CC - Agendas - City Council - WORKSHOP - 8/17/2010

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COUNCIL AGENDA MEMO — August 17, 2010 ,1112-,p DEPARTMENT: Public Works AGENDA ITEM: Discussion/direction on rate increases necessary to fund the FY 11-16 Water and Wastewater Capital Improvement Programs Approved By: Public Works Director: Mark Nietupski Finance Director: Mark Woodfill City Manager: Steve Norwood �� BACKGROUND Date: Changes to City water and wastewater rates necessary to fund the financial plan outlined by Dan Jackson, Economists.com, in his January 12, 2010, presentation were discussed at the subsequent Council meetings of January 19 and 26, 2010. Mr. Jackson cited various factors affecting the City's water and wastewater enterprises: slow growth in new customer accounts, much lower water use, reduced impact fee revenue, and most significantly, the City's extensive Capital Improvement Plan (CIP) which includes numerous projects to remedy existing system deficiencies. Funding required to keep the Sewer Fund on a stable financial footing continues to be a primary concern, in particular given the costs of extensive improvements to the Sundog and Airport Wastewater Treatment Plants required during the coming years which were detailed for Council on December 1, 2009. Council took no action to modify the rates, recognizing that wastewater adjustments had recently become effective on January 1, 2010, and current policy is to implement water rate increases during low -usage winter months, to provide a transition before the summer months of peak usage. At that time it was anticipated discussion of the rates would be resumed later in calendar year 2010. On March 23, 2010, to effect compliance with the House Bill 2008 moratorium (enacted August 12, 2009, with retroactivity), water and wastewater impact fees were rolled back to the amounts of June 29, 2009; sewer buy -in fees were reinstated; and refunds authorized of amounts paid on or after July 11, 2009, exceeding the fee levels which were in effect on June 29, 2009. This moratorium extends through June 30, 2012. As mentioned during prior rate and impact fee setting processes, many utilities infrastructure projects have two components: rehabilitation of the existing pipes, pump stations, etc., which may include an increase in capacity to remedy an existing deficiency, plus a second increment of capacity increase to serve new growth. Hence, each project must be looked at carefully when being prioritized for implementation, or when it is necessary to make reductions in the capital program. Finally, street and utilities projects are highly interrelated, adding another dimension of complexity.