Loading...
HomeMy WebLinkAboutJoint City Council and Water and Wastewater Rate Advisory Committee Agenda Packet - October 18, 2016 City of Colleyville Page 1 Joint City Council and Water and Wastewater Rate Advisory Committee Agenda City Hall 100 Main Street Colleyville, Texas 76034 817.503.1000 www.colleyville.com Tuesday, October 18, 2016 5:00 p.m. Executive Conference Room Third Floor – City Hall CALL TO ORDER AND ROLL CALL 1. APPROVAL OF MINUTES October 12, 2016 2. PRESENTATION AND DISCUSSION 2a Presentation of the Water and Wastewater Rate Advisory Committee Recommendations 3. ADJOURNMENT I hereby certify this agenda was posted on City Hall bulletin boards Friday, October 14, 2016 by 5:00 p.m. Amy Shelley, TRMC City Secretary A quorum of the City Council or any Colleyville Board, Commission, or Committee may be in attendance at this meeting. Any matter on this agenda may, at the discretion of the governing body, be opened for public comment and discussion. If you plan to attend this public meeting and have a disability that requires special accommodations, please advise the City Secretary at least 48 hours in advance at 817.503.1130, and reasonable accommodations will be made to assist you. City of Colleyville Page 1 City of Colleyville Water and Wastewater Rate Advisory Committee DRAFT - MINUTES City Hall 100 Main Street Colleyville, Texas 76034 817.503.1000 www.colleyville.com Wednesday, October 12, 2016 5:30 p.m. Executive Conference Room Third Floor – City Hall Chair Susan Mathisen called the Water and Wastewater Rate Advisory Committee meeting to order on October 12, 2016 at 5:30 p.m. ROLL CALL: Chair Susan Mathisen, Vice Chair Gerald Gibson, and Committee members Raymond Allee, Thomas Bauch, George Dodson, James Dove, Jeff Gilstrap, Joe Moore, Jeff Pistor, and Samuel van Bever were present. Tim Raine arrived at 5:40 p.m. City Manager Jennifer Fadden, Chief Financial Officer Brian Hogan, Public Works Director Jeremy Hutt, Mayor Richard Newton, Councilmember Bobby Lindamood, Chris Ekrut, Director, Environmental Practice, NewGen Strategies and Solutions, and Assistant City Secretary Christine Loven were also present. 1. APPROVAL OF MINUTES October 6, 2016 Vice Chair Gibson made a motion to approve the October 6, 2016, meeting minutes as written. Committee member George Dodson seconded the motion. The motion carried with the following vote: Aye: 10 – Chair Mathisen, Vice Chair Gibson, Committee members Allee, Bauch, Dodson, Dove, Gilstrap, Moore, Pistor, and van Bever 2. REGULAR AGENDA ITEMS 2a Presentation and discussion of Committee recommendations to the City Council Chair Mathisen stated she had sent an email to the committee noting there would be changes to the information the committee received due to a change in the required revenue figures. This evening the committee will review those changes, the impact to customers, and the analysis. Chair Mathisen stated the committee City of Colleyville Page 2 Water and Wastewater Rate Advisory Committee DRAFT - Minutes October 12, 2016 would review the options, determine the recommendations to City Council, and that she would like to offer additional recommendations other than rates, for the City Council to consider. Chair Mathisen asked everyone to follow along for a brief review of the original revenue requirement the committee analyzed and considered. Chair Mathisen reminded the committee the TRA water purchasing cost is a variable, and the City cost (of distribution) is the fixed cost of water which was at $3 million, for a total requirement of $12 million. There has been an adjustment to City (distribution) cost of approximately $1.3 million because the revenue requirement for funding capital improvements does not need to be received through rates at this point in time. There was discussion of a similar adjustment (decrease) to the revenue requirements for wastewater of approximately $571,000. Chair Mathisen explained there has been a policy of drawing down the reserve for capital improvements and the budgeted reduction in the Utility Fund Balance (or reserve) for FY2017 is $750,000. Working with staff, we have we have learned there is sufficient funding available (in the Utility Fund Balance) for capital improvements for several years. Committee member Pistor asked Chair Mathisen if the $750,000 is a long term piece that is currently above the budget required for repairs this year and is it sustainable. Chair Mathisen explained that a portion of the revenue in the FY2017 adopted budget, was to be funded via a transfer from the Utility Fund Balance. That piece (portion of revenue) of the budget will go to fund capital project expenditures. The FY17 approved budget includes $804,500 for capital improvements (expenditures). The cost study information reflected required revenue of $1.4 million for water capital improvements and did not include the amounts to be utilized from the Utility Fund Balance. Committee member Raines asked Chair Mathisen how this difference occurred. City Manager Jennifer Fadden explained the cost of service study was built on a long term projection of capital at $1.4 million for water; $600,000 for wastewater, built into the rate structure; the long term cost of service has those costs built into the revenue requirements from the rates. Committee member Raines asked staff if that is a different policy for the City Council. City Manager Jennifer Fadden stated the reserves, which have been set aside for many years, were there to fund long term infrastructure needs, and the policy has been to invest those funds for longer periods and use it as needed for infrastructure projects. Once those funds are spent, the funds will be depleted, including the impact fees, so that funding was not built into the rates as a source of funding. Committee member Raines asked staff if that means the reserve funding is coming through the water rate and not the general budget. City Manager Jennifer Fadden stated the funds which are held in long term investments are basically from the City of Colleyville Page 3 Water and Wastewater Rate Advisory Committee DRAFT - Minutes October 12, 2016 excess revenue derived from the tiered water rate structure over the last several years. Committee member Dove asked Chair Mathisen for the fund total and how the $750,000 effects the balance. City Manager Jennifer Fadden responded the total amount invested in the Utility Fund is $7.6 million, of which $3.6 million is for impact fees which does not come from the rate structure, but is paid for by new development; just under $4 million is in long term investments that will mature over the next few years that can then be converted to cash, to be utilized for CIP projects, which we are projecting through Fiscal Year 2019. Committee member Raines stated the reserve is used for capital water and wastewater projects only. City Manager Jennifer Fadden concurred. Committee member Raines stated that if we set water rates at such a level that the reserves are not being funded, those funds will be depleted, and the City Council will have to take action on how funding will be done in the future. Committee member Gilstrap added it appears the reserve would be depleted in three years. Committee member Raines said if we are going to recommend a rate that depletes reserves and does not add revenue, we all need to be aware of that because those CIP costs will have to be addressed at some point. Committee member Bauch stated it appears $2 million is projected annually for CIP and asked if that amount is projected to be needed forever. City Manager Jennifer Fadden concurred, and stated the $2 million figure was arrived at, in large part, from the 2014 Water and Wastewater Master Plan which identified $55 million worth of CIP projects, which would need to be completed over the next 20 years. Mayor Newton recapped the CIP projected expenditures over the next three fiscal years and explained they come in a little under $2 million each year. He further explained the current funding and spending policy is an existing policy and is currently used by City Council, but there will have to be a discussion sometime in the future, regarding the capital funding policy and what needs to be changed to meet future needs. Committee member Raines asked if the committee was to make a recommendation regarding policy. Chair Mathisen stated the draw down on funds was not new and she did not feel including the CIP funding strategy was in the committee’s charge. Vice Chair Gibson stated the Master Plan previously discussed was two years old and asked how close were the projections compared to expenses. Mayor Newton City of Colleyville Page 4 Water and Wastewater Rate Advisory Committee DRAFT - Minutes October 12, 2016 responded saying the figures he quoted were from the actual CIP, and each year the expenses were slightly under the $2 million. Committee member Dodson questioned if the utility reserves (Utility Fund Balance) were increased last year when there was $1.2 million transferred to the General Fund. Mayor Newton explained the tiered rate structure generated excess revenue which went to the general fund but was not used when City Council went to the flat rate because, while some revenue was generated from the tiered water rate, how much additional excess revenue depended on usage; high usage equaled higher revenue, less usage incurred debt. Mayor Newton stated the City Council went to an all cash policy a couple of years ago, but had borrowed funds and the excess was used to pay that debt back. Mayor Newton further stated in the future, City Council will have to decide what they are comfortable with as a fund balance and a new policy and rate structure will have to be addressed then, however, he believes that is sometime in the future. He also advised the current policy is to operate on a cash basis. Chief Financial Officer Hogan stated the City issued debt in 1996, 1998 and 2002, and the money currently on the books is the refunding (refinancing loans) which occurred in 2010 to pay off the debt and lower the interest rate. There was discussion regarding definitions of draw down, fund balance, the funding of the Capital Improvement Program (CIP) long term projections, and investment and current terminology. Committee member Dodson stated the City budget is spread across too many funds and does not allow clarity for cost, debt, salaries, and number of employees. To have the funds split so dramatically is confusing and the City Council may want to address this. Mayor Newton stated the City Council and staff worked with this budget and went line by line through the budget and he feels they have brought transparency and clarity, through use of terminology and presentation, but the budget is very complex. Vice Chair Gibson asked if everyone was clear on the required revenue and the proposed rates. There was a brief review of the base and volumetric rates for water, based on the previous proposal before the revenue requirement change which was discussed tonight. Chair Mathisen stated she did not feel there was a reason to increase rates to pay for capital improvements when we have three or four years of CIP investments in City of Colleyville Page 5 Water and Wastewater Rate Advisory Committee DRAFT - Minutes October 12, 2016 the bank. She further noted, before rates are increased in the future, it is important to balance our rate proposal so all fixed costs are covered and volumetric or variable costs are covered for all purchased water, and that is what we are recommending. Chairman Mathisen asked for a review of the Wastewater Rate Structure presented as Scenario A. There were no questions regarding the wastewater rates. Committee member Moore requested a conservation piece be considered in the recommendation to City Council. There was discussion regarding the ability to fund maintenance and repair beyond use of the drawn down over the next three years. The Committee believes with the base rate established, the need for funding will be easily demonstrated in the future and chose not to make a recommendation concerning the future needs. There was discussion relative to the annual pass-through costs by Trinity River Authority, and the recommendation of the committee is a 12-month rate recommendation. Chair Mathisen stated she felt the following would be the recommendation of the committee and asked for discussion: 1.The water base rate be established at $14.01 for a 1” or less meter; $28.01 for a 1-1/2”; $44.82 for a 2” meter; $84.04 for a 3” meter; $140.06 for a 4” meter. The American Water Works Association (AWWA) meter equivalent standards were utilized in setting base rates. There will be zero gallons included in the base rate. The volumetric rate per 1,000 gallons be set at $4.17. 2.The wastewater base rate for residential be established at $12.54 and the volumetric rate for residential and commercial be established at $2.31 per 1,000 gallons. The wastewater base rate for commercial be established at $18.54. 3.Recommend the City Council establish a new accounting policy whereas a) the Government Fund charges the Utility Fund for the value of indirect costs of support personnel provided (by the Government Fund) to the Utility Fund and b) that the Utility Fund charge the General Fund for all city (municipal) usage of water and wastewater. City of Colleyville Page 6 Water and Wastewater Rate Advisory Committee DRAFT - Minutes October 12, 2016 4.Recommend City Council review sources of funding for future Capital Improvement Projects for the water and wastewater system and provide a long term plan and funding policy. 5.Recommend City Council consider establishing a committee to review and recommend conservation options in the future. Committee member George Dodson made a motion to present the above recommendations the City Council as stated by Chair Mathisen. Committee member Moore seconded the motion. The motion carried with the following vote: Aye: 11 – Chair Mathisen, Vice Chair Gibson, Committee members Allee, Bauch, Dodson, Dove, Gilstrap, Moore, Raine, Pistor, and van Bever Chair Mathisen stated she would work with staff and Mr. Chris Ekrut to prepare a presentation which will be presented to City Council at a joint worksession on Tuesday, October 18, 2016 at 5:00 p.m. in the Executive Conference Room. Chair Mathisen stated she will email the presentation to the committee in advance of the meeting. Chair Mathisen asked staff to prepare the minutes of this meeting and forward them to her as soon as possible. An item will be placed on the worksession agenda for approval of the minutes. 3.ADJOURNMENT The Water and Wastewater Rate Advisory Committee meeting adjourned at 7:58 p.m. APPROVED BY A VOTE OF AYES, NAYS, AND ABSTENTIONS ON THIS THE ___ DAY OF ___________ 2016. Minutes taken and prepared by: Christine Loven Assistant City Secretary City of Colleyville Page 1 Joint City Council and Water and Wastewater Rate Advisory Committee Agenda Briefing City Hall 100 Main Street Colleyville, Texas 76034 www.colleyville.com Agenda Number 2a Agenda Date 10/18/2016 Number Type Presentation and Discussion Department City Manager Title Presentation of the Water and Wastewater Rate Advisory Committee Recommendations Strategy Map Connection Explanation Water and Wastewater Rate Advisory Committee Chair Susan Mathisen, will present the findings and recommendations of the committee and answer questions of the City Council. Attachments Colleyville Water & Wastewater Rate Advisory Committee Report to the City Council October 18, 2016 Colleyville Water and Wastewater Background Information •Colleyville joined with several other city governments to purchase treated water from the Trinity River Authority (TRA) several years ago. The TRA purchases and treats water and provides the water to Colleyville. •Colleyville pumps the purchased water into water towers, monitors water quality to ensure it’s safety, then distributes it using approximately 200 miles of pipe to customers throughout the city. •Colleyville employees administer water purchasing, customer billing as well as maintain and operate the water system. •Under the current rate structure the cost of TRA water is approximately 75% of the cost of delivery of the water to customers. These costs have been rising at roughly 5% annually. •TRA also provides wastewater treatment for Colleyville customers, with the City providing the infrastructure and staff to manage the infrastructure. There is no metering of wastewater. Billing for residential users is based on the average of December –February water usage. •The cost of TRA water treatment is approximately 55% of the City’s total wastewater utility costs and it is predicted to increase to 69% over the next 5 years. •There has not been a comprehensive cost of service study for the City of Colleyville to establish the proper allocation of rates between the base and volumetric rates for many years. •According to the Texas Water Code, rates should be “sufficient, equitable and consistent in application to each class of customer…” 2 Objectives for the Water and Wastewater Committee The City Council formed this committee to seek input and recommendations from the community in a transparent fashion with regard to potential water and wastewater rate changes. Our primary objectives: •Reach a consensus with regards to recommendations to be made to the City Council before October 18th how water and wastewater utility rates should be structured. •Assist the City Staff and City Council in the communication and education of our community about water and wastewater rates through city publications, city sponsored announcements, local media and personal communication with citizens. 3 Water and Wastewater Revenues Prior to August 2016 Adoption of Interim Rate •The base water and wastewater rates (or minimum charge) in Colleyville have included a specific amount of water plus a portion of the city’s cost of distribution. Over the years the volumetric rates have increased because of increasing distribution and delivery costs, and rate increases from TRA. •Revenues charged through the volumetric rate were not always adequate to cover all of the city’s costs in periods of heavy rainfall leading to a decrease in water purchased from the city. •In 2012 City council adopted a tiered rate structure for water. In July 2015 the City Council adopted new a rate plan under the existing tiered structure that became effective December 2015. This new rate plan included a number of changes. Most notably, the new plan instituted increases in the volumetric rates by 9.3% to 15% within each tier. Customers utilizing high volumes of water were impacted significantly experiencing rates up to 50% more than those using low volumes. The rate structure was intended to encourage water conservation. The primary result of tiered rates was the receipt of water revenues of over and above the city’s Utility Fund costs. Water and Wastewater Revenues increased approximately $1.1 million when comparing the FYE 2012 (no tiered rates) and FYE 2015. The FYE 2016 budget projected a one year increase in revenue of $1.3 million. 4 Water and Wastewater Rate Concerns •In January 2016 when a significant increase in the tiered water rates became effective, Colleyville water customers became increasingly concerned about their water bills. •City Staff commissioned a comprehensive utility rate study to analyze the costs of delivery. NewGen Strategies and Solutions was selected to conduct the study. •The City Council adopted an ordinance establishing interim flat volumetric rate effective August 1, 2016. •NewGen analyzed the cost of delivery of water and disposal of wastewater to the City, presenting their results to the City Council on August 16, 2016. In that report, NewGen recommended rates be modified or rebalanced to provide full cost recovery in the base rates (minimum monthly bill). •The City Council formed a Water & Wastewater Rate Advisory Committee of Colleyville citizens to study the results of the NewGen report and to report their findings and recommendations to the City Council by October 18, 2016. •The remainder of this presentation provides the findings and recommendations of the committee. 5 Water & Wastewater Advisory Committee Key Findings •The city has not adopted a full cost recovery model in it’s water and wastewater rate structure. •The meter equivalencies as suggested by the American Water Works Association (AWWA) provide a reasonable and sufficient basis for determining base rates according to meter sizes. •A flat volumetric (water and wastewater usage) rate is equitable according to the AWWA. •A base rate differential of $6 between residential and non-residential wastewater customers is equitable according to the AWWA. •The Utility Fund currently does not charge the City government departments for their water and wastewater usage. 6 Note: The city is currently using Utility Reserves to fund Utility capital projects for the next several years, so current revenues are not required to fund those projects. Water & Wastewater Advisory Committee Key Findings (cont’d) •Required revenue for both Water and Wastewater in the NewGen Study does not align with budgeted revenue. The NewGen Study indicated required revenues of approximately $16.4 million. The actual revenues required to recover costs are approximately $14.5 million. The difference is due to the assumption that all capital improvements would be funded via a new rate structure. Current city policy provides that capital improvements are funded with cash. •City staff provided information that there is an unrestricted Utility Fund Balance of approximately $11.2 million as of October 2016. The fund balance includes approximately $7.6 million in investments maturing throughout 2017. City staff estimates the existing Utility Fund balance can be utilized to fund projected capital improvements through fiscal 2020. 7 Colleyville Water Rates Recommended 2017 Water Rates Distribution Base Charge (no water) Water Volumetric Charge (no distribution) $14.01 up to 1” $28.01 1 ½ “ $44.82 2” $84.04 3” $140.06 4” $4.17/1K Gal *Meter Equival 1.0 2.0 3.2 6.0 10.0 *Meter Equivalency Relative to 1” (AWWA Standard) load applied to system from Meter Size **Includes additional $.28 / 1,000 Gal TRA Increase 2016 Interim Water Rates (Set 8/1/2016) Revenue approximately $10.7 million =Revenue approximately $10.7 million Water $6.34 Distribution $7.01 Base Charge (includes 1,500 Gal water) Water Distribution $6.34+ Volumetric Charge (includes some Distribution costs) $13.55 up to 1” $15.57 1 ½ “ $20.29 2” $33.20 3” $51.27 4” $4.36/1K Gal *Meter Equival 1.0 1.15 1.5 2.45 3.78 *Meter Equivalency Relative to 1” (Colleyville Set) 8 Distribution Costs should be separated from Costs of Purchased Water Colleyville Wastewater Rates Recommended 2017 Wastewater Rates =Revenue approximately $3.8 million Distribution Base Charge (no WW) Wastewater Volumetric Charge (no Distribution) $2.31/1K Gal*Residential Rate $12.54 *Residential Example, Commercial Rate of $18.54 per existing Ordinance differential of $6.00, Volume Charge is Water Volume ***Residential Volumetric Rate set for Dec –Feb Avg. Water Use 2016 Wastewater Rates Revenue approximately $3.8 million Wastewater $4.71 Distribution $5.74 Base Charge (includes 1,500 Gal WW) Wastewater Distribution $4.71+ Volumetric Charge (includes some Distribution costs) $3.14/1K Gal *Residential Rate $10.45 *Residential Example, Commercial Base Rate is $13.45, Volume Charge is Water Volume **Current Rates are providing excess revenue due to Volumetric Charge ***Residential Volumetric Rate set for Dec –Feb Avg. Water Use 9 Distribution Costs should be Separated from Wastewater Treatment Costs Water and Wastewater Advisory Committee Recommendations The following five recommendations were approved in a unanimous vote by the committee October 12, 2016: 1)The water rates for residential and non-residential be established at: –Base Rate: •$14.01 for a 1” or less meter •$28.01 for a 1-1/2” meter •$44.82 for a 2” meter •$84.04 for a 3” meter •$140.06 for a 4” meter –Volumetric rate of $4.17 per 1,000 gallons. 2)The wastewater rates be established at : –Base Rate: •Residential $12.54 •Non-residential $18.54 –Volumetric rate of $2.31 per 1,000 gallons, residential and non-residential. 10 Water and Wastewater Advisory Committee Recommendations (cont’d) 3)Establish a new accounting policy whereas: –The Utility Fund charges the General Fund for all municipal usage of water and wastewater. –The Government Fund charges the Utility Fund for the value of indirect costs of support personnel provided (by the General Fund) to the Utility Fund. 4)Review sources of funding for future capital improvement projects for the water and wastewater system and provide a long term funding policy. 5)Consider establishing a separate committee to review and recommend potential water conservation and best practice management options. 11 Water and Wastewater Advisory Committee Impact Highlights Adoption of the recommended water and wastewater rate structures will: 1.Provide a balanced rate structure with full cost recovery resulting in revenue stability in periods of low water usage mitigating the Utility Fund’s financial risk. 2.Provide an equitable rate structure to all users. 3.Provide a model that separates the City’s Delivery Costs from the TRA charges which can be easily modified as a result of changes in cost in either area that may be adopted in the future 4.Provide transparency in utility charges to users. 5.Provide rate decreases to approximately 50% of the monthly billings. 6.Protect low water usage users from high water billings. A maximum one month variance of approximately $6 has been calculated for low water users under the proposed rates in comparison to the prior rate structures. 7.Provide all customers with better control of their water and wastewater bill through water usage. 12