Discussion of Reclaimed Water Rates.

Staff is proposing to City Council a three-year interim adjustment to reclaimed water rates to fund much needed capital improvements that create more system reliability for our customers today and to start planning for the future.  Six capital projects will be presented by staff that, when completed, will expand the reclaimed water system’s capacity and our ability to deliver more reclaimed water as well as start the public conversation of what the goals and objectives of the reclaimed water system should be into the future.   Additionally, staff will present a summary of the Reclaimed Water Rate Public Report prepared by the City's Management Services Division which is on file with City Clerk office for public review. This report outlines the current revenue requirement details for the Reclaimed Water Fund, underlying financial data information, the need for a proposed rate adjustment and presents a staff recommendation for Council to consider.  The staff recommendations were approved by the Flagstaff Water Commission. A Public Hearing on proposed Reclaimed Water Rates is scheduled to be held at the November 7, 2017 City Council meeting. 
 

At its Work Session on June 27, 2017, Council gave direction to the City Manager to proceed with preparing reclaimed water rate options for the next three years (2018-2020), defining critical capital improvement projects and to determine the rates necessary to meet the revenue requirements.  Staff believes that the intent of this direction was to allow Council to better understand the specific needs of the Reclaimed Water utility fund, define much needed capital improvements to create more system reliability for our customers today, and to start planning for the future. 

The City Management Services Division has prepared a short-term financial plan and rate and fee analysis for the Reclaimed Water utility to ensure there is sufficient revenues to meet its operational, capital and debt service obligations.  As part of this rate analysis, the Water Services Division and Management Services Division facilitated dialogue with the City Council and Water Commission at several public meetings. During these meetings, the Water Commission made recommendations to be forwarded to City Council for their consideration. The goal of this analysis was to result in fair and equitable rates to the City’s reclaimed water users. 

The financial Public Report has been prepared using generally accepted rate setting techniques. The City’s utility accounting, budgeting, and billing records were the primary sources for the data contained within the report. The purpose of the financial study is to provide financial review of revenues that will cover the necessary expenditures.