Consideration and Adoption of Resolution No.  2018-22:  A resolution of the Flagstaff City Council adopting Notice of Intent to increase stormwater rates or rate components, fees or service charges and establishing a date for a public hearing on the proposed changes for June 19, 2018

This action adopts a Notice of Intention, which is required by Arizona Revised Statues Section 9-511.01 prior to a municipality increasing water/stormwater rates, rate components, fee or service charges.  Arizona Revised Statutes require a Notice of Intention be adopted by City Council at least 60 days prior to the public hearing and published a copy of the Notice of Intent in the local newspaper not less than 20 days before the public hearing.  A written report must be filed with the City Clerk and posted on the City website at least 30 days prior to the public hearing.  This report will be filed and posted by May 18, 2018.

The City is recognizing the need to establish stormwater rates that will allow the Water Services Division to address a portion of the capital improvements needed in our community.  An increase in stormwater rates is needed in order to meet current expenditures, provide for an increased capital improvement program and provide sound fiscal management to the Stormwater Fund.

The new stormwater rates and services fees would go into effect in August 2, 2018.

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COUNCIL GOALS: Provide sustainable and equitable public facilities, services, and infrastructure systems in an efficient and effective manner to serve all population areas and demographics.

REGIONAL PLAN: Goal WR.2.2  Maintain and develop facilities to provide reliable, safe and cost-effective stormwater services.

Stormwater service charges were amended on December 19, 2017, and new service charge went into effect on February 1, 2018.  Ordinance 2017-32 amended section 12-02-002-003, Schedule of Stormwater Management Utility Service Charges and Fees within the Flagstaff City Code.

On March 20, staff presented to City Council a discussion on increasing the Stormwater service charge to fund capital projects.  Staff discussed the $74M of identified projects in our community and a service charge structure that would increase revenues by $36M over the next seven to eighteen years.  Council provided direction to bring back a service charge increase in both a ten-year and a twelve-year time frame.

• Adopt Resolution 2018-22
• Do not adopt Resolution 2018-22 and provide staff direction on future considerations of service charge increases. This will leave the Stormwater Fund capital project program unchanged.

The Flagstaff community has a large list of needs as it relates to Stormwater.  The Northern Arizona Master Drainage Study has identified the top rated 37 projects which have a current cost estimate of $74.4 million.  The current funding for Stormwater capital improvements is $600,000 per year.  In order to make progress on the Stormwater needs, staff presented to Council on March 20, 2018 several option of a Stormwater service charge increase.  In the presentation staff provided the top 10 Stormwater projects.   Council directed staff to bring back a service charge consideration that would raise $36 million over the next 10-12 years.  This Notice of Intent is the first requirement set forth in ARS 9-511.01 which sets forth requirements for a Stormwater service charge increase.

In accordance with the adopted City of Flagstaff Water Policies

• Utility rates and revenues should generate sufficient revenues to meet operational costs, capital program requirements, debt service obligations, and maintain adequate reserves consistent with sound financial management practices.
• Utility rates should be set proportionate to the cost of providing the water service to each customer class to promote fairness and equity.
• A financial plan that follows the water policies and goals established by City Council on April 1, 2014.

Regular rate reviews and modification are necessary to maintain a stable financial position for the Stormwater Fund.

A public hearing will be advertised to be held at the June 19, 2018, City Council meeting.