Live Life Lincoln. Live Life Lincoln. Live. Life Lincoin. Live Life Lincoln Live ife  oIn  MINUTES  CITY OF LINCOLN CITY COUNCIL & LINCOLN REDEVELOPMENT SUCCESSOR AGENCY SPECIAL MEETING MINUTES Council Work Session November 7, 2017  4:00PM - 6:00PM -First Floor Conference Room Mayor Gilbert called the meeting to order at 4:06PM.  1. - ROLL CALL  Councimemberspresent Gabriel Hydrick  Paul Joiner Dan Karleskint Stan Nader Peter Gilbert Matt Brower, City Manager Bruce Cline, Interim City Attorney Steve Ambrose, Support Services Director Jennifer Hanson, Public Services Director Ray Leftwich, City Engineer Gwen Scanlon, City Clerk Matt Wheeler, Community Development Director  Mayor Pro Tem: Mayor: Staff members present:  Various City employees, consultants and members oft the public were also present.  2. PLEDGE OF ALLEGIANCE led by Chief. Jim Datzman, retired police chief of South San Francisco. 4.A. Water Rate summary of actions taken to date (Raftelis Financial Consultant (RFC) current rate Matt Brower, City Manager, gave a brief powerpoint, made a part of these minutes by mention thereof, and introduced Gerald Harner, City Treasurer and Ad Hoc' Water Committee Chair, who then gave a  3. PUBLIC COMMENT - NONE 4. WATER RATE DISCUSSION study efforts, Ad Hoc, Special Meetings)  brief history of water rate actions taken to date. 4.B. Water Rate Study Update = Capital Projects  Councilman Nader asked about the purpose of water tanks, difference in cost between 10 Million Gallon (mg) Water Tank and 5mg Tank, sites for water tanks, his concerns with ift the City had enough water storage and about the Water Capital Replacement Fund. Ray Leftwich and Jennifer Hanson, Public Services Director, responded and a brief discussion ensued. Mayor Gilbert opened for public a) Jim Datzman, al Lincoln resident, stated he had sent a two page email to each Councilman and stated the water budget is difficult to understand and requested a simplified explanation of water resources needed. Mr. Datzman continued he suggested ratepayers be reimbursed for past three years as well as businesses but did not want to see a rate increase. Mr. Datzman concluded by stating another ad hoc committee should be formed for a common resolution but the recall comments made at b) Lena Labosky, al Lincoln resident, agreed with the reduction in tank sizes but did not think the ratepayers should be charged for any part of the tank and cited fund balances from June 30, 2017 and suggested the funds be moved around or the City borrow from the other public facilities element funds.  comment at 4:41PM with the following comments:  the last Council meeting were not productive.  600 Sixth Street Lincoln, CA 95648 www.c.lmncoln.ca.u 916-434-2400    Live Life Lincoln Live Life Lincolne Live Life Lincoin Live Life Lincoln Live ife ipcoln  Page 20 of6  City Council & Lincoln Redevelopment Successor. Agency November 7,2017 Committee Interview Special Meeting & Work Session  Ray Leftwich responded to this comment and a brief discussion ensued regarding funding of the tanks. c) Ted Jones, al Lincoln resident and member oft the City's Ad Hoc' Water Committee, questioned where the funding for the 10mg tank was coming from initially. Ray Leftwich stated initially by developers with the replacement of pre-PFE water capacity and PFE policies and the 5mg tank being built at Boulder Court for a total of 15mg tanks but the City re-analyzed to only build what was needed now. Mr. Jones stated he appreciated the downsizing from 10 mg to 5mg tank but it is confusing because City is bringing int funding from the capital improvements instead of water connection and so the ratepayers end up paying for the tank where it was 100% from developers before and iti is confusing Jennifer Hanson responded to this comment and a brief discussion ensued regarding number of tanks d) Tony Manning, al Lincoln resident and LIFT member (LIFT is a group unified to lifting Lincoln to new heights through Integrity, Financial responsibility and total Transparency), agreed with Mr. Jones' comments and asked why the developers could not pay for the 10mg tank and stated the changes in tank sizes was an 11th hour switch designed to make ratepayers pay 40%. Mr. Manning stated at the last workshop the Mayor said the City needed to burn down their reserves and it looks like this is an attempt to do that by changing the strategy and having ratepayers payf for this infrastructure and asked Matt Brower responded to this comment and al brief discussion ensued regarding analysis of downsizing oft the tanks. Mayor Gilbert asked for Council direction. Councilman Nader stated he was uncomfortable with acting on this item and suggested this be brought back to a regular meeting for action. Bruce Cline, City Attorney, stated the required action is to affirm the proposed capital projects fort the water rate study. Councilman Karleskint motioned and Councilman Joiner seconded to direct staff to Affirm the Proposed Capital Projects for the Water Rate Study By the following Vote (Approved): Karleskint- = Aye, Joiner- Aye, Hydrick - Aye, Gilbert- Aye and Nader- No. Mayor  to public.  and the funding of the tanks.  the Council to dig in deep on this issue.  Gilbert clarified that the Council could revisit this issue if needed. 4.C. Consideration of credits for non-residential water ratepayers.  Matt Brower gave a brief presentation and used an Excel spreadsheet detailing funds 710 and 711, Attachments 1-3 and Exhibits E-K made a part of these minutes by mention thereof, and stated the refund would be $1.6 million for non-residential credits. Mayor Gilbert opened for public comment at a) John Fischer, representing the Lincoln Crossing Homeowners Association on the City's Ad Hoc Water Committee, questioned why the reserve rate amount increased from the $3.2 million to $4 million. Ray Leftwich explained the mileage amount of construction the City could do per year and the cost of construction has risen approximately 22% and a brief discussion ensued regarding the number change and project costs. Mr. Fischer asked if resource limitation still existed and stated in regards to the bait and switch he suggested the Ad Hoc' Water Committee should have met again before this b) Donna Hodgson, al Lincoln resident, stated she would like the reserve rates to be in line with national and industry standards as the City is over-reserving thet funds and encouraged the Council to c) Tony Manning, al Lincoln resident and LIFT member (LIFT is a group unified to lifting Lincoln to new heights through Integrity, Financial responsibility and total Transparency), stated his concern with  5:15PM with the following comments:  change was madé.  consider her opinion as she has extensive experience.  600 Sixth Strect Lincoln, CA 95648 www.ci.lince oln.ca.us 91 2400    Live Life Lincoln ive ife incoln. Live Life Lincoln Live Lite Lincoln Live Life  oIn  Page 3 of6  City Council & Lincoln Redevelopment: Successor. Agency November 7,2017 Committee Interview Special Meeting & Work Session  the changed numbers and asked what had changed in last month and begged the Council to take a dig into the numbers as he thought the City was trying to make numbers look better than they are. Matt Brower, City Manager, explained the changed numbers and referenced numbers were includedi in the approved budget and how they differ from reserve targets and what was included ini the Capital d) Ted Jones, a Lincoln resident and member oft the City's Ad Hoc' Water Committee, asked if the commercial refund $1.6 million credit would include industrial and irrigation and stated his concern with the proposed funding of a portion of the water tank being paid by ratepayers, including a decommissioned tank int the calculations and the vote on the proposed tank sizes. Abrief discussion e) Jim Datzman, al Lincoln resident, requested the Capital outlay budget figures for thet five prior years to compare with the five years included in the current budget as he did not understand the jump f) Ted Jones, a Lincoln resident and member of the City's Ad Hoc Water Committee, asked if the attorney fees in the mediated settlement be allocated to the commercial refund as well as the  Improvement Program (CIP).  ensued regarding the tanks, locations and who would pay for them. in the CIP budget from $3.3 million to current year $23 million.  residential refund.  Councilman Nader exited the room at 5:35PM.  9) Byron Chapman, a Lincoln resident, stated his concern with the reduced tank size and how long before another new tank is needed as inflation might raise the cost to be higher than constructing the Matt Brower, City Manager, stated the Council may want to consider the next policy extending credits beyond the one year statute of limitation before acting and al brief discussion ensued. Councilman Joiner motioned and Councilman Karleskint seconded to Approve Refunds for Commercial Water Ratepayers Back to the One Year Statute of Limitations By the following Vote (Approved): Joiner-Aye, Karleskint-, Aye, Hydrick - Aye, Gilbert- Aye and Nader- Absent. Mayor Gilbert clarified 4.D. Consideration of additional water refunds to ratepayers going back to when previous water rates Bruce Cline, Interim City Attorney, gave a brief staff report on statute of limitations of the recent mediation settlement and whether a refund beyond the statute would be considered a gift of public funds. Mr. Cline stated he reviewed a number of cases with outside Legal Counsel and stated he believed the one year statute is the applicable statute per the Government Code in regards to government claims. Mr. Cline continued the Jackson/Schmidt claim was settled for a $1.4million refund tor residential rate payers and ift the City paid in excess of the claims the issue becomes a gift of public funds and whether there is a public benefit in paying out those funds. Mr. Cline stated payment in excess of a statutory claim becomes complicated and the Council would need to make a finding that there is an exception and a public benefit exists. He concluded the San Juan Capistrano case came out in April 2015 and no claims were filed with the City of Lincoln until February, 2017. Mr. Cline stated the City needs to analyze the impact of additional refund beyond the one year statute on the rest of the ratepayers not receiving refunds, on Capital Projects and reserve levels. Mr. Cline continued he thought it would be hard to go back beyond April of 2015 because no one filed any claims but stated any action taken by Council should be brought back to a regular meeting to offer the public opportunity  10mg tank now.  that the Council could revisit this issue if needed.  were adopted.  600 Sixth Street L incoin, CA 95648 ww.d.imcoln.caun 916-43 34 2400    Live Life . Lincoln Live Life Lincoln. Live Life Lincoln Live. Life Lincoln Live Life Lipcoln  Page 40 of6  City Council & Lincoln Redevelopment Successor. Agency November' 7,2017 Committee Interview Special Meeting & Work Session  to comment. Matt Brower, City Manager, referenced Attachments 1,2 and 3 and what the impact would be on the reserves if additional refunds were given beyond residential and beyond the one year statute. Mayor Gilbert opened for public comment at 6:02M with the following comments: a) Donna Hodgson, a Lincoln resident, questioned the Fund 711 Reserve Target shown on Attachment 3, line 31 as it shows $400,000 reserve and she believes it should have been $4 million. Ms. Hodgson offered for consideration the San Juan Capistrano case was ruled oni in August, 2013 prior to rates going into effect and stated the City was charging illegal rates. She encouraged the Council to refund back to when rates were adopted to avoid cost of future lawsuits and suggested claims could bei filed federally as the City used Automated Clearing House (ACH) in their utility billing b) Lena Labosky, al Lincoln resident, stated she disagreed with the City Attorney because the City received letters from McNeil Law Firm in 2013 claiming the rates were illegal and also received a second letter sO she disagrees the City didn't know as they were notified in 2013. c) Richard Pearl, al Lincoln resident, stated he is familiar with operating rates are set and the basis is that they! be fair and equitable. He continued he felt the City should be held harmless because the City based the rates on analysis by consultants and legal counsel and rate structures are incredibly difficult to create and in his opinion they acted correctly at that time. Mr. Pearl stated the City should look at whati is fair and equitable now on current ratepayers and impact in future to make sure City is d) Tony Manning, a Lincoln resident and LIFT member (LIFT is a group unified to lifting Lincoln to new heights through Integrity, Financial responsibility and total Transparency), also referenced the McNeil Law letters and gave a copy to the City Clerk, made a part of these minutes by mention thereof. Mr. Manning asked for Bruce Cline's opinion ont the three-year refund to the' Verdera HOA for the PG&E bill for the Verdera pump house that was mistakenly paid by the Verdera HOA when it should e) John Fisher, al Lincoln resident, questioned the 5% shown on Attachment 3, Line 501 for the Capital Reserve Target in fiscal year 2017/18 and what that actually meant. Matt Brower, City Manager, stated with the additional refunds the reserve is 5% less than target reserve of 33% recommended by the City's Ad Hoc' Water Committee, a brief discussion ensued regarding reserve f) Byron Chapman, a Lincoln resident, stated the City is trying to address four issues at once: (1) what it cost to keep water system in place; (2) rates collected by City an error (3) rates collected to be refunded to ratepayers as they were charged in error; and (4) once refunded City needs to complete projects now what does the City do. Mr. Chapman stated when all four issues taken at once it is confusing and main issue is how the funds were collected and the truck needs to be backed up in order g) Jim Datzman, a Lincoln resident, questioned if he heard correctly that the City was paying the Bruce Cline, Interim City Attorney, stated the requirements for a claim against the City and clarified the City owned the pump which was being paid by others so City made determination to pay and to go back three years. Mayor Gilbert asked permission from other Councilmen to speak first on this item and read his comments in to the record and asked that Council join him in supporting a refund of overcharges and add to the next regular City Council meeting for action. Councilman Hydrick stated integrity is important to him but he supports refunds going back only one year. Councilman Joiner  which is a two year statute and requested interest on her refund.  proactive in supplying water in the future.  have been paid by the City.  targets.  tor move forward and can't do all four things at same time.  Clubhouse bill and Mayor Gilbert clarified it was the pump house not clubhouse.  600 Sixth Street I incoln, CA 95648 www.di-lincln.caus 916-434-2400    Live. Life. Lincoln ive Life Lincoln. Live. Life Lincoln Live Life Lincoin Live Life Lipcoln  Page 5 of6  City Council &1 Lincoln Redevelopment Successor. Agency November 7, 2017 Committee. Interview Special Meeting & Work Session  stated he was struggling on how far back and he thought it would be useful to convene the City's Ad Hoc' Water Committee to discuss refund issue further. Councilman Karleskint stated the rates were instated prior to him coming on to the Council but he would like further analysis to go beyond the one year statute of limitations and he would like to see the impact of refunds on the rest of the City's ratepayers. Councilman Nader stated he has done extensive research going back to the rates being instated in 2013 and he supports the Commercial refund for one year but going beyond one year he is uncomfortable unless the City's Ad Hoc' Water Committee analyzes beyond. Mayor Gilbert stated he heard from two Councilmembers that the City's Ad Hoc' Water Committee should be reconvened and he supported that as well. Councilman Nader stated going beyond the $1.4million residential refund and approving the $1.6million non-residential refund would impact the timeline of the current rate study being done by Raftelis Financial Consultants (RFC) and the City would either need to cut projects, reduce reserve amount or increase rates. Ab brief Council discussion ensued regarding convening the City's Ad Hoc Water Committee, deferred maintenance, additional analysis needed on refunds and impacts of refunds and the impact of additional analysis on timeline of current rate study. Matt Brower, City Manager, summarized Council's direction to staff: (1) authorized the change in scope from 10mg water tank to 5mg water tank and funding strategy of 40% of the tank cost being paid by Fund 711 and remainder from PFE fees (new development); (2) issuing of credits to commercial ratepayers $1.6million going back to February, 2016 within one year statute of limitations; and (3) reconvening the City's Ad Hoc' Water Committee for discussion of policy decision of issuing credits beyond one year statute of limitations possibly to April, 2015 or January, 2014 and bring back for further Council deliberation. Mayor Gilbert polled Council on (1) authorized the change in scope from 10mg water tank to 5mg water tank and funding strategy of 40% of the tank cost being paid by Fund 711 and remainder from PFE fees (new development); (2) issuing of credits to commercial ratepayers $1.6million going back tol February, 2016 within one year statute of limitations; and (3) reconvening the City's Ad Hoc Water Committee for discussion of policy decision of issuing credits beyond one year statute of limitations possibly to April, 2015 or January, 2014 and bring back for further Council deliberation. By the following Vote (Approved): Karleskint- - Aye, Nader- Aye, Joiner- - Aye, Gilbert- Aye and Hydrick - No.  5.STAFF REPORT- staff report location for the City-Wide Solar Project.  5.A. Termination of the Nor Cal Crushing Lease. Agreement for WWTRF Solar Project and Proposed Jennifer Hanson, Public Services Director, gave a brief staff report and stated the Solar Project for the Wastewater Treatment Facility was located at the current location of the Nor Cal Crushing sO she was seeking direction on terminating the lease so they can initiate clean-up activities at this site. Mayor Gilbert asked for Council consensus to proceed with termination of the NorCal Crushing Lease Jennifer Hanson continued there are two possible locations of the City-Wide Solar, location. A and B made a part of these minutes by mention thereof. She continued location. A is north oft the current City Corporation Yard and location B is across Flightline Drive, staff recommended location B. Mayor a) Byron Chapman, a Lincoln resident, asked if the reflection from the solar array would be an issue for airplane pilots using the Lincoln Regional Airport. Jennifer Hanson stated the reflection would Jennifer Hanson stated the Council has two more check-in points before this project was approved. Mayor Gilbert asked for Council consensus on location B and received unanimous approval.  Agreement and received unanimous approval.  Gilbert opened for public comment at 7:06M with the following comments:  be similar to pond or lake.  600 Sixth Strecr L Lincoln, CA 95648 www. linco oln.ca. us  2400    Live Life Lincoln Live Life Lincoln: Live Life LIncoln Live. Life Lincoin Live Life Lipcoln.  Page 6of6  City Council & Lincoln Redevelopment Successor Agency November7,2017 Committee Interview Special Meeting & Work Session  5.B. Follow up to October 3, 2017 Work Session Affordable Housing Discussion.  Matt Brower, City Manager, gave al brief staff report and proposed a series of education modules at the upcoming City Council work sessions for Council to get up to speed on this issue. Mayor Gilbert asked for Council consensus on the education modules and received approval from Councilmen Joiner and Karleskint. Councilman Nader expressed disappointment and stated the St. Vincent de Paul representatives from Lincoln were moving forward with ai task force. Councilman Hydrick stated he could not support. Mayor Gilbert stated he supports and with Councilman Joiner and Karleskint the  majority approved moving forward with the education modules. 5.C. SMART (Saving More. After Renewed Thinking) program.  Matt Brower, City Manager, gave a brief staff report detailing the new program. A brief discussion ensued regarding recent email problems the City experienced and suggestion of getting a new Information System in place. Mayor Gilbert asked for Council consensus on instating the SMART  program and received unanimous approval. 6.COUNCIL INITIATED BUSINESS  Councilman Joiner requested Council backup to the Affordable Housing discussion as het thought the education modules were intended as a compromise and if Councilman Nader and Hydrick did not support was ite even worth Staff's time to move forward. Al brief Council discussion ensued and Council consensus was to have one education module to discuss financing and possible role the City could play  and to decide ift further modules would be valuable.  Mayor Gilbert announced the City's Turkey Drive on November 16, 2017.  7.WORK SESSION ADJOURNED by Mayor Gilbert adjourned the Work Session at 7:35PM stating there was nothing to report from Closed Session meeting that occurred prior to' Work Session and that  Council was reconvening the Closed Session immediately following at 7:36PM.  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Net Position E42-E32 Operating Reserve Target Capital Reserve Target Target Total Reserves Above/(Below) Target Perc. Above/(Below) Target  0 0 0 8,371,031  0 0 0 6,135,518  0 0 0 5,827,105 5,856,499  0 0 0  $14,477,941 16,406,026 17,387,201 18,385,076 19,345,210 $11,231,169 11,954,738 12,833,348 13,476,297 14,697,878 $20,782,415 $12,822,319 $10,689,371 $10,735,884 $10,503,831 $6,940,000 $6,686,801 $4,862,266 $4,879,385 $5,025,766 $9,398,000 $6,686,801 $4,862,266 $4,879,385 $5,025,766 $11,384,415 $6,135,518 $5,827,105 $5,856,499 $5,478,065  $3,246,772 4,451,288  4,553,853  4,908,779 4,647,332  $2,458,000  $0  $0  $0  $0  $3,676,061 $4,000,000 $7,676,061 $1,400,000 $1,613,384 $3,013,384 $0  $0 $0 $0 $0 $0 $0 $0  $0 $0 $0 $0 $0 $0 $0  $0 $0 $0 $0 $0 $0 $0  $0 $0 $0 $0 $0 $0 $0  $3,708,354 $6,135,518 $5,827,105 $5,856,499 $5,478,065  $694,970 $6,135,518 $5,827,105 $5,856,499 $5,478,065 $694,970 $6,135,518 $5,827,105 $5,856,499 $5,478,065 $8,371,031 $6,135,518 $5,827,105 $5,856,499 $5,478,065 $3,676,061 $3,945,063 $4,235,005 $4,536,278 $4,850,300 $4,000,000 $4,000,000 $4,000,000 $4,000,000 $4,000,000 $7,676,061 $7,945,063 $8,235,005 $8,536,278 $8,850,300 $694,970 ($1,809,545) ($2,407,900) ($2,679,779) ($3,372,235)  9%  -23%  -29%  -31%  -38%    A BC  G  H  Combined Summary of Water Funds 710&711 Attachment 2: Credit Exceeding Statute ofl Limitation to January2014  Budgeted #s RFCStudy#s RFCStudy#s RFCStudy#s RFC Study#s $18,291,981 $6,508,534 $4,273,021 $3,964,608 $3,994,002  Activity (see exhibit D) Proposed Ratel Increases: RFCS Study Unaudited Beginning Net Position. July1 Liabilities and Receiveables Receivables (less 10% uncollectable) Liabilities Difference Adjusted Net Position E9+E14 Operating Budgets FY17/18 Budgeted Operating Revenues FY17/18 Budgeted Operating Expenditures Difference Adjusted Net Position E15+E20 CapitalE Budgets FY17/18 Capital Expenditures (see exhibitA A) Encumbrancel Roll Over FY1 16/17(see exhibitE B) Sum Adjusted Net Position E21- E26 Reservel Requirements Fund 710 Reserve1 Target Fund 711 Reserve Target (see exhibit C) Sum Adjusted Net Position E27- -E32 Refunds within 1 Year Statute of Limitations (SOL) Single Family Residentail (SFR) Non-SFR Sum Adjusted Net Position E33-E38 Optional Refunds Beyond 1 Year SOL Adjusted! Net Position E39-E41 Year End Net Position E42+E32 Operating Reservel Target Capital Reserve Target Target Total Reserves Above/(Below)" Target Perc. Above/(Below)" Target  FY17/18 0% $2,134,338 $2,890,676 ($756,338)  FY18/19 FY19/20 FY20/21  FY21/22 3.50% 0 0 0  3.20%  3.50% 0 0 0  3.50%  0 0 0  0 0 0  $17,535,643 6,508,534 4,273,021 3,964,608 3,994,002 $14,477,941 16,406,026 17,387,201 18,385,076 19,345,210 $11,231,169 11,954,738 12,833,348 13,476,297 14,697,878 $3,246,772 4,451,288 4,553,853 4,908,779 4,647,332 $20,782,415 $10,959,822 $8,826,874 $8,873,387 $8,641,334 $6,940,000 $6,686,801 $4,862,266 $4,879,385 $5,025,766 $9,398,000 $6,686,801 $4,862,266 $4,879,385 $5,025,766 $11,384,415 $4,273,021 $3,964,608 $3,994,002 $3,615,568  17 18 Z 23 24 26 27 28 29 32 37 38 39  $2,458,000 $3,676,061 $4,000,000 $7,676,061 $1,400,000 $1,613,384 $3,013,384 $1,862,497  $0 $0 $0 $0 $0 $0 $0 $0  $0 $0 $0 $0 $0 $0 $0 $0  $0 $0 $0 $0 $0 $0 $0 $0  $0 $0 $o $0 $0 $0 $0 $0  $3,708,354 $4,273,021 $3,964,608 $3,994,002 $3,615,568  $694,970 $4,273,021 $3,964,608 $3,994,002 $3,615,568 ($1,167,527) $4,273,021 $3,964,608 $3,994,002 $3,615,568 $6,508,534 $4,273,021 $3,964,608 $3,994,002 $3,615,568 $3,676,061 $3,945,063 $4,235,005 $4,536,278 $4,850,300 $4,000,000 $4,000,000 $4,000,000 $4,000,000 $4,000,000 $7,676,061 $7,945,063 $8,235,005 $8,536,278 $8,850,300 ($1,167,527) ($3,672,042) $4,270,397) ($4,542,276) ($5,234,732)  49 50  -15%  -46%  -52%  -53%  -59%    BCI  D  G  H  Combined Summary of Water Funds 710 &711 Attachment 3: Credit Exceeding Statute of Limitation to April2015  Budgeted #s RFCStudy#s RFCStudy#s RFCStudy #s RFCStudy#s $18,291,981 $7,255,468 $5,019,955 $4,711,542 $4,740,936  Activity (see exhibit D)  FY17/18 0% $2,134,338 $2,890,676 ($756,338) $17,535,643 7,255,468  FY18/19 3.20%  FY19/20 3.50%  FY20/21 3.50%  FY21/22 3.50%  Proposed Rate Increases: RFC Study Unaudited Beginning Net Position. July1 Liabilities and Receiveables Receivables (less 10%1 uncollectable) Liabilities Difference Adjusted Net Position E9+E14 Operating Budgets FY17/18 Budgeted Operating Revenues FY17/18 Budgeted Operating Expenditures Difference Adjusted Net Position E15+E20 Capital Budgets FY17/18 Capital Expenditures (see exhibit A) Encumbrance Roll Over FY1 16/17(see exhibit B) Sum Adjusted Net Position E21-E26 Reserve Requirements Fund 7101 Reservel Target Fund 711 Reserve Target (see exhibitc) Sum Adjusted Net Position E27-E32 Refunds within 1' Year Statute ofl Limitations (SOL) Single Family Residentail (SFR) Non-SFR Sum Adjusted Net Position E33-E38 Optional Refunds Beyond 1 Year SOL Adjusted Net Position E39-E41 Vear End Net Position E42+E32 Operating Reservel Target Capital Reserve Target Target Total Reserves Above/Below)" Target Perc. Above/(Below) Target  9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50  0 0 0  0 0 0  0 0 0  0 0 0  5,019,955 4,711,542 4,740,936  $14,477,941 16,406,026 17,387,201 18,385,076 19,345,210 $11,231,169 11,954,738 12,833,348 13,476,297 14,697,878 $20,782,415 $11,706,756 $9,573,808 $9,620,321 $9,388,268 $6,940,000 $6,686,801 $4,862,266 $4,879,385 $5,025,766 $9,398,000 $6,686,801 $4,862,266 $4,879,385 $5,025,766 $11,384,415 $5,019,955 $4,711,542 $4,740,936 $4,362,502  $3,246,772  4,451,288  4,553,853  4,908,779 4,647,332  $2,458,000  $0  $0  $0  $0  $3,676,061 $400,000 $4,076,061 $1,400,000 $1,613,384 $3,013,384 $1,115,563  $0 $0 $0 $0 $0 $0 $0  $0 $0 $0 $0 $0 $0 $0  $0 $0 $0 $0 $0 $0 $0  $0 $0 $0 $0 $0 $0 $0  $7,308,354 $5,019,955 $4,711,542 $4,740,936 $4,362,502  $4,294,970 $5,019,955 $4,711,542 $4,740,936 $4,362,502 $3,179,407 $5,019,955 $4,711,542 $4,740,936 $4,362,502 $7,255,468 $5,019,955 $4,711,542 $4,740,936 $4,362,502 $3,676,061 $3,945,063 $4,235,005 $4,536,278 $4,850,300 $4,000,000 $4,000,000 $4,000,000 $4,000,000 $4,000,000 $7,676,061 $7,945,063 $8,235,005 $8,536,278 $8,850,300 ($420,593) ($2,925,108) ($3,523,463) ($3,795,342) ($4,487,798)  -5%  -37%  -43%  -44%  -51%    Exhibit E  RFC Study withoutr reimbursements beyond the settlement for Single-Family Reimbursement for Non-Single Family Residential customers for the period February 2016 thru! September 2017 based on settlement criteria Potential reimbursement for ALL water customers for the period April 2015 thru Potentiall reimbursement for ALL water customers for the period January 2014  Residential customer: accounts.  1,115,563 1.862.497  January 2016 based on settlement criteria thrul March 2015 based on settlement criteria  Chart belowi indicates the potential rate increases for each reimbursement: amount, including the shortfalis in meeting the target reserve balances during the 5 year rate period. All scenerios would meett the target reserve  balances by the end of the rate period. Additional Reduction to Target Available Funds! Reserves $  Potential Rate Increases  Meets Yes Yes  Maximum Shortfall nla n/a  FY17-18 FY 18-19 FY19-20 FY20-21 FY21-22  0.0% 0.0%  3.2% 5.0% 8.0% 11.0%  3.5% 4.5% 3.5% 4.0%  3.5% 4.0% 3.5% 3.0%  3.5% 4.0% 3.5% 3.0%  $ 1.115,563 No $ (400,000) 0.0%  1.862,497  No $ (1,800,000)! 0.0%    Exhibit F  Single Family Residential - 3/4" meter, 5,000 gallons  $50.53  $49.16  $47.80  $45.52.  $42.35  CURRENT FY17-18  FY18-19A1 FY18-19B FY18-19C  Fiscal Year 17-18 reflects the proposed change in rate structure to a single uniform rate and no tiers.    Exhibit G  Single Family Residential - 3/4" meter, 18,000 gallons  $88.62  $36.23  $83.83  $83.28  $79.84  CURRENT FY17-18  FY18-19AF FV18-19B FY18-19C  Fiscal Year 17-18 reflects the proposed change in rate structure to a single uniform rate and no tiers.    Exhibit H  Single Family Residential - 3/4" meter, 50,000 gallons  $373.37  $164.32  $172:54---947747 --$182:40-  -  CURRENT FY17-18  FY18-19A FY18-19B FY18-19C  Fiscal Year 17-18 reflects the proposed change in rate structure to a single uniform rate and no tiers.    Exhibitl I  Single Family Residential - 1" meter, 5,000 gallons  $67.78 $69.71  $71.65  $64.55  $59.53  CURRENT FY17-18  FY18-19 A FV18-19B FY18-19C  Fiscal Year 17-18 reflects the proposed change in rate structure to a single uniform rate and no tiers.    Exhibit]  Single Family Residential - 1" meter, 18,000 gallons  $109.75  $106.78  $103.81  $100.46  $98:87-  CURRENT FV17-18  FY1B-19AFY18-19B FV18-19C  Fiscal Year 17-18 reflects the proposed change in rate structure to a single uniform rate and no tiers.    Exhibit K  Single Family Residential - 1"r meter, 50,000 galions  $390.55  $18335  $192.52 $198.02 $203.52  CURRENT FY17-18  FY18-19A FY18-19B FY18-19C  Fiscal Year 17-18 reflects the proposed change in rate structure to a single uniform rate and no tiers.    McNellLawOffices  TON October7,2013  City of Lincoln City Council c/othe City of Lincoln City Clerk 6006"Street Lincoln, CA 95648  byl PMBK,FAX9105S, E-mail pauilaed.Imoohm.a.us  re: Item 9.1.A Proposed Water, Wastewater and Solid Waste Rate. Adjustments" Objection to consideration and adoption of Ordinance 869B amending Title 13 of the Lincoln Municipal Code as it pertains to new and increased water rates  Agenda for the Regular Meeting of the City Council  To the honorable: members of the City of Lincoln City Council:  Ihave been retained to represent Pete Santina and other similarly situated water: rate payers and citizens in the City of Lincoln. On behalf of my clients objection is made to your scheduled consideration and possible adoption of new and increased water rates described in Item 9.1.A of your regular agenda. You will not get to consideration of those proposed increased water: rates unless the count of Proposition 218 "protests" is less than ai majority per California Constitution XIIID $6(a)(2). However, even ift thej proposed increased water: rates survive the "protest" vote, the increased water rates must comply with the absolute substantive requirements of XITID $6(b)(1)-(5). This is to advise you that the proposed increased water: rates are in direct and irreconcilable conflict with XIID $6(b)(1)-(5) [Prop. 218),  and you cannot legally adopt them.  Below is a summary list of some of the more egregious substantive violations of Prop. 218 in these proposed increased water rates. This should be sufficient toj put you on notice of1 both the legal deficiency of the proposed rates, and the need for you to go "back to the drawing board" to redraft water rates that respect the legal rights 1. Prop. 218 provides that: "Revenues derived from the fee or charge shall not exceed the funds required to provide the property related service." XIID $6(b)(1). The City's proposed. water rate increase would cause the average single family monthly customerl bill -and the revenues collected from that-- to go from $22.90 to $55.68 (see Figure 1-2inHF&H Rate Study): inj just 3 % years (uly 1, 2017), an increase of 143%! [Your publicnotice to rate payers selected out single family homes for comparison, resulting in a comparative: increase of 97%, essentially disguising 50% in relation to the more: meaningful comparison for all single familiesHowever, in looking at the City ofLincoln budget documents, as well as the HF&H Rate Study, there are no plans for dramatic increases in salaries, benefits, professional services, water purchases, or even capital expenditures in that time period. Rather, the increase stems from thei new enormous charges aimed at accumulating a "Target Balance" ($2.5Million) to provide a so-called "cash margin" to facilitate (with extra  of thei rate payers and citizens of the City ofl Lincoln.  2301 Hemsted Drive, Suite E, Redding, California 96002 KeNLaOcedyLen  1  TBL530.222.8992 IFAX 530.222.8892    money!) taking care of undefined "cash flow constraints" and a "Contingency Balance" ($5 Million): for future "unforeseen" requirements (paid with more extra money!) seemingly ini the nature of a "rainy day fund," as described on  page 10 of thel HF&H Rate Study!  Thus the City's new: rates are explicitly aimed at accumulating about $7.5 Million of extra money collected from rate payers, to serve no: real substantive purpose other than a sort of City slush fund -and certainly not "actually required toj provide the property related service" as: mandated by Prop. 218. This is a blatant violation of Prop. 218 and a fatal flaw in your proposed water  rates.  2. Both the "Target Balance" and the "Contingency Balance" conflict with Prop. 218 in another way, in that they are: noti identified to an immediate and actual use that exists today, but rather they are designated for vaguely defined future contingencies. Ini that respect they both violate XII $6(b)(4) which states that: Fees or charges based on potential or future use of a service are not  permitted."  3. A less obvious but just as real drain ofe extra money from the proposed water rates is the newly imbedded expense described as a "Cost Allocation" transferred to the General Fund. (See Ex. A to the HF&H Rate Study at p. 5, line 49.) These charges start at about $690,000 annually and escalate toj just over $11 Million by. July 1,2017. The total charges manage to divert just over $5 Million by thel FY 2017-18 Year! There is no explanation for these extraordinary diversions of funds from water rates in the Rate Study or anywhere else. Though a "cost allocation" is generally an accounting for verifiable expenses incurred by one department specifically and directly on account of another department, the data to support this -if there is any-is mysteriously lost. The City's Budget documents also provide no clue as to the accounting for these diversions to the general fund, though the City's Financial Statement (at p.27) does acknowledge that the City's accounting practices are. supposed to conform to Governmental Accounting Standards Board (GASB) Statement No. 34. Ofnotei ist that GASB 34 requires that both "reciprocal interfund activity" and "nonreciprocal interfund activity" must be specifically and reliably accounted for; and for any movement of money to another fund (like the General Fund) that is not documented as "reasonably equivalent in value to, services provided" (ie. nonreciprocal interfund activity"), the activity must reported as a "transfer" rather than expenditure/expenses to accurately reflect its nature. (See GASB No. 34, at $112.b.(1) and $411.)Given that the City's budget documents pertaining to this transfer of water rate: revenues to the General Fund violate basic requirements of GASB No. 34, the designation of such funds as a "Cost. Allocation" must be ignored and the funds treated as a  pure transfer.  2    Unfortunately, The City's failure to account for the diversions to the General Fund is not an accident nor an anomaly. The last available "Compliance Reports" for the City, signed by the auditor April 20, 2012, were performed by Richardson & Company, entitled INDEPENDENT. AUDITOR'SI REPORT ONI INTERNAL CONTROL OVER FINANCIAL REPORTING. AND ON COMPLIANCE. AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIALSTATEMENTS, PERFORMED. IN ACCORDANCE WITH GOVERMMENTAUDITINGSTANDARDS. The auditor found that (p.12) as of 2011 "the City has not developed and formally documented an indirect cost allocation plan that identifies costs for supporting services and allocates them tol benefitting departments and funds on an equitable basis." And (p.12) "The City developed an indirect cost plan with no substantiated base for allocation." While the Report looks at allocated costs in the context of compliance with OMB A-87, thesystemic cause of the problem has nothing to do with A-87: the City has no substantiated base for cost allocation and no plan to allow for allocation of costs on an equitable basis. These (among others) are findings as toi the accounting practices of the City that the auditor describes in a serious tone as "significant deficiencies." ." Thus the City's failure toj provide any competent accounting basis for diversions of water rate: revenues to the General Fund as "Cost. Allocations" wasi not an oversight, and not a problem that the City either knows how to fix or has the will to fix. Because these diversions of rate funds to the General Fund cannot be characterized as attributable to "the cost of the service" of providing water, they are patently "surplus" revenues collected in violation of XIIID $6(b)(1)'s prohibition of collection of revenues that "exceed the funds required toj provide the property related service." And since the funds are diverted tot the General Fund for expenditure on general governmental services rather than the specific services of providing water to Lincoln's rate payers, the diversions also violate XIIID $6(b)(2), which states that: "Revenues derived from the fee or charge shall not be used for any purpose other than that for which the fee or charge was 4. Insofar as both "1." and "3." above falsely inflate and cause to be imposed disproportionately. high water: rates paid by rate payers in the City of Lincoln, the falsely inflated rates charged by the City violate XHD $6(b)(3), which forbidsi imposition of property related fees or charges on any parcel which "exceed the proportional cost of the service attributable to the parcel." 5. The proposed water rates are radically restructured toi impose steeply "tiered rates" that sharply increase the charges for increased consumption of water. (See Figure 2-13 and Figure 2-14 at p. 18-19 of thel HF&H Rate Study.) This structure fori the proposed rates was developed in consultation with the City's Finance Committee, and according to thel Rate Study (at p.19) thes system of sharply increasing tiered rates "reflects the Finance Committee's: interest in providing a stronger price signal to customers who place the greatest burden on the system." (emphasis added) For example (see p. 20 of thel Rate Study), the  imposed."  3    tiers for both "Single Family" and "Multi Family" quantity charges range from a low of $1.60 per 1,000 gallons up to a maximum of $11.01 per1 1,000 gallons of water. (Other primary classifications include Multi-Family and Non- Residential.)There is no evidence in thel Rate Study, and no attempt to provide factual justification (for a policy-based distinction) that would show thata gallon of water in one tier is more or less expensive for the City to produce than In addition, the City establishes different schedules of tiered rates for quantities of water provided through different meter sizes, ranging from meter sizes of 341 inch in increments up to the largest size of 8inch meters. In general, differing sizes of meters dictate capacity of flow and therefore impact the capacity requirements of the capital facilities infrastructure. There are ascending fixed "meter service" charges for ascending sizes of meters, al logical relationship for addressing the increased capacity demands placed on the City's physical infrastructure to meet the increased capacities of meters as they expand in size. But for operations and sales of water -thel basis for charging the additional rates for quantities of water-there: is no evidence in the Rate Study for determining that a gallon of water from a 34 inch meter is more expensive to the City than a gallon of water flowing from an 81 inch meter. Its should also be noted, that while all classifications of rate payers are assigned tiered rates, and different size meters can be used in almost all of them, there are variations among the classifications in the number of tiers and quantity in thei tiers - resulting in rates that are different for different rate payers both (a) among the rate payers using different quantities of water within the same classification, and (b) between the different classifications, and (c) between the rate payers getting their water from different size meters in all classifications, And then there are a few odd or unusual rate distincticns with no explanation. There are apparently some connections in the City that are charged "flat rates." And there are deliberately different rates set for residential rate payers living in aj particular real estate development, int two different sections, called Verdera Villages 13-17 & 19, and Verdera Village 20. Again no rationale Thej problem for all of these differing rates is that there is no evidence that their differences are in any way tied to the commensurate differences in the City's cost of supplying water toi the: rate payers that are paying potentially radically different amounts per 1,000 gallons of use. As to any rate payer that pays more per 1,000 gallons of water than any of the other rate payers who at least contribute the actual cost of their water use, it may be fairly said that the higher paying rate payer isl being charged discriminatory rates that "exceed the proportional cost of the service attributable toi the parcel" in violation of XII $6(b)(3). Some rate payers who pay less than their true cost of service and are  a gallon of water in another tier.  and any number of combinations of those three factors.  is given for differing charges to these classifications.  4    being subsidized by the rate payers charged more than their costs, may, not complain as individuals but nonetheless become part of a rate methodology that is arbitrary, capricious, and discriminatory-a: system that cannot bel legally  adopted or implemented.  The California Court of Appeal has addressed thei issue of tiered pricing for water rates, and found that even when the pricing structure is based upon the public policy of promoting water conservation through increasing tiered rates for increased water usage, that policy cannot overcome the clear Constitutional mandate of Prop. 218 that charges "shall not exceed the proportional cost of the service attributable o thej parcel." City of Palmdalev. Palmdale Water District (2011)198 Cal. App. 4th926. Here in the City ofLincoln the desired "price signal" of increasing tiered rates is unconstitutional in the absence of any genuine evidence that the rates are proportionately commensurate with higher expenses incurred by the City in supplying water. There is not even an attempt to: make out that justification ini thel Rate Study or any of the materials for consideration by the City Council. The proposed water rates, all of which are stratified by multiple tiers of ascending rates, cannot be 6. Finally, a fair criticism of the proposed water rates that has been voiced but flatly ignored, is the suggestion that the reasonable "cost of service" for water: mustinclude the cost of a reasonably viable aiternative mode of supply that may be less expensive than the existing source of supply. Ini that circumstance, ift the City refuses consideration ofa a real but less expensive source ofwater, in favor of using only a much more expensive source of water for 100% of the proposed new water: rates, then the resulting rates will be disproportionately high and result in total revenues that exceed the funds required to provide thej property related service - XIII $6(b(1)8:(3). Iam referring, of course to the City 's unobstructed potential use of ground water  legally adopted.  that is (I am told) in plentiful supply.  The documentation for the proposed water: rates appears to indicate that the City of1 Lincoln relies on contract water purchased at very high rates - in the neighborhood of $500 an acre/foot. On the other hand, extraction of groundwater, even with the amortized cost of well installation and the power costs of pumping water: from deep levels of an aquifer (300 ft.+), isl known to cost considerably less than $100 per acre/foot. Al huge economicadvantage of groundwater is that unlike surface water supplies (like those currently purchased by the City) there is no requirement for filtration, chlorination or treatment. Therefore it is realistic that the City could replace al large percentage ofi its currently high priced contract purchases with groundwater at a savings as great as 80% per unit of quantity. Such obvious and economical available water supplies cannot be ignored in making the legal determination of a true "cost of service" for water rates. Your current proposed water: rates are unlawfully  5    disproportionately. high and would collect more: revenue than the reasonable amount of funds needed to supply water to the rate payers ofI Lincoln. In summary, iti is respectfully submitted that the proposed water rates cannot bel lawfully adopted, for all of the reasons described above. You should reject the proposed rates, direct your staff to give fair consideration to the concepts discussed herein, and come back with ai much different proposal that meets the needs of the City but also respects the Constitutional mandates of  Proposition 218.  Very truly yours, MCNEILLLAW: OFFICES  MAAmRN  WALTER: P.MCNELL  cc: Clients  6    McNellLawOrices  OTIGATION November11,2013  City ofl Lincoln City Council c/o the City of Lincoln City Clerk 600 6th Street Lincoln, CA 95648  by, FAX (916) 645-8903; E-mail parin@ci.imehn..is &1 hand delivery re: City Council Meeting of November 12, 2003 and Agenda Item 6.2F "Adopt Ordinance 888B Amending Sections and Adding Sections to Title 13, Lincoln Municipal Code asi it Relates to Water and Wastewater Services (second reading/adoption) Objection to adoption of Ordinance 888B and Notice re: Offset Provisions of Gov. Code S 53728 for unlawful imposition of taxes without compliance with the voter approval provisions of Prop. 62 To the honorable members of the City of Lincoln City Council:  As you know,Ihave! been retained to represent Pete Santina and other similarly situated water: rate payers and citizens in the City of Lincoln. Item 6.2F on your agenda is the adoption of new water: rates for the City of Lincoln. I would refer you to the objections made in the previous letters of October' 7 and October 22, 20131 that we have submitted. None of those objections have been addressed or remedied. Ify you go forward with the adoption of the proposed new water rates: in Ordinance 888B you will be deliberately enacting and imposing an illegal tax on all water customers in the City of Lincoln, in violation of California Constitution Article XIIIC $2 and Government Code SS 53722 & 53723 (Proposition 62) by not] permitting the electorate to vote on the taxes. Water rates are now automatically classified as "taxes" unless proven by the City to be a valid property-related charge imposed in accordance with the provisions of Article XIIID (see Article XIIIC $1(e)7), sO the imposition of these unlawful taxes would also automatically trigger the "offset" provisions of Gov.  Code S 53728, which reads as follows:  $53728. Reduction in property tax allocations equal to revenues derived Ifany local government or district imposes any tax without complying with the requirements of this Article, or in excess ofits authority as clarified by Section 53727, whether or not any provision of Section 53727 is held not applicablet to such jurisdiction, the amount ofp property tax revenue allocated to the jurisdiction pursuant to Chapter 6 of part 0.5 ofD Division 1 ofthe Revenue and Taxation Code (commencing with Section 95) shall bei reduced by one dollar ($1.00) for each one doliar ($1.00) ofr revenue attributable to such tax for each  from failure to comply with article  280 Hemsted Drive, Suite E, Redding, California 96002 Mcheicaohcadymatcen  TEL 530.222.8992 I FAX 530.222.0892    year that the tax is collected. Nothing in this section shall impair the right of any citizen or taxpayer to maintain any action to invalidate any tax imposedi in In simple terms, ift the City of Lincoln adopts illegal taxes without voter approval, then it is the duty of the State to withhold an equivalent amount of the funds normally channeied to the City through property taxes. The ill-gotten gains from the illegal tax are offset by the State's reduction ini funding. Thisi is a remedial measure so that local governments will: not have an incentive to establish illegal taxes and collect millions of dollars from rate-payers before they can be stopped by either the State or by judicial action. Ifyou go forward in adopting these illegal water rates you have been fairly warned. Thank you for your attention to this matter.  violation ofthis Article.  Very truly yours, MCNEILLLAW OFFICES PARmRN  WALTER P. MCNEILL  cc: Clients  280 Hemsted Drive, Suite E, Redding, California 96002 Mokellaohsa@ynatcn  TRL 530.222.8992 IFAX 530.222.8892    26.9 Acres  250  Citywide Solar Array Site Location A  Lincoln      10.2 Acres  250  Lincoln Citywide Solar Array Site Location B    SPEAKER INFORMATION  Public Comments Request for Council Meetings  Please complete this card and present it to the City Clerk prior to the start of the  meeting if you wish to speak at this evening's Council Meeting.  NAME: - iDAzDAN CITY OF RESIDENCE: hislaln MEETING DATE: 1  S2  SUBJECT: AGENDA ITEM #:  MVAYCR  Public Comments provides you an opportunity to speak tot the City Council about an issue on the agenda or any other item of concern. Speakers are requested to restrict their comments to issues that are within thej jurisdiction ofthe City Council and to stay within thet three-minute  time limit.  SPEAKER INFORMATION  Public Comments Request for Council Meetings  Please complete this card and present it to the City Clerk prior to the start of1 the  meeting if you wish to speak at this evening's Council Meeting.  NAME: CITY OF RESIDENCE: MEETING DATE: SUBJECT: AGENDA ITEM #:  DONAA Hodosan  3595503 LINCOLN  November 7357 Watoy Rates Aredit  AT  Public Comments provides you an opportunity to speak to the City Council about an issue on the agenda or any other item of concern. Speakers are requested to restrict their commentsto issues that are within the jurisdiction of the City Council and to stay within the three-minute  time limit.