Public Hearing and Possible Action: Utilities Rate Study - Council vote regarding Consultant and Possible Alterations to Path Forward.

This is a continuation of the Public Hearing first opened on October 6, 2015 which was continued on October 20, 2015.   In response to questions and comments from Council and the Public relative to the Utilities Rate Study, staff proposes two items.  First, the consultant Willdan Financial (Willdan) will provide a brief presentation on the overall rate setting process including what goes into a cost of service analysis, developing rate structures and where the City Council has discretion (policy) in the rate setting process.  Willdan  will also discuss the process undertaken regarding the existing rates that have been in place since 2010.   Second, Council can vote on three proposed options on how to move forward.  The three options are outlined here.  Option-1:Stay the present course; Option-2: Slow down the process;  Option-3: Pause and withdraw from the current process.  The details and pros v. cons of each option are discussed below. 

The Willdan Financial Services contract was originally awarded at $114,380.  An additional $35,000 was authorized to provide additional rate scenarios and public hearing dates for a total contract value of $149,380.  A total of $127,180 has been spent to date.

COUNCIL GOALS:
2) Ensure Flagstaff has a long-term water supply for current and future needs.
3) Provide sustainable and equitable public facilities, services, and infrastructure systems in an efficient and effective manner to serve all population areas and demographics.
7) Address key issues and processes related to the implementation of the Regional Plan.

REGIONAL PLAN:
The Flagstaff Regional Plan 2030 supports the update and adjustment to City utility rates with the following goals: Policies are only included where needed to clarify a goal. Goal WR.2 Manage a coordinated system of water, wastewater and reclaimed water utility service facilities and resources at the City level and identify funding to pay for new resources. Goal WR.4 logically enhance and extend the City's public water, wastewater and reclaimed water utility services including their treatment, distribution and collection systems in both urbanized and newly developed areas of the City to provide an efficient delivery of services. Goal E.1 increase energy efficiency. E1.4 promote cost effective energy efficient terminologies and design. Goal U.7 Provide for public services and infrastructure. Goal LU.8 balance future growth with available water resources. Goal CD.1 Improve the City and County financial systems to provide for needed infrastructure development and rehabilitation, including maintenance and enhancement of existing infrastructure. Goal PF.2 Provide sustainable and equitable public facilities services, and infrastructure systems in an efficient and effective manner to serve all population areas and demographics.

The City Council adopted a Resolution of Intent to modify water, wastewater, reclaimed water and stormwater rates at the August 25, 2015 meeting.  Additionally, Council opened a Public Hearing on October 6th, continued the hearing on October 13, 2015 and continued the hearing on October 20, 2015.

Vote on the options below.

Option 1:  Stay the present course
       a.  Retain Willdan Financial Services (Willdan) to complete the Rate Study and develop their Final Report.
       b.  Continue with Willdan's presentation on Capacity Fees at a future meeting.
       c.  Wrap up and close the Public Hearing.
       d.  Council to provide direction on rate structures, etc. (e.g., residential, non-residential or reclaimed water).
       e.  Staff will draft an Ordinance for Council's consideration.
       e.  Proceed to 1st read of an Ordinance adjusting utility rates.
       f.    Other?
 Pros - Keeps the process of considering adjustments to any utility rates on the established timeline.  Maintains adequate funding of each utility fund for their operations, maintenance and replacement.
 Cons - General concerns with the process and consultant.

Option 2:  Slow down the process
       a.  Retain Willdan Financial Services (Willdan) to complete the Rate Study and develop their Final Report.
       b.  Separate out the Reclaimed Water portion of the Rate Study and meet with Council in a future Work Session to receive further direction.
       c.  Continue moving forward with Water, Wastewater, Stormwater and Capacity fees.  
       d.  Continue with Willdan's presentation on Capacity Fees at a future meeting.
       e.  Wrap up and close the Public Hearing.
       e.   Council to provide direction on rate structures, etc (e.g., residential, non-residential or reclaimed water).
       e.  Staff will draft an Ordinance for Council's consideration.
      f.   Proceed to 1st read of an Ordinance adjusting utility rates.
      g.  Staff to provide a presentation on the Water Conservation Program at a future Work Session.
       h. Other?
Pros - slows the process down allowing Council and the public more time to provide input and direction to staff on what to include in a draft Ordinance on any adjustment to rates.
Cons -  delays implementation of any adjustment to some or all of the rates.

Option 3:  Pause and withdraw from process
       a.  Stop all work with Willdan Financial Services.
       b.  Staff to provide a presentation on the Water Conservation Program at a future Work Session.
       c.  Come back to Council sometime next year in a Work Session to seek input/direction regarding policy issues to be addressed in a new rate study.    
       d.  Delay implementation of any new utility rates until sometime after January 2017.
       e.  Other?
Pros - Allows Council and the public more time to provide input and direction to staff on what policy issues  to address in a new rate study.
Cons - Staff will need to identify what capital projects will be deferred.

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