $192.30 $217.70 $235.12 $249.23 $259.20 $269.57
6 inch $384.62 $427.32 $461.50 $489.19 $508.76 $529.11
8 inch $615.37 $678.85 $733.16 $777.15 $808.23 $840.56
10 inch $884.50 $1,768.83 $1,910.34 $2,024.96 $2,105.95 $2,190.19
Residential Customers - Tiered Volumetric Rates
Tier 1 - Zone 1 $4.39 $4.00 $4.32 $4.58 $4.77 $4.96
Tier 1 - Zone 2 $4.93 $4.37 $4.72 $5.00 $5.20 $5.41
Tier 1 - Zone 3 $5.52 $4.73 $5.11 $5.41 $5.63 $5.85
Tier 2 ( more than 30 TG)
Tier 2 - Zone 1 $4.93 N.A.N.A.N.A.N.A.N.A.
Tier 2 - Zone 2 $5.47 N.A.N.A.N.A.N.A.N.A.
Tier 2 - Zone 3 $6.06 N.A.N.A.N.A.N.A.N.A.
Note: The City recently transitioned from July1-June 30 fiscal years to calendar years (January to December).
Current
Rates
Proposed RatesWater Rate Schedule
Variable Charges for All Water Consumed ($/1,000 gallons (or TG))
Uniform Vol. Rates
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Agenda Item No. 9.1
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SFR Bill Comp Tiers, 30 of 36$32.41$41.19$45.58$55.68$67.53$85.09$107.04$41.07$49.07$53.08$62.29$73.10$89.11$109.13$36.00$45.36$50.04$60.80$73.44$92.16$115.55$0
$25
$50
$75
$100
$125
3 5 6 8.3 11 15 20Monthly BillMonthly Water Consumption (TG)
Single-Family Residential Water Bill Comparison
Current vs. Proposed FY'23/24 Rates (1" Meter)
Residential Bill - Current Rates
Residential Bill 60/40 V/F
Residential Bill 70/30 V/F
Average
ANNUAL Bill
(8.3 TG/mo.)Average
WINTER Bill
(6 TG/mo.)
Average
SUMMER Bill
(11 TG/mo.)
Agenda Item No. 9.1
Packet Page 120 of 199
$62.29$67.27$71.31$74.16$77.12$55.68$60.80$65.66$69.60$72.39$75.28$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28Monthly BillMonthly Water Consumption (TG)
Residential Water Bill Comparison
5-Year Projection (1" Meter)
Resid. - 5-Year Rates (60/40 V/F)
Resid. - 5-Year Rates (70/30 V/F)
Average Monthly Water Use - 8.3
TG
Agenda Item No. 9.1
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MFR Bill Comp, 32 of 36$104.32$148.22$200.90$222.85$244.80$279.92$323.82$110.07$150.11$198.16$218.18$238.20$270.23$310.27$106.83$153.63$209.79$233.18$256.58$294.02$340.82$0
$25
$50
$75
$100
$125
$150
$175
$200
$225
$250
$275
$300
$325
$350
15 25 37 42 47 55 65Monthly BillMonthly Water Consumption (TG)
Multi-Family Residential Water Bill Comparison
Current vs. Proposed FY'22/23 Rates (1.5" Meter)
Multi-Family Residential Bill - Current Rates
Multi-Family Residential Bill 60/40 V/F
Multi-Family Residential Bill 70/30 V/F Average
ANNUAL Bill
(42 TG/mo.)Average
WINTER Bill
(37 TG/mo.)
Average
SUMMER Bill
(47 TG/mo.)
Agenda Item No. 9.1
Packet Page 122 of 199
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Commercial Bill Comp, 33 of 36$55.43$99.33$134.45$152.01$178.35$252.98$340.78$60.71$100.75$132.78$148.80$172.82$240.89$320.96$62.89$109.69$147.12$165.84$193.92$273.48$367.08$0
$50
$100
$150
$200
$250
$300
$350
$400
10 20 28 32 38 55 75Monthly BillMonthly Water Consumption (TG)
Commercial Water Bill Comparison
Current vs. Proposed FY'23/24 Rates (< 1" Meter)
Commercial Bill - Current Rates
Commercial Bill 60/40 V/F
Commercial Bill 70/30 V/F
Average
WINTER Bill
(28 TG/mo.)
Average
ANNUAL Bill
(32 TG/mo.)
Average
SUMMER Bill
(38 TG/mo.)
Agenda Item No. 9.1
Packet Page 123 of 199
$152.01
$148.80$160.70$170.34$177.15$184.24$165.84$179.11$189.86$197.45$205.35$0
$50
$100
$150
$200
$250
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28Monthly BillMonthly Water Consumption (TG)
Commercial Water Bill Comparison
5-Year Projection (1" Meter)
Commercial - 5-Year Rates (60/40 V/F)
Commercial - 5-Year Rates (70/30 V/F)
Annual Monthly Water Use - 32 TG
Agenda Item No. 9.1
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Commercial Bill Comp (2), 35 of 36$149.35$237.15$342.51$425.92$478.60$544.45$610.30$147.83$241.43$353.75$442.67$498.83$569.02$639.22$155.25$235.33$331.42$407.49$455.54$515.60$575.66$0
$100
$200
$300
$400
$500
$600
$700
$800
20 40 64 83 95 110 125Monthly BillMonthly Water Consumption (TG)
Commercial Water Bill Comparison
Current vs. Proposed FY'22/23 Rates (2" Meter)
Commercial Bill - Current Rates
Commercial Bill 70/30 V/F
Commercial Bill 60/40 V/F
Average
WINTER Bill
(64 TG/mo.)
Average
ANNUAL Bill
(83 TG/mo.)
Average
SUMMER Bill
(95 TG/mo.)
Agenda Item No. 9.1
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Landscape Bill Comp, 36 of 36$33.48$64.21$173.96$301.27$384.68$45.36$78.12$195.11$330.83$419.75$49.07$77.10$177.20$293.31$369.39$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
5 12 37 66 85Monthly BillMonthly Water Consumption (TG)
Landscape Bill Comparison - Commercial
Current vs. Proposed FY'22/23 Rates (2" Meter)
Landscape Bill - Current Rates
Landscape Bill 70/30 V/F
Landscape Bill 60/40 V/F
Average
ANNUAL Bill
(37 TG/mo.)
Average
WINTER Bill
(12 TG/mo.)
Average
SUMMER Bill
(66 TG/mo.)
Agenda Item No. 9.1
Packet Page 126 of 199
City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study
Prepared by NBS – August 2023 34
Appendix B. Wastewater Rate Study Tables and Figures
Agenda Item No. 9.1
Packet Page 127 of 199
CITY OF GILROY Financial Plan & Reserve Summary
SEWER RATE STUDY
Financial Plan and Reserve Projections
TABLE 1 : FINANCIAL PLAN AND SUMMARY OF REVENUE REQUIREMENTS
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Sources of Funds 1
Rate Revenue:
User Fees 13,247,000$ 13,512,000$ 13,782,000$ 13,988,730$ 14,198,561$ 14,411,539$
Other Revenue:
Misc. Revenue & Interest Earnings2 992,066 649,871 397,017 15,619 15,853 16,091
Interfund Transfer In 1,533,500 2,244,000 2,244,000 2,244,000 2,244,000 2,244,000
Total: Sources of Funds 15,772,566$ 16,405,871$ 16,423,017$ 16,248,349$ 16,458,414$ 16,671,630$
Uses of Water Funds 1
Operating Expenses:
7500 - Sewer Administration 3,606,254$ 2,143,559$ 2,202,325$ 2,339,468$ 2,481,991$ 2,625,123$
7510 - Finance Sewer Utility Billing 921,605 1,037,477 1,083,341 1,120,978 1,159,924 1,200,226
7520 - Sewer Operations 2,758,341 4,362,836 4,320,125 4,464,460 4,613,637 4,767,818
SCWRA Oper. Costs (less Monit., Sampl., Pre-Tr.Costs)5,715,995 6,146,815 6,517,038 6,781,500 6,989,600 7,207,300
Monitoring, Sampling, Pretreatment (Non-Resid. Costs)N.A.365,700 440,200 388,500 400,400 412,700
Subtotal: Operating Expenses 13,002,195$ 13,690,686$ 14,122,829$ 14,706,406$ 15,245,153$ 15,800,467$
Other Expenditures:
Existing Debt Service 1,533,500$ 2,244,000$ 2,244,400$ 2,243,600$ 2,241,600$ 2,243,300$
Rate-Funded Capital Expenses - 75,401 335,906 211,300 755,038 1,334,115
Subtotal: Other Expenditures 1,533,500$ 2,319,401$ 2,580,306$ 2,454,900$ 2,996,638$ 3,577,415$
Total: Uses of Funds 14,535,695$ 16,010,087$ 16,703,135$ 17,161,306$ 18,241,791$ 19,377,882$
Plus: Revenue from Rate Increases2 - 540,480 1,121,811 1,743,733 2,408,627 3,119,008
Annual Surplus/(Deficit)1,236,871$ 936,264$ 841,693$ 830,775$ 625,250$ 412,756$
Net Revenue Reqt. (Total Uses less Non-Rate Revenue)12,010,129$ 13,116,216$ 14,062,118$ 14,901,687$ 15,981,938$ 17,117,791$
Total Rate Revenue After Rate Increases 13,247,000$ 14,052,480$ 14,903,811$ 15,732,463$ 16,607,187$ 17,530,547$
Projected Annual Rate Revenue Increase 0.00%4.00%4.00%4.00%4.00%4.00%
Cumulative Increase from Annual Revenue Increases 0.00%4.00%8.16%12.49%16.99%21.67%
Debt Coverage After Rate Increase (1.25 required)1.81 1.45 1.52 1.46 1.62 1.78
1. Revenue and expenses for FY 2022/23 through FY204/25 provided by the City. Revenues and expenses for all other years are escalated based on the forecasting
assumptions in Table 9 (See Exhibit 1 (O&M) Tab). Source file: FY23 Budgets.xlsx . The new vehicles expense in FY24 and FY25 was transferred to the CIP budget to avoid
incresaing rates to meet coverage requirements.
2. Interest income for FY2022-23 through FY2024-25 is from the City's Budget. For all other years, it is calculated based on historical LAIF returns.
3. Revenue from rate increases assumes an implementation date of April 1, 2023 for new rates. For each year thereafter, the assumption is that new rates will be
implemented on July 1st of each year.
Selection of Financial Plan Alternative 2
Financial Plan Alternatives FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
1 Alternative 1 - 2% Annual Rate Increases 0.00%2.00%2.00%2.00%2.00%2.00%
2 Alternative 2 - 4% Annual Rate Increases 0.00%4.00%4.00%4.00%4.00%4.00%
3 Alternative 3 - Custom Rate Increases 0.00%7.00%7.00%7.00%7.00%7.00%
4 No Rate Increases 0.00%0.00%0.00%0.00%0.00%0.00%
RATE REVENUE REQUIREMENTS SUMMARY 5-Year Projected Rate Period
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Agenda Item No. 9.1
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CITY OF GILROY Financial Plan & Reserve Summary
SEWER RATE STUDY
Financial Plan and Reserve Projections
TABLE 2 : EXCLUDED PLEDGE SUMMARYRESERVE FUND SUMMARY
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Total Beginning Cash1 18,206,179$
Unrestricted Reserves:
Operating Reserve
Beginning Reserve Balance 13,654,634$ 6,501,000$ 6,845,000$ 7,061,000$ 7,353,000$ 7,623,000$
Plus: Net Cash Flow (After Rate Increases)1,236,871 936,264 841,693 830,775 625,250 412,756
Plus: Transfer of Debt Reserve Surplus - - - - - -
Plus: Interest Earnings - 56,234 59,209 61,078 63,603 65,939
Less: Transfer Out to Capital Replacement Reserve (8,390,505) (648,498) (684,902) (599,853) (418,853) (201,695)
Ending Operating Reserve Balance 6,501,000$ 6,845,000$ 7,061,000$ 7,353,000$ 7,623,000$ 7,900,000$
Target Ending Balance (6 months of O&M)2 6,501,000$ 6,845,000$ 7,061,000$ 7,353,000$ 7,623,000$ 7,900,000$
Capital Rehabilitation & Replacement Reserve
Beginning Reserve Balance 4,551,545$ 12,942,049$ 13,495,633$ 11,271,248$ 8,151,561$ 6,946,887$
Plus: Grant Proceeds - - - - - -
Plus: Transfer of Operating Reserve Surplus 8,390,505 648,498 684,902 599,853 418,853 201,695
Less: Use of Reserves for Capital Projects - (94,914) (2,909,287) (3,719,540) (1,623,527) (1,500,000)
Ending Capital Rehab & Replacement Reserve Balance 12,942,049$ 13,495,633$ 11,271,248$ 8,151,561$ 6,946,887$ 5,648,582$
Target Ending Balance (Avg. Annual CIP)3 4,420,000$ 4,420,000$ 4,420,000$ 4,420,000$ 4,420,000$ 4,420,000$
Ending Cash Balance - Excl. Restricted Reserves 19,443,049$ 20,340,633$ 18,332,248$ 15,504,561$ 14,569,887$ 13,548,582$
Min. Target Ending Cash Balance -Excl. Restricted Reserves10,921,000$ 11,265,000$ 11,481,000$ 11,773,000$ 12,043,000$ 12,320,000$
Ending Surplus/(Deficit) Compared to Reserve Targets 8,522,049$ 9,075,633$ 6,851,248$ 3,731,561$ 2,526,887$ 1,228,582$
Days Cash on Hand 546 540 463 380 333 289
Annual Interest Earnings Rate 4 0.85%0.85%0.85%0.85%0.85%0.85%
1. Beginning cash balances provided by City staff for Fund 700 - Sewer Operations. Source file: Account Trial Balance FY22 - 430-435-700-705.pdf .
2. The target ending balance is set equal to 90-days of O&M expenses.
3. The target ending balance is set equal to the average annual CIP costs in future dollars for City infrastructure of approximately $30 M; we have doubled this to reflect
a lesser reserve target that includes about 50% of SCRWA infrastructure (i.e., half of $74 M).
4. Historical interest earning rates are per the average annual yields for funds invested in LAIF (2018-2022). The source is the California State Treasurer's website:
https://www.treasurer.ca.gov/pmia-laif/historical/annual.asp .
SUMMARY OF CASH ACTIVITY
SEWER FUND RESERVES
5-Year Projected Rate Period
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CITY OF GILROY Financial Plan & Reserve Summary
SEWER RATE STUDY
Financial Plan and Reserve Projections
TABLE 3 : EXCLUDED PLEDGE SUMMARYRESERVE FUND SUMMARY, cont.
Projected
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Restricted Reserves:
Sewer Impact Fee Reserve
Beginning Reserve Balance1 14,976,546$ 15,048,572$ 15,194,152$ 18,873,406$ 19,967,880$ 18,302,389$
Plus: Allocated Interest Earnings1 219,443 224,381 228,868 234,590 240,454 246,466
Less: Interfund Transfer out (1,533,500) (2,244,000) (2,244,000) (2,244,000) (2,244,000) (2,244,000)
Plus: Interfund Transfer In 386,083 437,408 410,049
Plus: Impact Fee Revenue1 1,000,000 1,803,192 5,620,243 3,315,184 1,093,093 1,357,983
Less: Use of Reserves for Capital Projects2 - (75,401) (335,906) (211,300) (755,038) (2,840,381)
Ending Impact Fee Fund Balance 15,048,572$ 15,194,152$ 18,873,406$ 19,967,880$ 18,302,389$ 14,822,457$
Target Ending Balance -$ -$ -$ -$ -$ -$
Debt Reserve
Beginning Reserve Balance3 -$ -$ -$ -$ -$ -$
Ending Debt Reserve Balance -$ -$ -$ -$ -$ -$
Target Ending Balance -$ -$ -$ -$ -$ -$
Annual Interest Earnings Rate 4 0.87%0.87%0.87%0.87%0.87%0.87%
1. Beginning cash balance for FY 2022/23 provided by City staff. Source file: 4 - Current Cash and Fund Balance - Wastewater 12062021.xlsx .
2. Determined in the CIP (Exhibit 2).
4. Historical interest earning rates are per the average annual yields for funds invested in LAIF (2018-2022). The source is the California State Treasurer's website:
https://www.treasurer.ca.gov/pmia-laif/historical/annual.asp .
SUMMARY OF CASH ACTIVITY 5-Year Projected Rate Period
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Agenda Item No. 9.1
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CITY OF GILROY Charts & Tables
SEWER RATE STUDY
Financial Plan Charts
CHART 1
$.0 Mil
$2.0 Mil
$4.0 Mil
$6.0 Mil
$8.0 Mil
$10.0 Mil
$12.0 Mil
$14.0 Mil
$16.0 Mil
$18.0 Mil
$20.0 Mil
2023 2024 2025 2026 2027 2028Annual ObligationsFiscal Year Ending June 30
Sewer Revenue Requirements vs.
Revenue Under Existing and Increased Rates
Rate Funded Capital Expenses
O&M Expenses
Revenues under Existing Rates
Revenues under Increased Rates
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CITY OF GILROY Charts & Tables
SEWER RATE STUDY
Financial Plan Charts
CHART 2
$.0 Mil
$5.0 Mil
$10.0 Mil
$15.0 Mil
$20.0 Mil
$25.0 Mil
2023 2024 2025 2026 2027 2028
Fiscal Year Ending June 30
Ending Cash Balances vs.
Recommended Reserve Targets
Sewer Fund - Unrestricted Reserves
Ending Cash Balance Minimum Target Reserve Balance
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CITY OF GILROY Charts & Tables
SEWER RATE STUDY
Financial Plan Charts
CHART 3
0.00%
4.00%4.00%4.00%4.00%4.00%
0%
1%
1%
2%
2%
3%
3%
4%
4%
5%
2023 2024 2025 2026 2027 2028
Fiscal Year Ending June 30
Projected Increases to Rate Revenue
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CITY OF GILROY Exhibit 1 - O&M
SEWER RATE STUDY
Operating Revenue and Expenses
TABLE 4 :REVENUE FORECAST1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Rate Revenue
700 7500 700 -75-7500-000-45120 User Fees 1 13,247,000$ 13,512,000$ 13,782,000$ 13,988,730$ 14,198,561$ 14,411,539$
Other Revenue
700 7500 700 -75-7500-000-45145 Overhead Revenue 1 14,505 14,940 15,388 15,619 15,853 16,091
700 7500 700 -75-7500-000-46110 Bank Interest See FP 327,561 334,931 341,629 - - -
700 7500 700 -75-7500-000-46310 Other Interest 1 650,000 300,000 40,000 - - -
700 7500 700 -75-7500-000-48110 Interfund Transfer In 6 1,533,500 2,244,000 2,244,000 2,244,000 2,244,000 2,244,000
700 7500 700 -75-7500-000-48420 Bond Proceeds 6 - - - - - -
700 7510 700 -75-7510-000-43110 Federal Grant 6 - - - - - -
TOTAL: RATE AND OTHER REVENUE 15,772,566$ 16,405,871$ 16,423,017$ 16,248,349$ 16,458,414$ 16,671,630$
Sewer Impact Fee Revenue
430 5500 430 -55-5500-000-45150 Developer's Impact Fee 1 1,000,000 1,803,192 5,620,243 3,315,184 1,093,093 1,357,983
430 5500 430 -55-5500-000-46110 Bank Interest See FP 219,443 224,381 228,868 - - -
430 5500 430 -55-5500-000-46210 Interfund Interest Income 1 - - - - - -
430 5500 430 -55-5500-000-48110 Interfund Transfer In 6 386,083 437,408 410,049 - - -
TOTAL: IMPACT FEE REVENUE 1,605,526$ 2,464,981$ 6,259,160$ 3,315,184$ 1,093,093$ 1,357,983$
TABLE 5 :OPERATING EXPENSE FORECAST1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Fund 700 - Sewer Operations
7500 - Sewer Administration
700 7500 700 -75-7500-000-50410 Pension Expense 3 -$ -$ -$ -$ -$ -$
700 7500 700 -75-7500-000-51510 Professional Support 2 - - - - - -
700 7500 700 -75-7500-000-51620 Audit Services 2 8,700 - - - - -
700 7500 700 -75-7500-000-51630 Contractual Services 2 6,185 5,288 5,552 5,722 5,898 6,079
700 7500 700 -75-7500-000-53165 Contra Capital Outlay 2 - - - - - -
700 7500 700 -75-7500-000-54110 Interfund Transfer Out 2 11,863 - - - - -
700 7500 700 -75-7500-000-54130 Fleet Service Charge 2 59,206 77,139 78,502 80,909 83,390 85,947
700 7500 700 -75-7500-000-54140 Facility Service Charge 2 134,639 216,418 232,659 239,793 247,145 254,723
700 7500 700 -75-7500-000-54145 Info Tech Service Charge 2 434,144 550,530 533,039 549,383 566,228 583,589
700 7500 700 -75-7500-000-54150 Overhead Charges 2 723,376 847,532 883,288 910,371 938,284 967,053
700 7500 700 -75-7500-000-54155 Liability Insurance Charges 2 401,933 430,902 452,735 466,617 480,924 495,669
700 7500 700 -75-7500-000-55110 Loss On Disposal Of F/A 2 - - - - - -
700 7500 700 -75-7500-000-56110 Amortization Expense 2 - - - - - -
700 7500 700 -75-7500-000-56120 Depreciation 2 - - - - - -
700 7500 700 -75-7500-000-57110 Debt Redemption 2 2,440,000 725,000 755,000 778,149 802,009 826,599
700 7500 700 -75-7500-000-57115 Debt Interest 2 904,708 1,519,000 1,489,400 1,535,067 1,582,134 1,630,645
700 7500 700 -75-7500-000-58115 Share Joint Venture Loss 2 - - - - - -
700 7500 700 -75-7500-000-58130 Claims 2 15,000 15,750 16,550 17,057 17,580 18,119
700 7500 700 -75-7500-000-55130 Cash Over Short 2 - - - - - -
Subtotal - Sewer Administration 5,139,754$ 4,387,559$ 4,446,725$ 4,583,068$ 4,723,591$ 4,868,423$
DESCRIPTION
ACCOUNT DESCRIPTION Basis
Basis
5-Year Projected Rate Period
5-Year Projected Rate PeriodFUNDDIVISION
FUND DIVISION
ACCOUNT
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Exhibit 1 (O&M), 7 of 34
Agenda Item No. 9.1
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CITY OF GILROY Exhibit 1 - O&M
SEWER RATE STUDY
Operating Revenue and Expenses
TABLE 6 :OPERATING EXPENSE FORECAST, cont.1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Fund 700 - Sewer Operations
7510 - Finance Sewer Utility Billing
700 7510 700 -75-7510-000-50110 Salaries 3 488,975$ 617,543$ 662,408$ 685,592$ 709,588$ 734,424$
705 8010 700-75-7510-000-50110 Utility Billing Supervisor (Split: Water/Sewer)3 - - - - - -
700 7510 700 -75-7510-000-50120 Wages/Part Time 3 23,048 33,750 21,788 22,551 23,340 24,157
700 7510 700 -75-7510-000-50130 Overtime 3 14,000 10,000 10,000 10,350 10,712 11,087
700 7510 700 -75-7510-000-50150 Overtime Meals 3 41 - - - - -
700 7510 700 -75-7510-000-50203 Compensated Absences 3 - - - - - -
700 7510 700 -75-7510-000-50205 Workers Comp 3 2,163 2,563 2,689 2,783 2,880 2,981
700 7510 700 -75-7510-000-50210 Retirement (Full Time)3 52,305 73,492 76,644 79,326 82,103 84,976
700 7510 700 -75-7510-000-50212 Deferred Compensation 3 1,230 2,070 2,070 2,142 2,217 2,295
700 7510 700 -75-7510-000-50213 UAL Retirement 3 88,677 94,578 101,904 105,471 109,162 112,983
700 7510 700 -75-7510-000-50215 Retirement (Part Time)3 18 759 490 507 525 544
700 7510 700 -75-7510-000-50220 Medicare 3 7,976 9,595 10,077 10,430 10,795 11,172
700 7510 700 -75-7510-000-50225 Health Insurance Benefits 3 106,784 115,262 115,505 119,547 123,732 128,062
700 7510 700 -75-7510-000-50230 Life Insurance Benefits 3 824 794 821 850 879 910
700 7510 700 -75-7510-000-50235 Employee Assistance Prog 3 964 1,116 1,139 1,179 1,220 1,263
700 7510 700 -75-7510-000-50240 Unemployment Insurance 3 864 971 1,024 1,060 1,097 1,135
700 7510 700 -75-7510-000-50255 Misc Disability Insurance 3 1,030 1,307 1,307 1,353 1,400 1,450
700 7510 700 -75-7510-000-50260 Retiree Medical 3 - 900 900 932 964 998
700 7510 700 -75-7510-000-51110 Employee Training 2 - 3,400 3,400 3,504 3,612 3,722
700 7510 700 -75-7510-000-51120 Employee Travel, Food, Lodge 2 669 1,250 1,250 1,288 1,328 1,369
700 7510 700 -75-7510-000-51420 Telecommunications 2 - - - - - -
700 7510 700 -75-7510-000-51430 Postage 2 50 100 100 103 106 109
700 7510 700 -75-7510-000-51510 Professional Support 2 2,200 - - - - -
700 7510 700 -75-7510-000-51630 Contractual Services 2 119,000 66,025 67,825 69,905 72,048 74,257
700 7510 700 -75-7510-000-52110 Office/Computer Supplies 5 4,000 2,000 2,000 2,105 2,215 2,331
700 7510 700 -75-7510-000-52210 Repairs & Maintenance 2 - - - - - -
700 7510 700 -75-7510-000-50114 Earned Leave Cashout 2 6,787 - - - - -
700 7510 700 -75-7510-000-51230 Tuition 2 - - - - - -
Subtotal - Finance Sewer Utility Billing 921,605$ 1,037,477$ 1,083,341$ 1,120,978$ 1,159,924$ 1,200,226$
Basis 5-Year Projected Rate PeriodFUNDDIVISIONACCOUNTDESCRIPTION
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Exhibit 1 (O&M), 8 of 34
Agenda Item No. 9.1
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CITY OF GILROY Exhibit 1 - O&M
SEWER RATE STUDY
Operating Revenue and Expenses
TABLE 7 :OPERATING EXPENSE FORECAST, cont.1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Fund 700 - Sewer Operations
7520 - Sewer Operations
700 7520 700 -75-7520-000-50110 Salaries 3 1,313,539$ 1,826,894$ 1,972,608$ 2,041,649$ 2,113,107$ 2,187,066$
700 7520 700-75-7520-000-50110 FT Engineer I/II 3 - - - - - -
700 7520 700 -75-7520-000-50120 Wages/Part Time 3 11,337 60,000 65,000 67,275 69,630 72,067
700 7520 700 -75-7520-000-50130 Overtime 3 50,154 50,000 50,000 51,750 53,561 55,436
700 7520 700 -75-7520-000-50150 Overtime Meals 3 - 1,000 1,000 1,035 1,071 1,109
700 7520 700 -75-7520-000-50203 Compensated Absences 3 - - - - - -
700 7520 700 -75-7520-000-50205 Workers Comp 3 58,511 66,947 70,795 73,273 75,838 78,492
700 7520 700 -75-7520-000-50210 Retirement (Full Time)3 136,961 218,375 229,291 237,317 245,623 254,219
700 7520 700 -75-7520-000-50215 Retirement (Part Time)3 156 1,350 1,463 1,514 1,567 1,621
700 7520 700 -75-7520-000-50220 Medicare 3 21,506 28,106 30,290 31,350 32,447 33,583
700 7520 700 -75-7520-000-50225 Health Insurance Benefits 2 240,740 375,906 377,348 388,918 400,842 413,133
700 7520 700 -75-7520-000-50230 Life Insurance Benefits 2 2,149 2,241 2,321 2,393 2,466 2,542
700 7520 700 -75-7520-000-50235 Employee Assistance Prog 2 2,446 3,097 3,159 3,256 3,355 3,458
700 7520 700 -75-7520-000-50240 Unemployment Insurance 2 2,798 2,915 3,096 3,191 3,288 3,389
700 7520 700 -75-7520-000-50255 Misc Disability Insurance 2 2,701 3,733 3,733 3,847 3,965 4,087
700 7520 7007520-50260 RETIREE MEDICAL 1,508 1,800 - - - -
700 7520 700 -75-7520-000-51110 Employee Training 2 - 40,000 40,000 41,226 42,491 43,793
700 7520 700 -75-7520-000-51120 Employee Travel, Food, Lodge 2 - 15,000 15,000 15,460 15,934 16,423
700 7520 700 -75-7520-000-51420 Telecommunications 2 1,939 2,500 2,500 2,577 2,656 2,737
700 7520 700 -75-7520-000-51430 Postage 2 - - - - - -
700 7520 700 -75-7520-000-51510 Professional Support 2 11,298 15,000 15,000 15,460 15,934 16,423
700 7520 700 -75-7520-000-51630 Contractual Services 2 227,332 806,000 550,000 566,864 584,245 602,158
700 7520 700 -75-7520-000-52110 Office/Computer Supplies 2 73 1,500 1,500 1,546 1,593 1,642
700 7520 700 -75-7520-000-52150 Department Supplies 2 8,582 10,000 10,000 10,307 10,623 10,948
700 7520 700 -75-7520-000-52210 Repairs & Maintenance 2 26,213 100,000 100,000 103,066 106,226 109,483
700 7520 700 -75-7520-000-52310 Equipment Rental 2 - 10,000 10,000 10,307 10,623 10,948
700 7520 700 -75-7520-000-53120 Equipment/Furniture 2 25,000 - - - - -
700 7520 700 -75-7520-000-54110 Interfund Transfer Out2 2 300,000 390,000 409,500 422,056 434,997 448,334
SCWRA Operational Costs 2 5,715,995 6,512,515 6,957,238 7,170,000 7,390,000 7,620,000
700 7520 700 -75-7520-000-50114 Earned Leave Cashout 2 11,460 - - - - -
700 7520 700 -75-7520-000-50212 Deferred Compensation 3 3,608 5,742 5,742 5,943 6,151 6,366
700 7520 700 -75-7520-000-50213 UAL Retirement 3 249,086 284,730 310,780 321,657 332,915 344,567
700 7520 700 -75-7520-000-50310 Apparel, Boots, Ppe 2 6,735 9,000 9,000 9,276 9,560 9,854
700 7520 700 -75-7520-000-51410 Utilities 2 2,765 6,000 6,000 6,184 6,374 6,569
700 7520 700 -75-7520-000-52710 Permits 2 39,747 25,000 25,000 25,767 26,557 27,371
700 7520 700 -75-7520-000-53135 Improvements 2 - - - - - -
700 7520 700 -75-7520-000-53142 Capital Improvement Plan See Exh 2 - - - - - -
Subtotal - Sewer Operations 8,474,336$ 10,875,351$ 11,277,363$ 11,634,460$ 12,003,637$ 12,387,818$
Basis 5-Year Projected Rate PeriodFUNDDIVISIONACCOUNTDESCRIPTION
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Exhibit 1 (O&M), 9 of 34
Agenda Item No. 9.1
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CITY OF GILROY Exhibit 1 - O&M
SEWER RATE STUDY
Operating Revenue and Expenses
TABLE 8 :OPERATING EXPENSE FORECAST, cont.1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Fund 700 - Sewer Operations
Additional Expenditures
700 7520 700-75-7520-000-53120 one-time vehicle purchases One-Time - 404,450 404,450 - - -
Subtotal - Additional Expenditures -$ 404,450$ 404,450$ -$ -$ -$
GRAND TOTAL: SEWER EXPENSES 14,535,695$ 16,704,836$ 17,211,879$ 17,338,506$ 17,887,153$ 18,456,467$
TABLE 9 :FORECASTING ASSUMPTIONS
Basis 2023 2024 2025 2026 2027 2028
Customer Growth4 1 --1.50%1.50%1.50%1.50%1.50%
General Cost Inflation5 2 --3.07%3.07%3.07%3.07%3.07%
Labor Cost Inflation6 3 --3.50%3.50%3.50%3.50%3.50%
Energy7 4 --7.44%7.44%7.44%7.44%7.44%
Fuel & Utilities8 5 --5.24%5.24%5.24%5.24%5.24%
No Escalation 6 --0.00%0.00%0.00%0.00%0.00%
1. Revenue and expenses for FY 2022/23 through FY2024/25 provided by the City. Revenues and expenses for all other years are escalated based on the forecasting assumptions in Table 9. Source file: FY23 Budgets.xlsx .
2. These expenses are costs related to the ownership, operation, maintenance and use of the South County Regional Wastewater Authority (SCRWA) jointly owned by the City of Morgan Hill. Based on the JPA agreement,
Gilroy is responsible for approx. 60% of these costs which are based on actual annual flow.
3. Expenses are inflated each year by the following annual inflation factor categories.
4. Customer growth is based on estimated service area population growth through FY 2044/45. Source file: Gilroy 2020 UWMP.pdf , page 3-9.
5. General cost inflation is based on the 5-year average annual change in the Consumer Price Index for all Urban Consumers in the San Francisco-Oakland-Hayward, CA area.
6. Labor cost inflation is based on the 5-year average annual change in the Quarterly Census of Employment and Wages for San Francisco County, CA.
7. Energy cost inflation is based on the 5-year average annual change in the Consumer Price Index for all Urban Consumers in the San Francisco-Oakland-Hayward, CA area.
8. Fuel & Utilities cost inflation is based on the 5-year average annual change in the Consumer Price Index - Average Price Data for Fuels and related products and power. This factor is used for utility costs other
than electricity.
5-Year Projected Rate PeriodBasis
INFLATION FACTORS3
FUND DIVISION ACCOUNT DESCRIPTION
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Exhibit 1 (O&M), 10 of 34
Agenda Item No. 9.1
Packet Page 137 of 199
CITY OF GILROY Exhibit 2 - CIP
SEWER RATE STUDY
Capital Improvement Plan Expenditures
TABLE 10 :CAPITAL FUNDING SUMMARY
CAPITAL FUNDING FORECAST Budget
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Grants -$ -$ -$ -$ -$ -$
Use of Capacity Fee Reserves (to Fund Impact Fee Projects)- 75,401 335,906 211,300 755,038 2,840,381
Use of 2021 Revenue Bond Proceeds 1,130,904 4,000,000 - - - -
Use of Capital Rehabilitation and Replacement Reserve - 94,914 2,909,287 3,719,540 1,623,527 1,500,000
Rate Revenue - 75,401 335,906 211,300 755,038 1,334,115
Total Sources of Capital Funds 1,130,904$ 4,245,716$ 3,581,099$ 4,142,140$ 3,133,603$ 5,674,496$
Uses of Capital Funds:
Total Project Costs 1,130,904$ 4,245,716$ 3,581,099$ 4,142,140$ 3,133,603$ 5,674,496$
Capital Funding Surplus (Deficiency)-$ -$ -$ -$ -$ -$
2021 Revenue Bond Proceeds (Per Capital Improvement Program)1 1,130,904$ 4,000,000$ -$ -$ -$ -$
Remaining 2021 Bond Proceeds 4,000,000$ -$ -$ -$ -$ -$
New Revenue Bond Proceeds (If needed)-$ -$ -$ -$ -$ -$
1. Source file: 11. Adopted-CIP-FY21-FY25.pdf , page 77.
CAPITAL IMPROVEMENT PROGRAM FUNDING OPTIONS
2
Policy Choice (CIP & Master Planned Project ONLY)2023 2024 2025 2026 2027 2028
1 Full Funding of CIP, at actual cost & timing $1,130,904 $5,560,420 $4,326,924 $5,241,120 $3,171,420 $3,778,820
2 75% Funding of CIP, at actual cost & timing $1,130,904 4,170,315 3,245,193 3,930,840 2,378,565 2,834,115
3 50% Funding of CIP, at actual cost & timing $1,130,904 2,085,158 1,622,597 1,965,420 1,189,283 1,417,058
4 No CIP - - - - - -
Total Planned CIP through FY 2027/28 16,559,028$
Capital Improvement Program Funding Choice 2023 2024 2025 2026 2027 2028
Effective Annual Funding Amount 1,130,904$ 4,170,315$ 3,245,193$ 3,930,840$ 2,378,565$ 2,834,115$
TABLE 11 :CAPITAL IMPROVEMENT PROGRAM COSTS (in Current-Year Dollars ) - 5% inflation added to these projects (per Harjot)
Project No.Description 2023 2024 2025 2026 2 2027 2028
Capital Improvement Program - Fiscal Year 2021 to Fiscal Year 2025 1
800490 Annual Citywide Sewer Repair and Rehabilitation 250,000$ 250,000$ 250,000$ 250,000$ 250,000$
800510 Asbestos Cement Sewer Pipe Replacement Citywide - 265,629 1,008,600 - -
800530 Large Diameter Sewer Rehabilitation Citywide - 273,105 1,081,100 - -
EN2403 Corporation Yard EV and EV Charging -
800550 Old Gilroy - Chestnut to Forest Sewer Upgrade 50,999 251,600 - - -
SW2402 Joint Morgan Hill-Gilroy Trunk Line Repairs - 1,938,671 -
900720 Old Gilroy Street at Railroad Crossing Sewer Replacement - - - - 587,400
7520-53120 Vehicles/Equipment (operations budget transferred to CIP by NBS)- 404,450 404,450 - - -
Subtotal - Capital Improvement Program -$ 2,644,120$ 1,444,784$ 2,339,700$ 250,000$ 837,400$
Subtotal - Master Plan Projects -$ 2,511,420$ 2,511,420$ 2,511,420$ 2,511,420$ 2,511,420$
Total - CIP & Master Plan Projects (Current Year Dollars)$0 $5,155,540 $3,956,204 $4,851,120 $2,761,420 $3,348,820
* Morgan Hill Contribution for the SCRWA expansion is approximately is $31.5M (FY 21-25).
5-Year Projected Rate Period
Funding Sources:
Insert policy choice in box to right, based on options listed above:
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Exhibit 2 (CIP), 11 of 34
Agenda Item No. 9.1
Packet Page 138 of 199
CITY OF GILROY Exhibit 2 - CIP
SEWER RATE STUDY
Capital Improvement Plan Expenditures
TABLE 12 :CAPITAL IMPROVEMENT PROGRAM COSTS (in Future-Year Dollars ) Inflation removed because 5% inflation already Included
Project No.Description 2023 2024 2025 2026 2 2027 2028
Capital Improvement Program - Fiscal Year 2021 to Fiscal Year 2025 1
800490 Annual Citywide Sewer Repair and Rehabilitation -$ 250,000$ 250,000$ 250,000$ 250,000$ 250,000$
800510 Asbestos Cement Sewer Pipe Replacement Citywide - - 265,629 1,008,600 - -
800530 Large Diameter Sewer Rehabilitation Citywide - - 273,105 1,081,100 - -
EN2403 Corporation Yard EV and EV Charging - - - - - -
800550 Old Gilroy - Chestnut to Forest Sewer Upgrade - 50,999 251,600 - - -
SW2402 Joint Morgan Hill-Gilroy Trunk Line Repairs - 1,938,671 - - - -
900720 Old Gilroy Street at Railroad Crossing Sewer Replacement - - - - - 587,400
7007520-54114TRF OUT SCRWA CIP (Transferred from Operations to CIP by NBS)1,130,904 404,880 370,720 390,000 410,000 430,000
7520-53120 New Vehicles (operations budget transferred to CIP by NBS)- 404,450 404,450 - - -
Subtotal - Capital Improvement Program (in Future Year Dollars)1,130,904$ 3,049,000$ 1,815,504$ 2,729,700$ 660,000$ 1,267,400$
Sewer System Master Plan Projects 3
Gravity Main Improvements
Santa Teresa - Long Meadow Subtrunk
SLP-1 Santa Teresa Boulevard -$ 223,980$ 223,980$ 223,980$ 223,980$ 223,980$
Welburn Subtrunk
WP-1 Welburn Avenue - 188,040 188,040 188,040 188,040 188,040
WP-2 Welburn Avenue - 82,980 82,980 82,980 82,980 82,980
Forest-Swanston Subtrunk
FP-1 Loof Avenue - 127,200 127,200 127,200 127,200 127,200
FP-2 Forest Street - 225,220 225,220 225,220 225,220 225,220
Old Gilroy Subtrunk
OP-1 Old Gilroy Street - 11,120 11,120 11,120 11,120 11,120
OP-2 Old Gilroy Street - 90,100 90,100 90,100 90,100 90,100
Uvas Park Subtrunk
UP-1 Uvas Park Drive - 262,680 262,680 262,680 262,680 262,680
UP-2 Hoxett Street / ROW - 200,940 200,940 200,940 200,940 200,940
UP-3 Yorktown Drive - 223,600 223,600 223,600 223,600 223,600
UP-4 Greenwich Drive - 74,560 74,560 74,560 74,560 74,560
UP-5 Orchard Drive - 25,960 25,960 25,960 25,960 25,960
UP-6 W. 10th Street - 175,020 175,020 175,020 175,020 175,020
Thomas Subtrunk
TP-1 London Place - 387,200 387,200 387,200 387,200 387,200
TP-2 Monterey Road - 212,820 212,820 212,820 212,820 212,820
Subtotal - Master Plan Projects (in Future Year Dollars)-$ 2,511,420$ 2,511,420$ 2,511,420$ 2,511,420$ 2,511,420$
Total - CIP & Master Plan Projects (in Future Year Dollars)1,130,904$ 5,560,420$ 4,326,924$ 5,241,120$ 3,171,420$ 3,778,820$
Impact Fee Projects 4 (in Future Year Dollars)
800520 Carmel-Dowdy Alley - Sixth to Seventh Sewer Replacement -$ 75,401$ 273,200$ -$ -$ -$
800540 Monterey and Princeville Sewer Network - - - - 755,038 2,840,381
800560 Seventh St - Carmel-Dowdy to Hanna-Rosanna Alleys Sewer Repl. - - 62,706 211,300 - -
800570 Wastewater Treatment Plant Expansion (SCRWA)*- - -
Subtotal - Impact Fee Projects (in Future Year Dollars)-$ 75,401$ 335,906$ 211,300$ 755,038$ 2,840,381$
Estimated Future Projects (Impact Fee Funded)
Future Projects5 - - - - - -
Total: Impact Fee Funded CIP (Future-Year Dollars)-$ 75,401$ 335,906$ 211,300$ 755,038$ 2,840,381$
Total - All (Impact Fee, CIP & Master Plan Projects) (Future Year Dollars)$1,130,904 $5,635,821 $4,662,830 $5,452,420 $3,926,458 $6,619,201
* City contribution - SCRWA TP Construction (bond funded)$17,840,994 $15,719,810 $1,867,896
(Bond-Funded)
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Exhibit 2 (CIP), 12 of 34
Agenda Item No. 9.1
Packet Page 139 of 199
CITY OF GILROY Exhibit 2 - CIP
SEWER RATE STUDY
Capital Improvement Plan Expenditures
TABLE 13 :FORECASTING ASSUMPTIONS
Economic Variables 2023 2024 2025 2026 2027 2028
0.00%4.00%4.00%4.00%4.00%4.00%
Cumulative Construction Cost Multiplier from 2023 1.00 1.04 1.08 1.12 1.17 1.22
1. Capital project costs provided by City Staff. Source file: 11. Adopted-CIP-FY21-FY25.pdf , pages 43, 60-77.
2. Capital projects beginning in FY 2025/26 are unfunded and identified in the City's Capital Improvement Program. These costs have been allocated over a 5-year period from FY 2025/26
through FY 2029/30. Source: 11. Adopted-CIP-FY21-FY25.pdf , pages 239-242.
3. Capital project costs are from the City's Draft Sewer System Master Plan (May 2022). Source file: Draft Water Master Plan.pdf , Table 8.2, pages 100-101.
4. Capital projects funded by impact fees. Source file: City of Gilroy Water_Sewer Operations and Impact FundsFY24_25.xlsx, CIP Worksheet. April 2023.
5. Future project costs beyond FY 2029/30 were calculated based on the City's 5-year average (FY24-28).
6. The project costs in future-year dollars have been inflated by 4% annually.
7. For reference purposes, the annual Construction Cost Inflation percentage is the 5-year average change in the Construction Cost Index for September 2017-2022 (4.0%). Source:
Engineering News Record website (http://enr.construction.com ).
Annual Construction Cost Inflation, Per Engineering News Record7
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Exhibit 2 (CIP), 13 of 34
Agenda Item No. 9.1
Packet Page 140 of 199
CITY OF GILROY Exhibit 3 - Debt
SEWER RATE STUDY
Debt Service
TABLE 14 :SEWER UTILITY EXISTING DEBT OBLIGATIONS
EXISTING DEBT OBLIGATIONS Budget
Annual Repayment Schedules:FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Wastewater Revenue Bonds, Series 2021A - Loan Amount $47,080,000
Principal Payment -$ 725,000$ 755,000$ 785,000$ 815,000$ 850,000$
Interest Payment 1,533,500 1,519,000 1,489,400 1,458,600 1,426,600 1,393,300
Subtotal: Annual Debt Service 1,533,500$ 2,244,000$ 2,244,400$ 2,243,600$ 2,241,600$ 2,243,300$
Coverage Requirement ($-Amnt above annual payment)2 1,840,200$ 2,692,800$ 2,693,280$ 2,692,320$ 2,689,920$ 2,691,960$
Reserve Requirement (total fund balance)3 -$ -$ -$ -$ -$ -$
Grand Total: Existing Annual Debt Service 1,533,500$ 2,244,000$ 2,244,400$ 2,243,600$ 2,241,600$ 2,243,300$
Grand Total: Existing Annual Coverage Requirement 1,840,200$ 2,692,800$ 2,693,280$ 2,692,320$ 2,689,920$ 2,691,960$
Grand Total: Existing Debt Reserve Target -$ -$ -$ -$ -$ -$
1. Revenue bonds issued to finance the City's obligations for the capital improvements of the SCRWA Treatment Facility. Source file: 08. Official Statement.pdf .
2. The City must have net revenues that are at least equal to 1.2 times the annual debt service payment. Source file: 08. Official Statement.pdf.
4. Per the Official Statement, the City is not required to fund a debt service reserve.
TABLE 15 :EXISTING ANNUAL DEBT OBLIGATIONS TO BE SATISFIED BY SEWER RATES
Annual Obligations 2023 2024 2025 2026 2027 2028
Existing Annual Debt Service 1,533,500$ 2,244,000$ 2,244,400$ 2,243,600$ 2,241,600$ 2,243,300$
Existing Annual Coverage Requirement 1,840,200$ 2,692,800$ 2,693,280$ 2,692,320$ 2,689,920$ 2,691,960$
Existing Debt Reserve Target -$ -$ -$ -$ -$ -$
5-Year Projected Rate Period
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Exhibit 3 (Debt), 14 of 34
Agenda Item No. 9.1
Packet Page 141 of 199
CITY OF GILROY Exhibit 4 - Current Rates
SEWER RATE STUDY
Projected Sewer Rates Under Existing Rate Schedule
TABLE 16 : CURRENT WASTEWATER RATE SCHEDULE
Residential - Monthly Fixed Rate
Single Family Residence $39.66 $46.64 $51.07 9%29%
Multi-Family Residence $28.17 $33.13 $34.39 4%22%
Non-Residential - Volumetric Monthly Charge ($/1,000 Gallons)
Low Strength $6.30 $7.41 $8.36 13%33%
Domestic Strength $7.83 $9.21 $9.51 3%21%
Medium Strength $10.27 $12.08 $13.15 9%28%
High Strength $15.84 $18.63 $21.56 16%36%
Non-Residential - Monitoring & Pretreatment Program Base Rate Monthly Charges
Significant/Categorical $210.00 $240.95 $287.19 19%37%
Non-Significant/Categorical $83.00 $95.22 $114.64 20%38%
Other Non-Residential $10.00 $11.47 $15.47 35%55%
1. City Website: https://www.cityofgilroy.org/DocumentCenter/View/8664/Water---Wasterwater-Rates-7-1-19pdf .
% Change
from 2015
to Proposed
Wastewater Rate Schedule1
Current Rates
(Adopted
7/1/2019)
Rates from
2015 Rate
Study
Proposed
Rates
% Increase
from Current
to Proposed
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Agenda Item No. 9.1
Packet Page 142 of 199
CITY OF GILROY
SEWER RATE STUDY
Cost-of-Service Analysis
TABLE 17 : CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS
Classification of Expenses
FY 2023/24 (VOL)(BOD)(TSS)(DA)(CA)(VOL)(BOD)(TSS)(DA)(CA)
Fund 700 - Sewer Operations
7500 - Sewer Administration
Pension Expense -$ -$ -$ -$ -$ -$ 40.0%25.0%25.0%0.0%10.0%
Professional Support - - - - - - 40.0%25.0%25.0%0.0%10.0%
Audit Services - - - - - - 40.0%25.0%25.0%0.0%10.0%
Contractual Services 5,288 2,115 1,322 1,322 - 529 40.0%25.0%25.0%0.0%10.0%
Contra Capital Outlay - - - - - - 40.0%25.0%25.0%0.0%10.0%
Interfund Transfer Out - - - - - - 40.0%25.0%25.0%0.0%10.0%
Fleet Service Charge 77,139 30,856 19,285 19,285 - 7,714 40.0%25.0%25.0%0.0%10.0%
Facility Service Charge 216,418 86,567 54,105 54,105 - 21,642 40.0%25.0%25.0%0.0%10.0%
Info Tech Service Charge 550,530 495,477 - - - 55,053 90.0%0.0%0.0%0.0%10.0%
Overhead Charges 847,532 339,013 211,883 211,883 - 84,753 40.0%25.0%25.0%0.0%10.0%
Liability Insurance Charges 430,902 172,361 107,726 107,726 - 43,090 40.0%25.0%25.0%0.0%10.0%
Loss On Disposal Of F/A - - - - - - 40.0%25.0%25.0%0.0%10.0%
Amortization Expense - - - - - - 30.0%35.0%35.0%0.0%0.0%
Depreciation - - - - - - 50.0%25.0%25.0%0.0%0.0%
Debt Redemption 725,000 362,500 181,250 181,250 - - 50.0%25.0%25.0%0.0%0.0%
Debt Interest 1,519,000 759,500 379,750 379,750 - - 50.0%25.0%25.0%0.0%0.0%
Share Joint Venture Loss - - - - - - 40.0%25.0%25.0%0.0%10.0%
Claims 15,750 6,300 3,938 3,938 - 1,575 40.0%25.0%25.0%0.0%10.0%
Cash Over Short - - - - - - 40.0%25.0%25.0%0.0%10.0%
Subtotal - Sewer Administration 4,387,559$ 2,254,689$ 959,257$ 959,257$ -$ 214,356$ 51.4%21.9%21.9%0.0%4.9%
CustomerStrength Basis of Classification
Direct Alloc.
(Monitoring,
Pretreat., etc.)Budget Categories
Total Revenue
Requirements Flow
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Agenda Item No. 9.1
Packet Page 143 of 199
CITY OF GILROY
SEWER RATE STUDY
Cost-of-Service Analysis
TABLE 18 : CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS, cont.
Classification of Expenses
FY 2023/24 (VOL)(BOD)(TSS)(DA)(CA)(VOL)(BOD)(TSS)(DA)(CA)
Fund 700 - Sewer Operations
7510 - Finance Sewer Utility Billing
Salaries 617,543$ 185,263$ 123,509$ 123,509$ -$ 185,263$ 30.0%20%20%0%30%
Utility Billing Supervisor (Split: Water/Sewer)- - - - - - 30.0%20%20%0%30%
Wages/Part Time 33,750 10,125 6,750 6,750 - 10,125 30.0%20%20%0%30%
Overtime 10,000 3,000 2,000 2,000 - 3,000 30.0%20%20%0%30%
Overtime Meals - - - - - - 30.0%20%20%0%30%
Compensated Absences - - - - - - 30.0%20%20%0%30%
Workers Comp 2,563 769 513 513 - 769 30.0%20%20%0%30%
Retirement (Full Time)73,492 22,048 14,698 14,698 - 22,048 30.0%20%20%0%30%
Deferred Compensation 2,070 621 414 414 - 621 30.0%20%20%0%30%
UAL Retirement 94,578 28,373 18,916 18,916 - 28,373 30.0%20%20%0%30%
Retirement (Part Time)759 228 152 152 - 228 30.0%20%20%0%30%
Medicare 9,595 2,879 1,919 1,919 - 2,879 30.0%20%20%0%30%
Health Insurance Benefits 115,262 34,579 23,052 23,052 - 34,579 30.0%20%20%0%30%
Life Insurance Benefits 794 238 159 159 - 238 30.0%20%20%0%30%
Employee Assistance Prog 1,116 335 223 223 - 335 30.0%20%20%0%30%
Unemployment Insurance 971 291 194 194 - 291 30.0%20%20%0%30%
Misc Disability Insurance 1,307 392 261 261 - 392 30.0%20%20%0%30%
Employee Training 3,400 1,020 680 680 - 1,020 30.0%20%20%0%30%
Employee Travel, Food, Lodge 1,250 375 250 250 - 375 30.0%20%20%0%30%
Telecommunications - - - - - - 30.0%20%20%0%30%
Postage 100 30 20 20 - 30 30.0%20%20%0%30%
Professional Support - - - - - - 30.0%20%20%0%30%
Contractual Services 66,025 19,808 13,205 13,205 - 19,808 30.0%20%20%0%30%
Office/Computer Supplies 2,000 600 400 400 - 600 30.0%20%20%0%30%
Repairs & Maintenance - - - - - - 30.0%20%20%0%30%
Earned Leave Cashout - - - - - - 30.0%20%20%0%30%
Tuition - - - - - - 30.0%20%20%0%30%
Subtotal - Finance Sewer Utility Billing 1,036,577$ 310,973$ 207,315$ 207,315$ -$ 310,973$ 30%20%20%0%30%
Strength Customer Basis of ClassificationBudget Categories
Total Revenue
Requirements Flow
Direct Alloc.
(Monitoring,
Pretreat., etc.)
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Agenda Item No. 9.1
Packet Page 144 of 199
CITY OF GILROY
SEWER RATE STUDY
Cost-of-Service Analysis
TABLE 19 : CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS, cont.
Classification of Expenses
FY 2023/24 (VOL)(BOD)(TSS)(DA)(CA)(VOL)(BOD)(TSS)(DA)(CA)
Fund 700 - Sewer Operations
7520 - Sewer Operations
Salaries 1,826,894$ 858,640$ 456,724$ 456,724$ 54,807$ -$ 47%25%25%3%0%
FT Engineer I/II - - - - - - 47%25%25%3%0%
Wages/Part Time 60,000 28,200 15,000 15,000 1,800 - 47%25%25%3%0%
Overtime 50,000 23,500 12,500 12,500 1,500 - 47%25%25%3%0%
Overtime Meals 1,000 470 250 250 30 - 47%25%25%3%0%
Compensated Absences - - - - - - 47%25%25%3%0%
Workers Comp 66,947 31,465 16,737 16,737 2,008 - 47%25%25%3%0%
Retirement (Full Time)218,375 102,636 54,594 54,594 6,551 - 47%25%25%3%0%
Retirement (Part Time)1,350 635 338 338 41 - 47%25%25%3%0%
Medicare 28,106 13,210 7,027 7,027 843 - 47%25%25%3%0%
Health Insurance Benefits 375,906 176,676 93,976 93,976 11,277 - 47%25%25%3%0%
Life Insurance Benefits 2,241 1,053 560 560 67 - 47%25%25%3%0%
Employee Assistance Prog 3,097 1,456 774 774 93 - 47%25%25%3%0%
Unemployment Insurance 2,915 1,370 729 729 87 - 47%25%25%3%0%
Misc Disability Insurance 3,733 1,754 933 933 112 - 47%25%25%3%0%
RETIREE MEDICAL 1,800 846 450 450 54 - 47%25%25%3%0%
Employee Training 40,000 18,800 10,000 10,000 1,200 - 47%25%25%3%0%
Employee Travel, Food, Lodge 15,000 7,050 3,750 3,750 450 - 47%25%25%3%0%
Telecommunications 2,500 1,175 625 625 75 - 47%25%25%3%0%
Postage - - - - - - 47%25%25%3%0%
Professional Support 15,000 7,050 3,750 3,750 450 - 47%25%25%3%0%
Contractual Services 806,000 378,820 201,500 201,500 24,180 - 47%25%25%3%0%
Office/Computer Supplies 1,500 705 375 375 45 - 47%25%25%3%0%
Department Supplies 10,000 4,700 2,500 2,500 300 - 47%25%25%3%0%
Repairs & Maintenance 100,000 47,000 25,000 25,000 3,000 - 47%25%25%3%0%
Equipment Rental 10,000 4,700 2,500 2,500 300 - 47%25%25%3%0%
Equipment/Furniture - - - - - - 47%25%25%3%0%
Interfund Transfer Out2 390,000 234,000 78,000 78,000 - - 60%20%20%0%0%
SCWRA Oper. Costs (less Monit., Sampl., Pre-Tr.Costs)6,146,815 2,889,003 1,536,704 1,536,704 184,404 - 47%25%25%3%0%
Monitoring, Sampling, Pretreatment (Non-Resid. Costs)365,700 - - - 365,700 - 0%0%0%100%0%
Earned Leave Cashout - - - - - - 47%25%25%3%0%
Deferred Compensation 5,742 2,699 1,436 1,436 172 - 47%25%25%3%0%
UAL Retirement 284,730 133,823 71,182 71,182 8,542 - 47%25%25%3%0%
Apparel, Boots, Ppe 9,000 4,230 2,250 2,250 270 - 47%25%25%3%0%
Utilities 6,000 2,820 1,500 1,500 180 - 47%25%25%3%0%
Permits 25,000 11,750 6,250 6,250 750 - 47%25%25%3%0%
Improvements - - - - - - 47%25%25%3%0%
Subtotal - Wastewater Environmental Compliance 10,875,351$ 4,990,236$ 2,607,913$ 2,607,913$ 669,290$ -$ 46%24%24%6%0%
Budget Categories
Total Revenue
Requirements Flow Strength Customer Basis of Classification
Direct Alloc.
(Monitoring,
Pretreat., etc.)
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Agenda Item No. 9.1
Packet Page 145 of 199
CITY OF GILROY
SEWER RATE STUDY
Cost-of-Service Analysis
TABLE 20 : CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS, cont.
Classification of Expenses, cont.
FY 2023/24 (VOL)(BOD)(TSS)(DA)(CA)(VOL)(BOD)(TSS)(DA)(CA)
Debt Service Payments
Outstanding Debt 2,244,000 1,029,676 538,112 538,112 138,100 - 46%24%24%6%0%
New Debt Issue - SRF Loan - - - - - - 50%25%25%0%0%
New Debt Issue - Revenue Bond - - - - - - 50%25%25%0%0%
Total Debt Service Payments 2,244,000$ 1,029,676$ 538,112$ 538,112$ 138,100$ -$ 46%24%24%0%0%
Capital Expenditures
Rate Funded Capital Expenses 75,401$ 34,598$ 18,081$ 18,081$ 18,081$ -$ 46%24%24%0%0%
TOTAL REVENUE REQUIREMENTS 18,618,887$ 8,620,172$ 4,330,678$ 4,330,678$ 825,471$ 525,329$ 46%23%23%4%3%
Less: Non-Rate Revenues
Other Revenue:
Misc. Revenue & Interest Earnings2 (649,871)$ (298,198)$ (155,839)$ (155,839)$ (39,994)$ -$ 46%24%24%6%0%
Interfund Transfer In (2,244,000) (1,346,400) (448,800) (448,800) - - 60%20%20%0%0%
NET REVENUE REQUIREMENTS 15,725,016$ 6,975,574$ 3,726,039$ 3,726,039$ 785,476$ 525,329$
Allocation of Revenue Requirements 100.0%44.4%23.7%23.7%5.0%3.3%
100.0%44.0%24.0%24.0%5.0%3.0%
TABLE 21 : NET REVENUE REQUIREMENTS INCLUDING RATE INCREASE
Adjustment to Current Rate Level:Total (VOL)(BOD)(TSS)(DA)(CA)
Projected Rate Revenue at Current Rates 13,512,000$
FY 2023/24 Projected Rate Increase 4%
Additional Rate Revenue from Rate Increase 540,480$
Adjusted Net Revenue Req'ts 14,052,480$ 6,183,091$ 3,372,595$ 3,372,595$ 702,624$ 421,574$
FY 2023/24 Target Rate Rev. After Rate Incr. (From Fin. Plan)14,052,480$
Percent of Revenue 44.0%24.0%24.0%5.0%3.0%
Strength Customer Basis of Classification
Direct Alloc.
(Monitoring,
Pretreat., etc.)
Allocations of COSA (Rounded)
Flow Budget Categories
Total Revenue
Requirements
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Agenda Item No. 9.1
Packet Page 146 of 199
CITY OF GILROY
SEWER RATE STUDY
Cost-of-Service Analysis
TABLE 22 : DEVELOPMENT OF THE FLOW ALLOCATION FACTOR
Customer Class Consumption
(TG/year)1
Number of
Dwelling Units
/ Accounts2
Winter
Consumption
(Dec-Feb '21)3
Annualized
Winter
Consumption
Adjusted
Annual Volume
(gallons)3
Percentage
of Adjusted
Volume
Residential Customers
Single-Family Residence 1,135,486 12,330 201,429 805,715 805,715,371 61.6%5.4 TG/mo.
Multi-Family Residence4 218,620 4,585 49,505 198,022 198,021,843 15.1%3.6 TG/mo.
Non-Residential Customers
Low Strength 77,640 427 77,640,000 5.9%
Domestic Strength 98,610 253 98,610,000 7.5%
Medium Strength 53,149 55 53,149,000 4.1%
High Strength 74,067 128 74,067,000 5.7%
Total: 1,657,571 17,778 250,934 1,003,737 1,307,203,214 100.0%
1. Consumption data for residential customers is not available. Calculation of estimated consumption available in source file:
FY 2021-22 Billing Journal Totals by Service v7.xlsx.
2. SFR and MFR customers are based on the number of dwelling units and all other customers are based on the number of accounts.
3. Annual consumption for all customer classes based on 12 months of water consumption.
4. MFR dwelling units provided by the City. Source file: MFR Units.xlsx .
TABLE 23 : DEVELOPMENT OF THE STRENGTH ALLOCATION FACTOR 205
Customer Class
Average
Strength
Factor (mg/l)1
Calculated
BOD (lbs./yr.)
Adjusted BOD
(lbs./yr.)
Percent
of Total
Average
Strength
Factor (mg/l)1
Calculated
TSS (lbs./yr.)
Adjusted BOD
(lbs./yr.)
Percent
of Total
Residential Customers
Single-Family Residence 805,715,371 205 1,377,532 2,755,063 51.4%205 1,377,532 1,744,176 51.4%Used strength for Residential from Appendix G
Multi-Family Residence 198,021,843 205 338,558 677,116 12.6%205 338,558 428,669 12.6%Used strength for Residential from Appendix G
Non-Residential Customers
Low Strength 77,640,000 167 108,135 216,271 4.0%167 108,135 136,917 4.0%Used strength for Residential from Appendix G
Domestic Strength 98,610,000 225 185,042 370,083 6.9%225 185,042 234,293 6.9%Used strength for Residential from Appendix G
Medium Strength 53,149,000 400 177,305 354,610 6.6%400 177,305 224,497 6.6%Used strength for Hotel/Motel without Dining from Appendix G
High Strength 74,067,000 800 494,175 988,350 18.4%800 494,175 625,705 18.4%Used strength for Industrial Laundry from Appendix G
Total: 1,307,203,214 2,680,747 5,361,493 100.0%2,680,747 3,394,256 100.0%
Total Annual from WWTP Data 5,361,493 BOD (lbs./yr.)3,394,256 TSS (lbs./yr.)
2.00 BOD Adj. Factor 1.27 TSS Adj. Factor
1. Avg. strength factors for BOD and TSS are from the CA State Water Resources Control Board, Revenue Program Guidelines (Appendix G), March 1998 Edition.
Annual Flow
(gallons)
Biochemical Oxygen Demand (BOD)Total Suspended Solids (TSS)
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Allocation Factors, 20 of 34
Agenda Item No. 9.1
Packet Page 147 of 199
CITY OF GILROY
SEWER RATE STUDY
Cost-of-Service Analysis
TABLE 24 : DEVELOPMENT OF THE CUSTOMER ALLOCATION FACTOR
Customer Class
Number of
Dwelling Units
/ Accounts
Percent
of Total
Residential Customers
Single-Family Residence 12,330 66.2%
Multi-Family Residence 4,585 24.6%
Non-Residential Customers - Strength Classes
Low Strength 427 2.29%
Domestic Strength 253 1.36%
Medium Strength 55 0.30%
High Strength 128 0.69%
Non-Residential Customers - Categorical Classes
Significant/Categorical 6 0.03%
Non-Significant/Categorical 458 2.46%
Other Non-Residential 387 2.08%
Total: 18,628 100.0%
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Allocation Factors, 21 of 34
Agenda Item No. 9.1
Packet Page 148 of 199
CITY OF GILROY
SEWER RATE STUDY
Cost-of-Service Analysis
TABLE 25 : ALLOCATION OF SEWER REVENUE REQUIREMENTS
Add Alt. 1 and 2
Commodity-Related Costs 6,183,091$ 44.0%
Capacity-Related Costs 6,745,190 48.0%
Monit., Sampl., Pretreat. (Non-Resid. Costs) 702,624 5.0%
Customer-Related Costs 421,574 3.0%
Net Revenue Requirement 14,052,480$ 100.0%
1. Reflects COSA calculation of the fixed and volumetric charges. See Funct. & Classification tab.
TABLE 26 : ALLOCATION OF NET REVENUE REQUIREMENTS TO CUSTOMER CLASSES COSA Results - Net Revenue Requirement (Including Rate Increases)
$Alloca. %
Residential Customers
Single-Family Residence 3,811,046$ 1,733,046$ 1,733,046$ 279,038$ 7,556,175$ 53.8%
Multi-Family Residence 936,646 425,933 425,933 103,762 1,892,275 13.5%
Non-Residential Customers
Low Strength 367,238$ 136,043$ 136,043$ 9,663$ 648,988$ 4.6%
Domestic Strength 466,427 232,797 232,797 5,726 937,747 6.7%
Medium Strength 251,396 223,064 223,064 1,245 698,768 5.0%
High Strength 350,338 621,712 621,712 2,897 1,596,659 11.4%
Non-Residential Customers (Monitoring, Sampling, Pretreatment Costs Only)Fixed Charge Rev. Reqts.
Significant/Categorical $20,542 2.9%136 $20,678 0.1%
Non-Significant/Categorical $619,036 88.1%10,354 $629,390 4.5%
Other Non-Residential $63,046 9.0%8,754 $71,800 0.5%
Total 6,183,091$ $3,372,595 $3,372,595 702,624$ 421,574$ 14,052,480$ 100.0%
1. Non-Residential Customers (Monitoring, Sampling, Pretreatment Costs are allocated on the basis of current/historical share of this program.
-
Cost of
Service Net
Rev. Req'ts.
% of COS
Net
Revenue
Req'ts.
Classification Components
COSA Results -
Net Rev. Reqts.
(49% Fixed / 51% Vol.)
Cost Classification Components
Direct Allocation
(Monitoring, Pretreat., etc.)
TSSBOD
Customer Class Commodity Customer
Capacity
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COSA - Sewer Rates, 22 of 34
Agenda Item No. 9.1
Packet Page 149 of 199
CITY OF GILROY
SEWER RATE STUDY
Cost-of-Service Analysis
TABLE 27 : CALCULATION OF PROPOSED SEWER RATES Rate Alt. 1 (COSA Fixed Rev. = 26%)
Total Fixed Volumetric
Residential - Monthly Fixed Rate
Single-Family Residence 12,330 805,715,371 7,556,175$ 7,556,175$ $51.07
Multi-Family Residence 4,585 198,021,843 1,892,275 1,892,275 $34.39
Non-Residential Customers
Low Strength 427 77,640,000 648,988$ 648,988$ $8.36
Domestic Strength 253 98,610,000 937,747 937,747 $9.51
Medium Strength 55 53,149,000 698,768 698,768 $13.15
High Strength 128 74,067,000 1,596,659 1,596,659 $21.56
Total 17,778 ############13,330,612$ 9,448,450$ 3,882,162$
Non-Residential Customers (Monitoring, Sampling, Pretreatment Costs Only)
Significant/Categorical3 6 $20,678 20,678$ $287.19
Non-Significant/Categorical3 458 629,390 629,390 $114.64
Other Non-Residential3 387 71,800 71,800 $15.47
Percent of Non-Resid . Rev. from Fixed vs. Vol. Charges 100.0%0.0%100.0%
1. SFR and MFR customers are based on the number of dwelling units and all other customers are based on the number of accounts.
2. Residential customer consumption is the annualized average winter water consumption. Non-residential customers is total annual consumption.
3. Number of accounts estimated by dividing the annual fixed charge revenues by the current fixed charges ($/account/month). Also, the Significant, Non-Significant and
Other Non-Residential accounts are included in the non-residential strength classes. They are shown here only for the calculation of the Monitoring, Sampling, and
Pre-Treatment fixed charges.
Volumetric
Charge
($/1,000 Gal.)
Customer Class
No. of
Dwelling
Units /
Accounts1
Annualized
Consumption
(Gallons)2
Annual Revenue Requirement Mo. Fixed Charge
Per EDU (Resid.)
or Account (Non-
Resid)
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COSA - Sewer Rates, 23 of 34
Agenda Item No. 9.1
Packet Page 150 of 199
CITY OF GILROY
SEWER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 28 : CURRENT VS. PROPOSED SEWER RATES
Rate Alt. 1 (COSA Fixed Rev. = 26%)
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Fixed Charge
Residential (100% Fixed)
Single-Family Residence $46.64 $51.07 $53.11 $55.24 $57.45 $59.74
Multi-Family Residence $33.13 $34.39 $35.77 $37.20 $38.69 $40.23
Non-Residential Volumetric Rates
Low Strength $7.41 $8.36 $8.69 $9.04 $9.40 $9.78
Domestic Strength $9.21 $9.51 $9.89 $10.29 $10.70 $11.12
Medium Strength $12.08 $13.15 $13.67 $14.22 $14.79 $15.38
High Strength $18.63 $21.56 $22.42 $23.32 $24.25 $25.22
Non-Residential - Monitoring & Pretreatment Program Base Rate Monthly Charges
Significant/Categorical $240.95 $287.19 $298.68 $310.63 $323.05 $335.98
Non-Significant/Categorical $95.22 $114.64 $119.22 $123.99 $128.95 $134.11
Other Non-Residential $11.47 $15.47 $16.09 $16.73 $17.40 $18.09
Note: The City recently transitioned from July1-June 30 fiscal years to calendar years (January to December).
Sewer Rate Schedule Current
Rates
Proposed Sewer Rates
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Current & Proposed Rates, 24 of 34
Agenda Item No. 9.1
Packet Page 151 of 199
Prepared by NBS
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$46.64 $46.64 $46.64 $46.64 $46.64
$51.07
$53.11
$55.24
$57.45
$59.74
$0
$10
$20
$30
$40
$50
$60
$70
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28Monthly BillMonthly Water Consumption (HCF)
SFR - Sewer Bill Comparison
Current vs. Proposed Rates
SFR Bill - Current Rates
SFR Bill - Proposed Rates
Agenda Item No. 9.1
Packet Page 152 of 199
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$33.13 $33.13 $33.13 $33.13 $33.13$34.39
$35.77
$37.20
$38.69
$40.23
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28Monthly BillMonthly Water Consumption (HCF)
Multi-Family Residential Sewer Bill Comparison
Current vs. Alternative Rates (3.6 TG/Mo.)
MFR Bill - Current Rates
MFR Bill - Proposed Rates
Agenda Item No. 9.1
Packet Page 153 of 199
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Low-Strngth 1-Yr, 27 of 34$29.64$66.69$105.96$148.20$222.30$33.44$75.23$119.53$167.18$250.77$0
$50
$100
$150
$200
$250
$300
4 hcf 9 hcf 14 hcf 20 hcf 30 hcfMonthly BillMonthly Water Consumption (HCF)
Low-Strength Commercial Sewer Bill Comparison
Current vs. Alternative Rates FY'23/24 (14.3 TG/Mo.)
Current Rates Proposed Rates
Agenda Item No. 9.1
Packet Page 154 of 199
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$106.31 $106.31 $106.31 $106.31 $106.31
$119.92
$124.72
$129.71
$134.90
$140.29
$0
$20
$40
$60
$80
$100
$120
$140
$160
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28Monthly BillMonthly Water Consumption (HCF)
Low-Strength Commercial Sewer Bill Comparison
Current vs. Proposed Rates (28 TG/Mo.)
Current Rates Proposed Rates
Agenda Item No. 9.1
Packet Page 155 of 199
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Dom-Strngth 1-Yr, 29 of 34$73.68$165.78$257.88$349.98$442.08$76.08$171.17$266.27$361.37$456.46$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
8 hcf 18 hcf 28 hcf 38 hcf 48 hcfMonthly BillMonthly Water Consumption (HCF)
Domestic-Strength Commercial Sewer Bill Comparison
Current vs. Alternative Rates FY'23/24 (14.3 TG/Mo.)
Current Rates Proposed Rates
Agenda Item No. 9.1
Packet Page 156 of 199
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$260.83 $260.83 $260.83 $260.83 $260.83$269.31
$280.09
$291.29
$302.94
$315.06
$0
$50
$100
$150
$200
$250
$300
$350
$400
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28Monthly BillMonthly Water Consumption (HCF)
Domestic-Strength Commercial Sewer Bill Comparison
Current vs. Proposed Rates (28 TG/Mo.)
Current Rates Proposed Rates
Agenda Item No. 9.1
Packet Page 157 of 199
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$868.37 $868.37 $868.37 $868.37 $868.37
$945.10
$982.90
$1,022.21
$1,063.10
$1,105.63
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28Monthly BillMonthly Water Consumption (HCF)
Medium-Strength Commercial Sewer Bill Comparison
Current vs. Proposed Rates (72 TG/Mo.)
Current Rates Proposed Rates
Agenda Item No. 9.1
Packet Page 158 of 199
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Med-Strength 23-24, 32 of 34$265.76$567.76$869.76$1,171.76$1,473.76$289.24$617.93$946.61$1,275.29$1,603.98$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
22 hcf 47 hcf 72 hcf 97 hcf 122 hcfMonthly BillAvg. Winter Consumption
Medium-Strength Commercial Sewer Bill Comparison
Current vs. Rate Alternatives (FY'23/24)
Current Rates Proposed Rates
Agenda Item No. 9.1
Packet Page 159 of 199
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$812.78 $812.78 $812.78 $812.78 $812.78
$940.48
$978.10
$1,017.22
$1,057.91
$1,100.23
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28Monthly BillMonthly Water Consumption (HCF)
High-Strength Commercial Sewer Bill Comparison
Current vs. Proposed Rates (43 TG/Mo.)
Current Rates Proposed Rates
Agenda Item No. 9.1
Packet Page 160 of 199
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 High-Strength 23-24, 34 of 34$260.82$540.27$819.72$1,099.17$1,378.62$301.80$625.15$948.51$1,271.86$1,595.21$0
$250
$500
$750
$1,000
$1,250
$1,500
$1,750
14 hcf 29 hcf 44 hcf 59 hcf 74 hcfMonthly BillAvg. Winter Consumption
High-Strength Commercial Sewer Bill Comparison
Current vs. Rate Alternatives (FY'23/24)
Current Rates Proposed Rates
Agenda Item No. 9.1
Packet Page 161 of 199
10.1.Recommendations for Updates/Improvements to the Gilroy Garlic
Festival Memorial at Christmas Hill Park
1. Staff Report:
2. Public Comment
3. Possible Action:
Discussion and direction regarding proposed updates/improvements to
the Gilroy Garlic Festival Memorial at Christmas Hill Park.
Agenda Item No. 10.1
Packet Page 162 of 199
Page 1 of 6
City of Gilroy
STAFF REPORT
Agenda Item Title:Recommendations for Updates/Improvements to the
Gilroy Garlic Festival Memorial at Christmas Hill Park
Meeting Date:October 16, 2023
From:Jimmy Forbis, City Administrator
Department:Administration
Submitted By:Jimmy Forbis, City Administrator
Prepared By:Jimmy Forbis, City Administrator
STRATEGIC PLAN GOALS Maintain and Improve City Infrastructure
RECOMMENDATION
Discussion and direction regarding proposed updates/improvements to the Gilroy Garlic
Festival Memorial at Christmas Hill Park.
BACKGROUND
In September 2019 a temporary memorial to the victims of the Gilroy Garlic Festival
shooting was erected to honor the three deaths and 17 wounded on July 28, 2019. At
the time, the memorial, designed by Gilroy landscape artist Karen Aitken, was originally
intended to be a temporary memorial located on the ranch side of Christmas Hill Park.
A plan for a permanent memorial never developed; thus, on October 19, 2020, the City
Council declared that the temporary memorial would be designated as the permanent
memorial going forward. The memorial, in its current form, is comprised of a large palm
tree and three flag-laden ropes going from the tree to a ranch-style fence. There is also
landscaping and a plaque memorializing the three victims who lost their lives on that
date - Stephen Romero, Keyla Salazar, and Trevor Irby.
On September 11, 2023, staff returned to the Council to provide a report and receive
feedback on repairs and upgrades to the Gilroy Garlic Festival Memorial (GGFM).
Feedback from the Council at the meeting included for staff to prepare a concept based
on the following:
Agenda Item No. 10.1
Packet Page 163 of 199
Recommendations for Updates/Improvements to the Gilroy Garlic Festival Memorial at Christmas
Hill Park
City of Gilroy City Council Page 2 of 6 October 16, 2023
•Garden only.
•Plan for a raised monument.
•Remove the draped ropes.
•Evaluate options for removing the existing palm tree and installation of three
replacement trees.
•Evaluate possible hardscape to help control the squirrels.
•Look at the possibility of a bench being added.
Based on feedback from that meeting, staff is proposing to undertake work as described
below.
ANALYSIS
Memorial
Presently, the GGFM features a memorial plaque placed at ground level, flat along the
ground in front of the garden area. Staff is proposing that an additional memorial be
placed, but with a vertical alignment that can be easily seen and apparent with a raised
profile. To do so, staff is proposing a concrete monument to be created with a visible
profile to those walking up towards the memorial.
The proposed monument would be 30” high, 30” wide, and 6-8" deep. The memorial
would include a base at the bottom and be constructed on a concrete pad to be installed
by the City, with a total depth of 6”-8" and being brought flush with ground level. The
memorial will feature an inscription that is discussed below. The monument would be a
solid block of concrete with the inscription carved into a finished face for the memorial,
facing out from the GGFM towards the southeast. This memorial type is durable and is
resistant to theft or relocation. The estimate for such a monument is approximately
$2,000. An example of a concrete monument, though not the same dimensions or the
proposed message design, is below.
Agenda Item No. 10.1
Packet Page 164 of 199
Recommendations for Updates/Improvements to the Gilroy Garlic Festival Memorial at Christmas
Hill Park
City of Gilroy City Council Page 3 of 6 October 16, 2023
The design of the memorial is a simple proposed inscription, with center aligned text. A
conceptual mock-up of the added memorial is below.
The foundation will be installed by City staff with City materials. The foundation is
necessary to support the upright design and help resist against wind or other external
force that may push against the face or back of the memorial.
Agenda Item No. 10.1
Packet Page 165 of 199
Recommendations for Updates/Improvements to the Gilroy Garlic Festival Memorial at Christmas
Hill Park
City of Gilroy City Council Page 4 of 6 October 16, 2023
Trees
One of the issues of discussion has been the presence of a palm tree at the GGFM.
The concerns raised include: 1) the maintenance requirements of the tree, including the
care and trimming of the tree to reduce the fronds that drop from the tree into the
garden, and the difficulty of maintaining the tree overall; and 2) the palm tree is not a
species that is indigenous to the area.
Despite these factors, staff does not currently recommend removing the palm tree due
to the large root structure underneath, which, when removed, may damage the GGFM
garden. Instead, staff will be working with the City’s tree maintenance contractor to
address the fronds from the palm tree and maintain the tree and clearance of any fronds
in a clean and well-ordered manner.
Additionally, staff is able to secure the donation of four oak trees that may be used
around the GGFM. Staff is proposing the installation of these trees, which would be
donated by Google, to the sides of the GGFM. The trees would be too large to install
within the GGFM but would still provide shade in the afternoon to the memorial area
when fully matured. This is a general park improvement and not necessarily tied to the
GGFM update.
Ropes and posts
The existing GGFM includes a series of three ropes that are draped and bound around
the palm tree and lead out to three posts at the corners of the memorial area. While part
of the initial temporary design, the ropes represent an ongoing maintenance and
replacement need. The ropes, being exposed to the weather of winter rains and
summer heat, will continue to deteriorate, including any new ropes that are installed as
replacements. Because of the longevity issues of using ropes draped over the GGFM,
staff is proposing the removal of the ropes from the tree and removing the corner posts
without replacement. If the plants currently in place are dependent upon the posts to
survive, they will be removed as well.
Benches
Staff has looked into options for a bench, as well as a picnic table. Staff is not
recommending to have any form of bench or table due to issues regarding trash
accumulation, vandalism, and use of such seating as a sleeping area, something
experienced in other parks and locations.
Hardscape for squirrels
Staff has researched hardscapes that can help deter squirrel activity in the garden.
Research has indicated that there are not many options aside from fencing areas
(chicken wire, rabbit fencing, hardware cloth, etc.) and landscaping with rocks due to
the adaptability of squirrels at overcoming hindrances and the need for the public and
staff to access the gardens. Staff is not recommending these options, due to access
issues, fundamental changes to the memorial garden, and the increase in cost needed
to make these changes. Staff will continue researching non-hardscape options, which
Agenda Item No. 10.1
Packet Page 166 of 199
Recommendations for Updates/Improvements to the Gilroy Garlic Festival Memorial at Christmas
Hill Park
City of Gilroy City Council Page 5 of 6 October 16, 2023
might help deter squirrels and other rodents that may attempt to enter the memorial
garden.
Conceptual drawing
Below is a rough, conceptual drawing of staff’s proposed layout. The image shows the
site of the new vertical monument at the front of the memorial garden and the addition
of the four trees. No changes are proposed to the garden itself.
ALTERNATIVES
The City Council may issue any direction regarding the recommendations proposed for
the work to be done at the GGFM. No specific alternative is currently available for
analysis.
FISCAL IMPACT/FUNDING SOURCE
The proposed improvements are estimated to cost $2,000, depending upon final quote
prices and shipping charges. The trees are coming from donations and do not
contribute to the cost. These funds would come from the City’s General Fund in the
Agenda Item No. 10.1
Packet Page 167 of 199
Recommendations for Updates/Improvements to the Gilroy Garlic Festival Memorial at Christmas
Hill Park
City of Gilroy City Council Page 6 of 6 October 16, 2023
Parks and Landscaping Division budget. No budget amendment is requested, as the
costs can be absorbed within existing appropriations.
PUBLIC OUTREACH
This item has been discussed previously at the September 11, 2023 City Council
Regular Meeting. The item was also included in the publicly posted agenda. Once any
direction is received regarding the proposed improvements, staff will engage the public
through our Communications and Engagement Office, specifically through social media
and the weekly e-newsletter.
NEXT STEPS
Once any final direction is received, staff will commence with the improvements.
Agenda Item No. 10.1
Packet Page 168 of 199
11.1.Authorize the City Administrator to Enter into a Three-Year Service
Agreement with the County of Santa Clara for Animal Sheltering
Services for the Period of July 1, 2023, through June 30, 2026
1. Staff Report:
2. Public Comment
3. Possible Action:
Authorize the City Administrator to sign a three-year service agreement
with the County of Santa Clara for Animal Sheltering Services from July
1, 2023, through June 30, 2026.
Agenda Item No. 11.1
Packet Page 169 of 199
Page 1 of 3
City of Gilroy
STAFF REPORT
Agenda Item Title:Authorize the City Administrator to Enter into a
Three-Year Service Agreement with the County of
Santa Clara for Animal Sheltering Services for the
Period of July 1, 2023, through June 30, 2026
Meeting Date:October 16, 2023
From:Jimmy Forbis, City Administrator
Department:Police
Submitted By:Pedro Espinoza, Police Chief
Prepared By:Patricia Vigil, Management Analyst
STRATEGIC PLAN GOALS Ensure Neighborhood Equity from City Services
RECOMMENDATION
Authorize the City Administrator to sign a three-year service agreement with the County
of Santa Clara for Animal Sheltering Services from July 1, 2023, through June 30, 2026.
EXECUTIVE SUMMARY
The County of Santa Clara (County) provides animal sheltering services to the City of
Gilroy (City). The County provides sheltering services for abandoned, impounded, lost,
or stray domestic animals, monitoring of quarantined animals, euthanasia of animals
deemed unfit for adoption, and low-cost spay/neuter services to residents of the
unincorporated areas of Santa Clara County.
BACKGROUND
In late May, Santa Clara County (SCC) advised the Gilroy Police Department (GPD) of
their intent to provide an updated Animal Sheltering Services Agreement, which was
ultimately provided to the City on June 15, 2023. The City desires to secure animal
sheltering services for domestic animals found within Gilroy's incorporated area for the
three fiscal years 2023, 2024, and 2025. The County has the necessary skills to provide
sheltering services and veterinary care for such animals during normally staffed hours,
Agenda Item No. 11.1
Packet Page 170 of 199
Authorize the City Administrator to Enter into a Three-Year Service Agreement with the County of
Santa Clara for Animal Sheltering Services for the Period of July 1, 2023, through June 30, 2026
City of Gilroy City Council Page 2 of 3 October 16, 2023
Monday-Friday, 8:00 a.m. to 6:00 p.m., and Saturday and Sunday, 8:00 a.m. to 5:00
p.m. No services are provided on County holidays; however, kennels are available to
GPD staff to secure animals based on the availability of kennels. Other veterinary
offices provide veterinarian services outside of the normal animal shelter staffed hours
at the City’s expense.
The Police Department has four Community Services Officers (CSO) positions
authorized. One of those CSO job functions is to serve as the Animal Control Officer
(ACO). The ACO's responsibilities are to respond to calls for service regarding barking
dogs, loose/off-leash dogs, dog fights, investigations of animal neglect/cruelty by
owners, dog bites, educating the community of the Gilroy Municipal Code (GMC)
regarding animals, and the issuance of citations for failure to follow the GMC. Other
CSO staff, Detention Service Officers, and Police Officers are cross-trained in ACO
duties if the primary ACO is not scheduled to work, is out ill, or is on vacation or training.
This service model allows for an expeditious and enhanced level of customer service to
the community and increases customer satisfaction.
ANALYSIS
During FY23, the County of Santa Clara Animal Services took in 4,307 animals. Of
those, 919 were intakes from Gilroy, or 21% of the total intake of domestic animals. As
such, the County has trued up its costs to account for the City’s intake of animals.
As part of the Animal Sheltering Services Agreement, the County shall provide the
following services:
•Sheltering of abandoned, impounded, lost, or stray domestic animals found in the
incorporated areas of Gilroy.
•Quarantine of impounded biting domestic animals,
•Provision for reclaiming abandoned, lost, or stray domestic animals during
business hours,
•Euthanasia and disposal of abandoned, lost, impounded, or stray domestic
animals that are unclaimed by their owners and deemed unfit for adoption,
rescue, or return-to-field,
•Return-to-field of feral and community cats after sterilization and vaccination,
•Acceptance of owner-relinquished and confiscated animals on approval of the
County after considering shelter population, space availability, and cost.
As part of veterinary services, the County shall provide the following:
•Veterinarian services during established business hours to treat and provide
veterinarian care to stray, injured, or sick domestic animals,
•Monitoring of quarantined animals, and
•Low-cost spay/neuter services provided to residents of the unincorporated areas
of Santa Clara County.
Agenda Item No. 11.1
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Authorize the City Administrator to Enter into a Three-Year Service Agreement with the County of
Santa Clara for Animal Sheltering Services for the Period of July 1, 2023, through June 30, 2026
City of Gilroy City Council Page 3 of 3 October 16, 2023
ALTERNATIVES
Council may reject approval to authorize the City Administrator to enter into a three-year
service agreement with the County of Santa Clara for animal sheltering services. Staff
does not recommend this option as it would mean alternative service providers would
have to be identified.
FISCAL IMPACT/FUNDING SOURCE
During the FY24 and FY25 budget process, approved funding was allocated for animal
sheltering services based on the FY21-23 Santa Clara County Animal Sheltering
Agreement compensation schedule. In late May, SCC advised GPD of their intent to
provide an updated Animal Sheltering Services Agreement. On June 15, 2023, SCC
provided GPD with a FY24-26 Animal Sheltering Services Agreement, which includes a
substantial increase due to the truing up of costs. For FY24, the compensation amount
is $150,000, an increase of $79,085 from FY23. The FY25 compensation amount is
$157,500, and FY26 is $165,375.
GPD will use approved FY24 ($70,015) and FY25 ($73,043) budget allocations in the
Police Services Special Revenue Fund (Fund 240) and the anticipated salary savings
within the GPD operations (3010) in the General Fund (100) to pay for the increase in
the compensation schedule for FY24 ($79,985) and FY25 ($84,457). The FY26
recommended budget allocation of $165,375 will be part of the FY26 and FY27 budget
process.
Attachments:
1. Animal Sheltering Services Agreement - Gilroy FY24-26
Agenda Item No. 11.1
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Agreement for Animal Page 1 of 7
Sheltering Services with
City of Gilroy
AGREEMENT BETWEEN THE
COUNTY OF SANTA CLARA AND THE CITY OF GILROY
FOR ANIMAL SHELTERING SERVICES
The County of Santa Clara (“COUNTY”), and the City of Gilroy, a municipal corporation
(“CITY”) (together, “PARTIES”) enter into this Animal Sheltering Services Agreement
(“Agreement”) as of _____________, 2023.
RECITALS
WHEREAS, CITY desires to secure animal shelter services for domestic animals found
within the incorporated area of Gilroy, and
WHEREAS, COUNTY has the necessary expertise and skill to perform those services
and COUNTY’s proposal can best meet CITY’s needs;
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. AGREEMENT DOCUMENTS
The documents forming the entire Agreement between CITY and COUNTY shall consist
of:
This Agreement;
Exhibit A – Scope of Services; and
Exhibit B – Compensation
If any discrepancies or inconsistencies between the provisions of this Agreement and
any of the above-referenced Exhibits arise, the provisions of this Agreement prevail.
This Agreement and the Exhibits set forth above contain all of the agreements,
representations, and understandings of the PARTIES hereto, and supersede and
replace any previous understanding, commitments, or agreements, whether oral or
written.
2. SCOPE OF SERVICES
COUNTY shall perform those services specified in detail in the attached Exhibit A,
entitled “Scope of Services.”
3. TERM OF AGREEMENT
This Agreement is effective from July 1, 2023 to June 30, 2026, unless otherwise
terminated under Section 5 (TERMINATION) below.
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Agreement for Animal Page 2 of 7
Sheltering Services with
City of Gilroy
4. COMPENSATION
CITY shall pay COUNTY for the costs of animal sheltering services under this
Agreement. The terms, rate, and schedule of payment are set forth in the attached
Exhibit B, entitled "Compensation".
5. TERMINATION
5.1 Termination Without Cause
Either PARTY may terminate this Agreement, without cause, by giving not less than
thirty (30) days written notice.
5.2 Termination for Material Breach
Either PARTY may terminate the Agreement in the event of breach of material
obligations under this Agreement immediately upon written notice.
5.3 Termination Authority
The Chief of Police of the CITY is empowered to terminate this Agreement on behalf of
CITY.
The County Director of Procurement, or their authorized designee, may terminate this
Agreement on behalf of the County.
5.4 Consequences of Termination
In the event of termination, COUNTY shall make reasonable and good faith efforts to
deliver to CITY records for animals sheltered by COUNTY under this Agreement in a
timely manner. COUNTY shall refund the CITY a prorated amount of funds based on
the time remaining in the fiscal year.
6. INDEMNIFICATION
City shall indemnify, defend, and hold harmless the COUNTY, its officers, agents
and employees from any claim, liability, loss, injury or damage arising out of, or in
connection with this Agreement by CITY and/or its agents, employees or sub-
contractors, excepting only loss, injury or damage caused by the sole negligence or
willful misconduct of personnel employed by the COUNTY. It is the intent of the
PARTIES to this Agreement to provide the broadest possible coverage for the
COUNTY. CITY shall reimburse the COUNTY for all costs, attorneys’ fees,
expenses and liabilities incurred with respect to any litigation in which the CITY
contests its obligation to indemnify, defend and/or hold harmless the COUNTY
under this Agreement and does not prevail in that contest.
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Agreement for Animal Page 3 of 7
Sheltering Services with
City of Gilroy
7. WAIVER
PARTIES agree that waiver of any breach or violation of any provision of this
Agreement shall not be deemed to be a waiver of any other provision or a waiver of any
subsequent breach or violation of the same or any other provision.
8. INDEPENDENT CONTRACTOR
COUNTY, in the performance of this Agreement, is an independent contractor.
COUNTY shall maintain complete control over all of COUNTY's employees, any
subcontracting subcontractors, and COUNTY's operations. Neither COUNTY nor any
person retained by COUNTY may represent, act, or purport to act as the agent,
representative or employee of CITY. Neither COUNTY nor CITY is granted any right or
authority to assume or create any obligation on behalf of the other.
9. COMPLIANCE WITH LAWS
PARTIES shall comply with all applicable laws, ordinances, codes and regulations
(collectively, "laws") of the federal, state and local governments, including without
limitation, any and all laws specified elsewhere in this Agreement.
10. CONFLICT OF INTEREST
PARTIES shall avoid all conflict of interest or the appearance of conflict of interest in
performance of this Agreement.
11. NONDISCRIMINATION
PARTIES agree that it shall not discriminate against, or segregate, any person, on
account of race, sex, color, age, religion, sexual orientation, actual or perceived gender
identity, disability, ethnicity, national origin, marital status, or family status, in connection
with or related to the performance of this Agreement.
12. CALIFORNIA PUBLIC RECORDS ACT
The COUNTY is a public agency subject to the disclosure requirements of the California
Public Records Act (“CPRA”). If CITY’s proprietary information is contained in
documents or information submitted to COUNTY, and CITY claims that such information
falls within one or more CPRA exemptions, CITY must clearly mark such information
“CONFIDENTIAL AND PROPRIETARY,” and identify the specific lines containing the
information. In the event of a request for such information, the COUNTY will make best
efforts to provide notice to CITY prior to such disclosure. If CITY contends that any
documents are exempt from the CPRA and wishes to prevent disclosure, it is required
to obtain a protective order, injunctive relief or other appropriate remedy from a court of
law in Santa Clara COUNTY before the COUNTY is required to respond to the CPRA
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Agreement for Animal Page 4 of 7
Sheltering Services with
City of Gilroy
request. If CITY fails to obtain such remedy within the time the COUNTY is required to
respond to the CPRA request, COUNTY may disclose the requested information.
CITY further agrees that it shall defend, indemnify and hold COUNTY harmless against
any claim, action or litigation (including but not limited to all judgments, costs, fees, and
attorney’s fees) that may result from denial by COUNTY of a CPRA request for
information arising from any representation, or any action (or inaction), by the CITY.
13. COUNTY'S RECORDS
13.1 Maintenance during Term
COUNTY shall maintain records, including any ledgers, books of account, invoices,
vouchers, canceled checks, and other documents evidencing or relating to charges for
services, or expenditures and disbursements charged to CITY for a minimum period of
three (3) years, or for any longer period required by law, from the date of final payment
to COUNTY pursuant to this Agreement.
13.2 Maintenance after Term
COUNTY shall maintain all documents which demonstrate performance under this
Agreement for a minimum period of three (3) years, or for any longer period required by
law, from the date of termination or completion of this Agreement.
14. ASSIGNABILITY
The PARTIES agree that COUNTY’s expertise and experience are material
considerations for this Agreement. COUNTY may not assign the performance of any
obligation or interest under this Agreement, except as authorized under Section 16 on
“Subcontractors” below.
15. SUBCONTRACTORS
15.1 Authorized Subcontractors
Notwithstanding Section 15 (ASSIGNABILITY) above, COUNTY may use
subcontractors in performing COUNTY’s services. COUNTY shall be responsible for
directing the work of the approved subcontractors and for any compensation due to
subcontractors.
16. GOVERNING LAW
This Agreement must be construed, and its performance enforced under California law.
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Agreement for Animal Page 5 of 7
Sheltering Services with
City of Gilroy
17. VENUE
In the event that either PARTY brings suit, the PARTIES agree that venue is vested in
Santa Clara County Superior Court or United States District Court, Northern District of
California, San José, California.
18. NOTICE
All notices and other communications required or permitted to be given under this
Agreement must be in writing and must be personally served, or mailed, postage
prepaid via U.S. mail, or sent via courier service, addressed to the respective parties as
follows:
CITY: City Administrator
City of Gilroy
7301 Hanna Street
Gilroy, CA 95020
408/846-0300
COUNTY: Program Manager
County of Santa Clara Animal Services
12425 Monterey Road
San Martin, CA 95046
Notice will be effective on the date personally delivered or if sent by courier service, on
the date of receipt. If mailed, notice will be effective three (3) days after deposit in the
mail. The PARTIES may change their respective addresses in accordance with the
provisions of this Section.
19. MISCELLANEOUS
21.1 Survival of Provisions
If any part of this Agreement is for any reason found to be unenforceable, all other parts
nevertheless shall remain enforceable.
21.2 Assignment
Subject to the provisions of Section 15 (ASSIGNABILITY), this Agreement binds and
inures to the benefit of the PARTIES and their respective successors and assigns.
21.3 Headings
The headings of the sections of this Agreement are inserted for convenience only. They
do not constitute part of this Agreement and are not to be used in its construction.
//
//
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Agreement for Animal Page 6 of 7
Sheltering Services with
City of Gilroy
20. CONTRACT EXECUTION
Unless otherwise prohibited by law or COUNTY policy, the parties agree that an
electronic copy of a signed contract, or an electronically signed contract has the same
force and legal effect as a contract executed with an original ink signature. The term
“electronic copy of a signed contract” refers to a transmission by facsimile, electronic
mail, or other electronic means of a copy of an original signed contract in a portable
document format. The term “electronically signed contract” means a contract that is
executed by applying an electronic signature using technology approved by the
COUNTY.
Agenda Item No. 11.1
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Agreement for Animal Page 7 of 7
Sheltering Services with
City of Gilroy
WITNESS THE EXECUTION HEREOF on the day and year first written above.
CITY OF GILROY
APPROVED AS TO FORM:
By: _________________________
ANDREW L. FABER, ESQ.
Berliner Cohen, LLP
Date: _________________________
CITY OF GILROY, a municipal
corporation
By: _________________________
JIMMY FORBIS
City Administrator, City of Gilroy
Date: _________________________
COUNTY OF SANTA CLARA
APPROVED:
By: _________________________
MATTHEW HADA
Chief Procurement Officer
Date: _________________________
APPROVED AS TO FORM AND LEGALITY:
By: _________________________
WILLIE NGUYEN
Deputy County Counsel
Date: _________________________
Agenda Item No. 11.1
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EXHIBIT A
SCOPE OF SERVICES
COUNTY shall provide:
1. Sheltering of abandoned, impounded, lost or stray domestic animals found in the
incorporated area of CITY;
2. Quarantine of impounded biting domestic animals;
3. Provision for reclaim of abandoned, lost or stray domestic animals during
established business hours;
4. Euthanization and disposal of abandoned, lost, impounded, or stray domestic
animals that are unclaimed by their owners and are deemed unfit for adoption,
rescue or return-to-field;
5. Return-to-field of feral and community cats after sterilization and vaccination; and
6. Acceptance of owner-relinquished animals and confiscated animals on approval
of the COUNTY Animal Services Program Manager after consideration of shelter
population, space availability, and costs.
As part of the Shelter Services, COUNTY shall provide the following veterinary services:
1. Veterinarian services during established business hours to treat and provide
veterinarian care to stray, injured, or sick dogs, cats, and other impounded
domestic animals;
2. Monitoring of quarantined animals; and
3. Low-cost spay/neuter services as provided to residents of the unincorporated
areas of Santa Clara County.
COUNTY shall provide sheltering and veterinary care of domestic animals during
normally staffed hours, which are Monday thru Friday from 8:00 am thru 6:00 pm and
Saturday and Sunday from 8:00 am thru 5:00 pm. Services will not be available on
COUNTY holidays, however, CITY will have access to “night drop” kennels based on
availability. Only dogs that appear to be free of injury may be left in the “night drop”
kennels by authorized CITY staff. Dogs that are not bright, alert and active, have open
wounds, broken limbs or have been hit by a car must be taken to an emergency
veterinarian at the CITY’S expense, but may be transported to the shelter by the CITY
during operational hours for continued care.
Agenda Item No. 11.1
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Animals taken into custody by CITY that are to be impounded by COUNTY are to be
transported promptly and humanely, and shall be made available for owner redemption
as required by law. Animals requiring a quarantine hold will be made available following
the quarantine period. Whenever an animal is impounded with identification, COUNTY
will make reasonable attempt to notify owners of the animal’s impoundment. Under any
other circumstance which CITY requests that an animal not be made available for
reclaim, adoption, rescue or return-to-field, such request must be approved by the
Animal Services Program Manager prior to impoundment. COUNTY will require an
address (in the case of cats) or a street and cross street (in the case of all other
animals) where each animal was found from both CITY and its residents, prior to
accepting an animal for impound.
COUNTY may collect fees from the public in connection with a portion of Animal
Sheltering Services provided under this agreement and as consistent with the County
Ordinance, including but not limited to impound, boarding and quarantine fees. These
fees shall be at the rates established by COUNTY.
Agenda Item No. 11.1
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EXHIBIT B
COMPENSATION
Invoicing and Payment
1. Payment to COUNTY
For Animal Sheltering Services provided by COUNTY to the CITY Under this
Agreement, CITY shall pay COUNTY for the costs of animal shelter and other services
for the period of July 1, 2023 through June 30, 2026 at the following rate:
July 1, 2023 – June 30, 2024 $150,000 Due August 11, 2023
July 1, 2024 - June 30, 2025 157,500 Due July 11, 2024
July 1, 2025 - June 30, 2026 165,375 Due July 11, 2025
Agenda Item No. 11.1
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CAUTION: This email originated from an External Source. Please use proper judgment and caution when opening
attachments, clicking links, or responding to this email.
From:
To:All Council Members
Subject:EXTERNAL - Renewal of the Animal Services Agreement
Date:Thursday, October 12, 2023 9:14:18 AM
Please approve the renewal of this agreement
Rhinda Bal
Agenda Item No. 11.1
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11.2.Annual Review and Adoption of the City's Investment Policy
1. Staff Report:
2. Public Comment
3. Possible Action:
Adopt a resolution establishing the City’s updated Investment Policy.
Agenda Item No. 11.2
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Page 1 of 2
City of Gilroy
STAFF REPORT
Agenda Item Title:Annual Review and Adoption of the City's Investment
Policy
Meeting Date:October 16, 2023
From:Jimmy Forbis, City Administrator
Department:Finance
Submitted By:Harjot Sangha, Finance Director
Prepared By:Harjot Sangha, Finance Director
STRATEGIC PLAN GOALS Develop a Financially Resilient Organization
RECOMMENDATION
Adopt a resolution establishing the City’s updated Investment Policy.
BACKGROUND
Per California Code Section 53646(a) and the City’s Investment Policy, the City
Administrator shall annually render to the City Council a statement of investment policy,
which shall be considered by the Council at a public meeting to ensure its consistency
with respect to the overall objectives of safety, liquidity, and yield. The City Council last
reviewed the policy in November 2022.
Per the City’s Investment Policy, temporarily idle or surplus funds of the City shall be
invested in accordance with principles of sound treasury management. The three basic
objectives of Gilroy's Investment Program are, in order of priority, (1) safety of invested
funds, (2) maintenance of sufficient liquidity to meet cash flow needs of the City; and (3)
attainment of the maximum yield possible consistent with the first two objectives.
ANALYSIS
The City’s idle cash is primarily invested in the Local Agency Investment Fund (LAIF)
which is a program offered to local agencies to participate in a major portfolio managed
by the California State Controller with 2,359 participants and $22.4 billion in assets at
Agenda Item No. 11.2
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Annual Review and Adoption of the City's Investment Policy
City of Gilroy City Council Page 2 of 2 October 16, 2023
the end of August 2023. All securities purchased by the pool follow Government Code
Section 16430 and 14680.4. One of the advantages of investing in LAIF is that it
provides great “daily liquidity”, meaning on any given day the City can withdraw large
sums of money the same day or within a day’s notice, while earning interest. A portion,
approximately 33% or $61.5 million, of the City’s portfolio is invested in US Treasury
securities which has allowed the City’s idle funds to earn additional interest as rates, or
yields, have increased over the last year.
With this annual review of the investment policy, staff recommends adding California
Cooperative Liquid Assets Securities System (CLASS) to the eligible securities list,
limited to 15% of the total portfolio. As previously mentioned, most of the City’s cash is
invested in LAIF. One of the limitations of LAIF is that it carries a maximum deposit limit
of $75.0 million. The City reached that limit on the two accounts it maintains with LAIF in
the last year. One of the two accounts currently remains at the limit, while the second is
at $45.0 million, excluding the $61.5 million in US Treasury securities held in the City
investment account with the US Bank.
California CLASS is a pooled investment option that was created in 2022 via a joint
exercise of powers agreement by and among California public agencies. Participation in
California CLASS is open to all public agencies in the state of California that have the
authority to invest their treasury funds. California CLASS is an alternative to LAIF.
Similar to LAIF, California CLASS provides California public agencies with a convenient
method for investing in high-quality, short to medium-term securities selected to
optimize interest earnings while maximizing safety and liquidity. CLASS’s Prime fund
offers similar daily liquidity, and the performance is also better than LAIF. For example,
for Fiscal Year 2023 LAIF’s reported average annual yield was 2.17% vs. CalCLASS’
Prime which reported 3.96% for the year. Expanding the list of eligible securities would
allow the City an additional option to increase the City portfolio’s short-term returns
while maintaining the City’s investment objectives of safety, liquidity, and yield.
ALTERNATIVES
The City Council could approve or reject the proposed change to the policy. The Council
could also direct staff to amend any of the other sections of the policy. The current
policy, with the proposed updates, provides adequate guidance for the City’s investment
program.
FISCAL IMPACT/FUNDING SOURCE
There is no fiscal impact to adopting the City’s General Investment Policy. Review and
update of the investment policy is an activity that is included in the Finance
Department’s annual and ongoing workplan.
Attachments:
1. Draft Resolution
2. Exhibit A – Investment Policy - Redline
Agenda Item No. 11.2
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RESOLUTION NO. 2023-XX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
GILROY ADOPTING THE CITY’S INVESTMENT POLICY
WHEREAS, the City has a responsibility to ensure it handles public funds
appropriately and
WHEREAS, Section 53646 of the Government Code allows local agencies to
annually approve a Statement of Investment Policy, which has been prepared by the chief
fiscal officer of such local agency; and
WHEREAS, the Investment Policy describes the investments the City can utilize
in compliance with California Government Code Section 53646, and good practice
dictates that local agencies prepare a written investment policy and
WHEREAS, the City Council formally adopts the investment policy via a resolution
that promotes sound financial management practices designed to meet the City Council’s
goals and objectives; and
WHEREAS, the City Council has been presented with a statement of Investment
Policy annually which is designed to conform with the requirements of the Investment Act
and
WHEREAS, the primary objective of the Investment Policy is to establish a
conservative set of investment criteria that will prudently protect the City’s assets, provide
liquidity to meet the City’s cash needs and enable the City to generate a market rate of
return from its investment activities; and
WHEREAS, the City Council has reviewed the Investment Policy and delegates
investment authority to the City Treasurer pursuant to California Government Code
Section 53607.
NOW, THEREFORE, the City Council of the City of Gilroy hereby adopts the
amended Investment Policy attached hereto as Exhibit A, a copy of which is on file at the
City offices and is available for inspection by the public.
Agenda Item No. 11.2
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Resolution No. 2023-XX
City’s Investment Policy Adoption
City Council Regular Meting | October 16, 2023
Page 2 of 2
1
1
4
5
PASSED, APPROVED, AND ADOPTED by the City Council of the City of Gilroy
at its meeting held on this 16th day of October 2023 by the following vote:
AYES:COUNCIL MEMBERS:
NOES:COUNCIL MEMBERS:
ABSTAIN:COUNCIL MEMBERS:
ABSENT:COUNCIL MEMBERS:
APPROVED:
Marie Blankley, Mayor
ATTEST:
_______________________
Thai Nam Pham, City Clerk
Agenda Item No. 11.2
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INVESTMENT POLICY
FOR
CITY OF GILROY
Revised: November 2022October 2023
I. STATEMENT OF OBJECTIVES
The purpose of this Investment Policy (“Policy”) is to identify elements that will foster a
prudent and systematic investment program that meet the City of Gilroy’s objectives
through a diversified investment portfolio. This policy also serves to organize and formalize
the City’s investment related activities, while complying with all applicable statutes
governing the investment of public funds.
Temporarily idle or surplus funds of the City of Gilroy shall be invested in accordance with
principles of sound treasury management and in accordance with the provisions of
California Government Code Sections 53600, et seq., the Municipal Code, guidelines
established by the California Municipal Treasurer's Association and the California Society
of Municipal Finance Officers, and this Investment Policy.
A. Overall Risk Profile
The three basic objectives of Gilroy's Investment Program are, in order of priority:
1. Safety of invested funds;
2. Maintenance of sufficient liquidity to meet cash flow needs of the City; and
3. Attainment of the maximum yield possible consistent with the first two objectives.
The achievement of these objectives shall be accomplished in the manner described
below:
1. Safety of Invested Funds
The City shall ensure the safety of its invested idle funds by limiting credit and
interest rate risks. Credit risk is the risk of loss due to the failure of the security
issuer or backer. Interest rate risk is the risk that the market value portfolio
securities will fall due to an increase in general interest rates.
a. Credit risk will be mitigated by:
i. Limiting investments to the safest types of securities as outlined in this
policy;
ii. By prequalifying the financial institutions with which it will do business; and
iii. By diversifying the investment portfolio so that the failure of any one issuer
or backer will not place an undue financial burden on the City.
b. Interest rate risk will be mitigated by:
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i. Maintaining adequate sums in 30 day or less funds.
ii. Structuring the City's portfolio so that securities mature to meet the City's
cash requirements for ongoing operations, thereby avoiding the need to sell
securities on the open market prior to their maturation to meet those specific
needs; and
iii. Investing primarily in shorter term securities (five years or less).
c. The physical security or safekeeping of the City's investments is also an
important element of safety. Detailed safekeeping requirements are defined in
Section III of this Policy.
2. Liquidity
The City’s investment portfolio shall be structured in a manner which strives to
achieve that securities mature at the same time as cash is needed to meet anticipated
demands (static liquidity). Additionally, since all possible cash demands cannot be
anticipated, the portfolio should consist largely of securities with active secondary or
resale markets (dynamic liquidity).
Funds equal to 20% of the total annual expenditure budget less any capital
expenditures for which bond proceeds are available, less internal service fund
charges and less Trust and Agency fund expenditures, as first adopted for each fiscal
year, shall be invested in the California State LAIF or other 30 day or less securities
for call requirements. However, this provision shall not require the sale of any
investment due solely to the adoption of a new budget, or amendment to a budget,
which would have the effect of increasing the dollar amount needed to maintain this
20% requirement in 30 day or less funds. At such time that the 30 day or less funds
falls below 20% of the annual expenditure budget, the City Treasurer, within 30
days, will notify the Investment Committee with a proposed action plan. The City
Council will be subsequently notified of the action taken. The specific percentage
mix of different investment instruments and maturities is described in Section II of
this Policy.
3. Yield
Yield on the City's investment portfolio is of secondary importance compared to the
safety and liquidity objectives described above. Investments are limited to relatively
low risk securities in anticipation of earning a fair return relative to the risk being
assumed. While it may occasionally be necessary or strategically prudent of the City
to sell a security prior to maturity to either meet unanticipated cash needs or to
restructure the portfolio, this Policy specifically prohibits trading securities for the
sole purpose of speculating on the future direction of interest rates.
B. Time Frame for Investment Decisions
The City's investment portfolio shall be structured to provide that sufficient funds from
investments are available every month to meet the City's anticipated cash needs. Subject
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to the safety provisions outlined above, the choice in investment instruments and
maturities shall be based upon an analysis of anticipated cash needs, existing and
anticipated revenues, interest rate trends, and specific market opportunities. No
investment should have a maturity of more than five (5) years from its date of purchase
without receiving City Council approval within the prior 90 days.
C. Pooling of Funds
The City will consolidate cash and reserve balances from all funds to maximize
investment earnings and to increase efficiencies with regard to investment pricing,
safekeeping and administration. Investment income will be allocated to the various funds
based on their respective participation and in accordance with generally accepted
accounting principles.
D. Definition of Idle or Surplus Funds
Idle or surplus funds for the purpose of this Policy are all City funds which are available
for investment at any one time, including the estimated checking account float,
excepting those minimum balances required by the City's banks to compensate them for
the cost of banking services. This Policy also applies to the idle or surplus funds
included in the general fund, special revenue funds, debt service funds, capital projects
funds, enterprise funds, internal service funds, trust/agency funds and of other entities
for which the City of Gilroy personnel provide financial management services.
E. Applicability of Policy
This policy does not apply to:
1. The City's Deferred Compensation Plan, the investments in which are directed by the
participating employees; and
2. Monies held by a trustee or fiscal agent and pledged to the payment or security of
bonds or other indebtedness, or obligations under agreements, of a local agency, or
certificates of participation in such bonds, indebtedness or agreements, the
investment of which may be in accordance with the statutory provisions governing
the issuance of those bonds, indebtedness or agreements, or to the extent not
inconsistent therewith, or if there are no specific statutory provisions, in accordance
with the ordinance, resolution, indenture or agreement of the local agency providing
for the issuance.
3. Monies held in a Section 115 trust for Post-Employment Benefits Trust (the
“Program”) for the purpose of pre-funding pension obligations and/or OPEB
obligations. Investment of such section 115 trust/s are directed by the separate
Investment Guidelines Document (IGD) as approved by the Plan Sponsor.
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F. Benchmark and Performance Standards
T investment portfolio shall be designed to attain a market-average rate of
return throughout budgetary and economic cycles, taking into account the City’s
risk constraints, the cash flow needs, and state and local laws. The performance
of the investment portfolio shall be compared to the average yield on the U.S.
Treasury bill that most closely corresponds to the investment portfolio’s
weighted average effective maturity.
II. INVESTMENTS
This section of the Investment Policy identifies policies, types of investments, and related
matters pertaining to instruments in which the City will invest its idle funds.
A. Investment Standards
The City of Gilroy operates its temporary pooled idle cash investments under the
Prudent Investor Standard, California Government Code, Section 53600.3 1, and with
additional guidance from the provisions of the Uniform Prudent Investor Act, California
Probate Code Section 16045, et seq 2. This affords the City a broad spectrum of
investment opportunities as long as the investment is deemed prudent and is allowable
under current legislation of the State of California (Government Code Section 53600, et
seq).
B. Eligible Securities
Subject to the Prudent Investor Standard and other applicable laws and regulations,
this policy permits investment in the following:
Insured Certificates of Deposit (CD's) of California banks and/or savings and loan
associations, and/or savings with a Superior or Excellent ranking of 165 or more as
provided by IDC Financial Publishing Inc. or similar rating publication) which mature in
five (5) years or less, provided that the City's investments shall not exceed Two Hundred
Fifty Thousand Dollars ($250,000.00) per institution. If the investment exceeds the
insured $250,000.00, the funds are to be collateralized at 110% of the deposit in
government securities or 150% in mortgages. (limited to 15% of the portfolio)
1Governing bodies of local agencies (e.g., a City Council) or persons authorized to make investment
decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore
fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging,
selling, and managing public funds, a trustee shall act with care, skill, prudence, and diligence under the
circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated
needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in
the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity
needs of the agency. Within the limitations of this section and considering individual investments as part to an
overall strategy, a trustee is authorized to acquire investments as authorized by law.
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2The standard of care for trustees investing and managing trust assets is the Prudent Investor Standard and
takes into consideration the purposes, terms, distribution requirements and other circumstances of the trust, and in
satisfying this standard, the trustee is required to exercise reasonable care, skill, and caution in light of the facts and
circumstances existing at the time of a trustee's decision or action.
Local Agency Investment Fund (State Pool) Demand Deposits
California Cooperative Liquid Assets Securities System (CLASS) (limited to 15% of the
portfolio)
Securities of the U.S. Government, or its agencies
Negotiable Certificates of Deposit (NCDs) placed with federal and state savings
and loan associations and federal and state chartered banks with an office in the
State of California. (limited to 15% of the portfolio)
Bankers Acceptances (limited to 15% of the portfolio)
Commercial paper (limited to 10% of the portfolio)
Passbook Savings or Money Market Demand Deposits
Securities or bonds purchased under a prior investment policy, which may or may
not meet the standards of this policy. (Such securities or bonds may be held or sold
under this Policy but additional purchases shall not be made.)
Money Market Mutual Fund (with $1.00 net asset value and which invests only in
instruments allowed under Government Code Section 53600, et seq.) - (limited to
5% of the portfolio)
C. Investments Deemed Not Appropriate at this Time
The City of Gilroy Investment Policy does not permit investment in the following
instruments or securities:
Corporate bonds or stocks
Repurchase agreements or reverse repurchase agreements
Interest only or principal only strips
Certificates of Deposit issued by institutions not operating within California
Inverse floaters and range notes
Financial futures or financial option contracts
Securities lending or leveraging any portion of the portfolio
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D. Collateralization Requirements
Uninsured Time Deposits with banks and savings and loans shall be collateralized in the
manner prescribed by law for depositories accepting municipal investment funds.
E. Preformatted Wire Transfers
Wherever possible, the City will use preformatted wire transfers to restrict the transfer of
funds to preauthorized accounts only. When transferring funds to an account not
previously approved, the bank is required to call back a second employee for
confirmation that the transfer is authorized.
F. Qualification of Brokers, Dealers and Financial Institutions
The City Treasurer shall investigate brokers and dealers who wish to do business with
the City to determine if they are adequately capitalized, have any pending legal actions
against the firm or the individual broker, and that they market securities appropriate to
the City's needs.
The City shall annually send a copy of the current edition of the Policy to all institutions
and broker/dealers which are approved to handle City of Gilroy investments. Receipt of
the Policy, including confirmation that it has been received by persons handling the
City's accounts, shall be acknowledged in writing within thirty (30) days.
G. Diversification
The portfolio should consist of a prudent mix of various types of securities, issues and
maturities.
H. Confirmation
Receipts for confirmation of purchase or sale of authorized securities should be received
by the City Treasurer within five (5) days and include the following information: trade
date, par value, rate, price, yield, settlement date, description of securities purchased,
agency's name, net amount due, third party custodial information. These are minimum
information requirements.
I. Internal Controls
Investment duties shall be separated by having at least three persons perform the
following functions for any particular investment: the recordation of investments and
disbursements, confirmation receipts, the preparation of Treasurer's reports, wire
transfers, bank reconciliations and treasury reconciliations. An independent analysis by
the external auditor shall be conducted annually to screen internal control, account
activity, including verification of all securities, and compliance with policies and
procedures.
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J. Interest Earnings
All interest earned on investments authorized by this Policy shall be allocated quarterly
to all City funds based on the positive cash balances in each fund as a percentage of the
entire pooled portfolio.
III. SAFEKEEPING OF SECURITIES
A. Safekeeping Agreement
The City shall contract with a bank or banks with federally insured deposits for the
safekeeping services through a third party custodial agreement, (California Government
Code Section 53601)3 which includes delivery versus payment provisions, for securities
which are owned by the City as part of its investment portfolio.
B. Handling of City-Owned Securities and Time Deposit Collateral
All securities owned by the City shall be held by the City or by its third-party custodian,
except the collateral for time deposits in banks, savings banks, and savings and loan
associations. The collateral for time deposits in banks and savings and loans shall be
held in a trust account in the City of Gilroy's name. Dealers or brokers shall not hold
any securities for the City. A broker is not an approved depository under California
Government Code Section 53630 4 and Section 53608 5
C. Security Transfers
The authorization to release City's securities will be telephoned to the appropriate
depository or custodian by a Finance Department member other than the person who
initiated the transaction. A written confirmation outlining the details for the transaction
and confirming the telephone instructions will be sent to the bank within five (5)
working days. A confirming notice documenting the transaction will be sent by the
bank to the City within five (5) working days of the transaction.
3Section 53601. Authorized Investments, circumstances. A local agency purchasing or obtaining any
security . . . shall require delivery of the securities to the local agency . . . by book entry, physical delivery or by
third party custodial agreement.
4Section 53630(c) allows state or national banks, state or federal savings banks or savings and loan
associations, state or federal credit unions and federally insured industrial loan companies as approved depositories.
5Section 53608. Deposit of securities; delegation of authority. The legislative body of a local agency may
deposit for safekeeping with a federal or state association, a trust company or a state or national bank located within
this state or with the Federal Reserve Bank of San Francisco or any branch thereof within this state, or with any
Federal Reserve Bank or with any state or national bank located in any city designated as a reserve city by the Board
of Governors of the Federal Reserve System, the bonds, notes, bills, debentures, obligations, certificates or
indebtedness, warrants, or other evidences of indebtedness in which the money of the local agency is invested
pursuant to this article or pursuant to other legislative authority. The local agency shall take from such financial
institution a receipt for securities so deposited. The authority of the legislative body to deposit for safekeeping may
be delegated by the legislative body to the treasurer of the local agency; the treasurer shall not be responsible for
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securities delivered to and receipted for by a financial institution until they are withdrawn from the financial
institution by the treasurer.
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D. Verification of Security
Securities held by an agent of depository as collateral securing time deposits will be
verified in writing during the year by the City's independent auditors as part of the City's
annual independent audit. The City's independent auditors confirm the collateral
directly with the bank holding that collateral. Those securities held by that depository or
custodian as collateral are subject to audit by the bank's auditors.
IV. STRUCTURE AND RESPONSIBILITY
This section of the Policy defines the overall structure of the investment management
program.
A. Responsibilities of the Finance Department
The Finance Department, through its officers and representatives, is charged with the
responsibility for maintaining custody of all public funds and securities belonging to or
under the control of the City and for the deposit and investment of those funds in
accordance with principles of sound treasury management and in accordance with
applicable laws and ordinances.
B. Responsibilities and Ethics of the City Treasurer
1. Delegation of Authority
The authority to manage the City’s investment program is derived from the
California Government Code Section 53600, et seq, The City Council is responsible
for the management of the City’s funds, including the administration of this
investment policy. The authority of the City Council to invest or to reinvest funds,
or to sell or exchange securities so purchased, is hereby delegated to the City
Treasurer, who shall thereafter assume full responsibility for those transactions until
the delegation is revoked and shall make quarterly reports of those transactions to
the City Council. (California Government Code Section 53607).
2. Responsibilities
The City Treasurer is appointed by the City Administrator and is subject to his
direction and supervision. The City Treasurer is charged with the responsibility for
the purchase, sale, custody and investment of City funds, and the development of
procedures to implement this Investment Policy. In fulfilling his responsibilities, the
City Treasurer is subject to the Prudent Investor Standard and shall render reports
regarding compliance with the Investment Policy. The City Treasurer is further
responsible for the duties and subject to the powers imposed by and applicable to
City Treasurers under the general laws of the State of California.
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3.Ethical Conduct
The City Treasurer will demonstrate integrity in all public and personal
relationships, protect the public trust, and seek no favor or accept any personal gain
which would influence or appear to influence the conduct of the office of Treasurer.
C.Responsibilities of the City Administrator
The City Administrator is responsible for directing and supervising the City Treasurer.
He is responsible further to keep the City Council fully advised as to the financial
condition of the City and its compliance with this Policy.
D.Responsibilities of the City Council
The City Council shall consider and annually adopt a written investment policy. As
provided in that policy, the Council shall receive and review quarterly investment
reports and may annually delegate investment authority to the City Treasurer pursuant to
California Government Code Section 53607.
E.Responsibilities of the Investment Committee
There shall be an Investment Committee consisting of the City Administrator, City
Treasurer/Finance Director, and the Finance Manager. The committee shall meet
quarterly to discuss cash flow requirements, monthly and quarterly investment reports,
investment strategy, investment and banking procedures, significant investment related
work projects being undertaken in each department which will affect the cash flow
management of the City Treasurer and to review compliance with the investment
policies adopted by the City Council. This will require timely reports from the
department heads to the City Treasurer concerning significant future cash flow
requirements.
V.REPORTING
The City Treasurer shall prepare a quarterly investment report, including a succinct
management summary that provides a clear picture of the status of the current investment
portfolio and transactions made over the past quarter by month. This management summary
will be prepared in a manner which will allow the City Administrator and City Council to
ascertain whether investment activities during the reporting period are in conformance with
the City's Investment Policy.
The quarterly investment report will include the following:
A.A listing of individual securities held at the end of the reporting quarter showing the:
1.type of investment
2.institution
3.date of maturity
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4.amount of deposit or cost of the security
5.rate of return
B.Unrealized gain or loss resulting from appreciation or depreciation by listing the cost
and market value of securities over one year in duration.
C.Average yield of return on the City's investments.
D.Maturity aging for the investments.
E.Compliance of the investment portfolio with the Investment Policy.
F.A statement denoting the ability of the City to meet expenditure requirements for the
next six months.
VI.REVIEW OF INVESTMENT MANAGEMENT
A.Statement of Policy
As set forth in California Code Section 53646(a), the City Administrator shall annually
render to the City Council a statement of investment policy, which shall be considered
by the Council at a public meeting.
B.Policy Review
This Investment Policy shall be reviewed annually by the City Council at a public
meeting in accordance with state law to ensure its consistency with respect to the overall
objectives of safety, liquidity, and yield. Proposed amendments to the Policy shall be
prepared by the City Treasurer and after review by the Investment Committee shall be
forwarded to the City Council for consideration at a public meeting.
Any recommended modifications or amendments shall be presented to the City Council
for their consideration and adoption.
VII.AUTHORITY
This Policy was duly adopted by authority of the City Council of the City of Gilroy on the
1st day of July 2015 and was most recently re-adopted on November 7, 2022October 16,
2023.
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