Item Coversheet
ADMINISTRATIVE REPORT
MEETING DATE:  6/28/2023Consent – Miscellaneous  ax.
TO:Honorable Mayor and City Council
FROM:Gregg Strakaluse, Public Works Director
DATE:3/3/2023
WARD: 
SUBJECT:

Miscellaneous Appropriations: 

 

  1. Appropriate $3,150,000 Equipment Fund Balance to the Public Works Department's operating budget within the Equipment Management Fund due to increases in repair and maintenance, fuel, and parts.
  2. Appropriate $375,000 Sewer Enterprise Fund Balance to the Public Works Department's operating budget due to increases in repair and maintenance, electricity, and fuel.
  3. Appropriate $1,200,000 Sewer Enterprise Fund Balance to the Public Works Department's operating budget due to increased electricity, internal vehicles, chemicals and equipment parts costs.
STAFF RECOMMENDATION:

Staff recommends approval of appropriations. 
BACKGROUND:

This Administrative Report appropriates funds for several operating budget line items. Following justifications are listed below.

 

Equipment Fund:

An appropriation of $3.15 million is needed to cover increases in several expenditure line items incurred for the City's fleet expenses. The budget shortfall can be attributed to several factors including increased costs for repair and maintenance, parts, and fuel. Fleet continues to have difficulty in recruiting and retaining technicians, which leaves a large number of vacancies for repair and maintenance services. Therefore, fleet has to outsource repair services due to staffing shortages. Fuel prices have increased in previous years and remained consistently high. Therefore, additional funds are needed in in the fuel line item to cover the shortfall for fuel costs. Fleet continues to see impacts on the cost of parts and materials due to supply chain issues. This appropriation is offset by internal rental revenue charged to various departments based on actual costs incurred to repair, maintain, and operate fleet equipment. There is no impact to the General Fund with this request.

 

Sewer Fund:

An appropriation of $375,000 is required to cover increased operating costs at Wastewater Treatment Plant 2 (WWTP 2).  The budget shortfall is due to increased costs for repair and maintenance, electricity, and fuel.  WWTP 2 has nine dams, due to the unusually high rainfall this year, extensive maintenance on the dams was needed to ensure against potential erosion.  Electricity costs are projected to exceed budgeted amount due to PG&E increasing Peak Demand pricing as well as the unit cost of electricity per kilowatt-hour.  The other notable unanticipated expense was the purchase of propane to heat the digesters.  The plant is designed to use digester gas to fuel boilers, which in turn maintains the digester temperature.  Due to operational issues, both digesters have been producing low quality gas, making it unusable as a fuel source for the boilers, and making the purchase of propane a necessity. 

 

An appropriation of $1.2 million is required to cover operating costs for Wastewater Treatment Plant 3 (WWTP 3) and Sewer Maintenance.  The budget shortfall is due to increased electricity, internal vehicles, chemicals and equipment parts costs. Electricity costs are projected to exceed budgeted amounts by approximately $660,000 for both WWTP 3 and Sewer Maintenance. This is due mainly to the increase in Peak Demand pricing as well as the unit cost of electricity per kilowatt-hour by PG&E. Internal vehicle costs exceeded the budgeted amount due to increased fuel costs. Chemical costs increased throughout the year as the market cost for raw material saw a significant increase. Chemicals such as dewatering polymer and sodium hypochlorite are critical in the treatment process and their usage is set by the volume of wastewater treated.  The other notable unanticipated expense is the increase to costs of equipment parts, this was due to the aging equipment at WWTP 3, coupled with the increased cost of equipment due to market conditions.

 

Absent these proposed actions, operating expenditures for the Wastewater Division will exceed budgetary appropriations.  There is no impact to the General Fund with this request.