6.
City Council Work Session
- Meeting Date:
- 10/11/2016
- From:
- Ryan Roberts, Utilities Engineering Manager
- Department:
- Utilities
Co-Submitter:
Brad Hill Utilities Director
TITLE:
Discussion on policy direction for a possible of scope of work regarding a Revenue and Rate Analysis for the Utilities Reclaimed Water Enterprise Fund.
DESIRED OUTCOME:
Provide direction to Utilities staff on what objectives, informational outcomes and financial policies should be included in a proposed scope of work that would be provided to consultants in determining changes to reclaimed water rates or their structure. Should Council give direction to staff that reclaimed rates or their structure should be changed, the goal would be to develop policies that are as fair and equitable as possible, provide existing customers with better service, maximize the use of existing reclaimed water supplies, while still promoting community objectives. Staff will then incorporate Council's direction into the RSOQ bid document and bring back at a later date for Council to consider.
EXECUTIVE SUMMARY:
During the Spring 2016, the Reclaimed Water Rate discussion was separated from the Water, Wastewater & Stormwater Rate discussion in order to better focus on this topic when appropriate. Staff would like to obtain policy direction from City Council for a possible scope of work regarding Revenue and Rate Analysis for the Utilities Reclaimed Water Fund. Staff is seeking direction whether we should consider changes to Reclaimed Water Rates or their structure, and if so, what objectives, informational outcomes and financial policies should be include in proposed scope of work.
Depending upon the direction from City Council, staff will come back at a later date with a draft Scope of Work for Council to consider. The Scope of Work will include discussion from the meeting and at least the financial analysis of existing reclaimed water revenues, system and operational costs, proposed new capital projects, and an evaluation of any proposed rate impacts. One primary focus of this study would be to ensure the City's Reclaimed Water Enterprise Fund has sufficient, defensible funding to meet their operational, capital, current and proposed debt obligations.
Depending upon the direction from City Council, staff will come back at a later date with a draft Scope of Work for Council to consider. The Scope of Work will include discussion from the meeting and at least the financial analysis of existing reclaimed water revenues, system and operational costs, proposed new capital projects, and an evaluation of any proposed rate impacts. One primary focus of this study would be to ensure the City's Reclaimed Water Enterprise Fund has sufficient, defensible funding to meet their operational, capital, current and proposed debt obligations.
INFORMATION:
City of Flagstaff is considering whether to analyze and evaluate reclaimed water rates for all classes of customers. One goal of this type of study would be to provide existing reclaimed water customers with improved service levels, and to maximize the use of available reclaimed water supply for future.
Attached is a copy of the Reclaimed Water Enterprise Fund's existing 10-year capital improvement program (CIP) and proposed new CIP projects should Council decide to consider increasing rates and revenues.
Below are several options and policies for Council to consider;
1. Council may decide to maintain the existing reclaimed water rates and rate structure.
2. Council may decide to adopt the 3% annual rate increase and keep existing rate structure as recommended by Willdan Financial services in October 2016. This option will increase reclaimed water rates by 3% each year for the next five years, allow for the completion of additional CIP to provide more reliable customer service and incur debt service levels up to 20% in the Reclaimed Water Enterprise Fund.
3. Council may decide to increase reclaimed water revenues by raising rates higher than 3% to complete additional CIP, such as:
COUNCIL GOALS:
1) 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
8) Improve effectiveness of notification, communication, and engagement with residents, neighborhoods and businesses and about City services, programs, policies, projects and developments
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 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.
Attached is a copy of the Reclaimed Water Enterprise Fund's existing 10-year capital improvement program (CIP) and proposed new CIP projects should Council decide to consider increasing rates and revenues.
Below are several options and policies for Council to consider;
1. Council may decide to maintain the existing reclaimed water rates and rate structure.
2. Council may decide to adopt the 3% annual rate increase and keep existing rate structure as recommended by Willdan Financial services in October 2016. This option will increase reclaimed water rates by 3% each year for the next five years, allow for the completion of additional CIP to provide more reliable customer service and incur debt service levels up to 20% in the Reclaimed Water Enterprise Fund.
3. Council may decide to increase reclaimed water revenues by raising rates higher than 3% to complete additional CIP, such as:
- Advanced Water Treatment Feasibility Study for reclaimed water to determine the feasibility and costs associated with indirect (groundwater augmentation) or direct potable reuse. This would include developing water quality goals for reclaimed water beyond existing regulatory requirements, identifying treatment processes to achieve those water quality goals, developing a conceptual design and associated construction costs.
- Looping the reclaimed water distribution system for improved system pressures and increased customer service reliability.
- Policy
- Cost of Service
- A portion of wastewater treatment expenses allocated to reclaimed water customers
COUNCIL GOALS:
1) 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
8) Improve effectiveness of notification, communication, and engagement with residents, neighborhoods and businesses and about City services, programs, policies, projects and developments
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 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.