Others present: City Manager Josh Copley and City Attorney Sterling Solomon.

Moved by Councilmember Jim McCarthy, seconded by Councilmember Eva Putzova to approve the minutes of the City Council Joint Work Session of April 5, 2017; Special Work Session of April 28, 2017; Work Session of June 13, 2017; Work Session of June 27, 2017; Special Meeting (Executive Session) of September 26, 2017; and Regular Meeting of October 3, 2017.

Vote: 7 - 0 - Unanimously

Rolf von Dorp, Flagstaff, presented another stack of signatures on petitions supporting the carbon fee and dividend action, and thanked the Council for their support of this item and addressing climate change.

Moved by Councilmember Scott Overton, seconded by Councilmember Charlie Odegaard to approve Consent Items 7-A through 7-D.

Vote: 7 - 0 - Unanimously

Revenue Director Sandy Corder stated that they presented a similar item awhile back, which is done on an annual basis. She said that this action tonight occurs every five years or so because there is not much volume.

Moved by Councilmember Eva Putzova, seconded by Vice Mayor Jamie Whelan to approve the write-off of delinquent and uncollectible non-sufficient funds (NSF) checks in the amount of $7,374.54.

Vote: 7 - 0 - Unanimously

Sustainability Manager Nicole Woodman briefly reviewed the item.

Councilmember Putzova said that the timeline referred to in the proposed contract talks about the plan being completed in the Spring of 2018 and then presented to the public and Council. She said that she would like to see this project completed prior to the Council's Summer Break next year, and asked for thoughts from the other councilmembers.

Ms. Woodman said that they are under a tight time crunch. They will be having their initial meeting with the consultants on Thursday and they will address that issue further with them. She added that the steering committee has already been meeting and partnering with a class at NAU to identify some potential projects.

Moved by Councilmember Celia Barotz, seconded by Councilmember Eva Putzova to approve the contract with Cascadia Consulting Group, Inc. (Cascadia Consulting) for consulting services in the amount of $92,645 and authorize the City Manager to execute the necessary documents.

Councilmember Overton said that he would be voting no, only because he would prefer to take the $92,000 and do some actionable projects. He believed they already knew what direction they were headed in, and would prefer to see the funds spent in that manner.

Councilmember Odegaard said that it appeared that what the consultant will be doing could be done by staff. Ms. Woodman said that the consultant will work with staff and the committee, to be as far-reaching as possible. She said that there is a lot of focus on equity and community engagement, and they need experts to infiltrate and get the community voice.

Vice Mayor Whelan said that they did have a good, thorough conversation and she understood the need for this. She said that she also understands that they have a very short window to do this and do it strong. It is extremely important for them and the next generation. They need to be thorough and mindful for generations to come.

Vote: 5 - 2

NAY:

Councilmember Scott Overton
Councilmember Charlie Odegaard

City Attorney Sterling Solomon said that the proposed Intergovernmental Agreement would allow for reciprocal legal services with Sedona and Cottonwood in those rare instances where there could be a conflict of interest if the City's legal staff were involved directly. An example was with the Hub appeal before the Board of Adjustment last year, and the City contracted with an outside firm. The proposed IGA would alleviate such a cost, and when needed, Flagstaff would assist the other communities.

Councilmember Barotz asked that if another community were to join in the future, that the IGA be brought back before Council for approval.

Councilmember Barotz said that she would like to know how much was expended on outside counsel for the Board of Adjustment appeal referenced above.

Moved by Councilmember Charlie Odegaard, seconded by Councilmember Scott Overton to read Resolution No. 2017-36 by title only.

Vote: 7 - 0 - Unanimously

A RESOLUTION OF THE FLAGSTAFF CITY COUNCIL APPROVING THE INTERGOVERNMENTAL AGREEMENT BETWEEN CITIES AND COUNTIES OF THE STATE OF ARIZONA FOR RECIPROCAL PROVISION OF LIMITED LEGAL SERVICES

Moved by Councilmember Scott Overton, seconded by Councilmember Charlie Odegaard to adopt Resolution No. 2017-36.

Vote: 7 - 0 - Unanimously

Others present: City Manager Josh Copley and City Attorney Sterling Solomon.

Brad Hill, Water Services Director for the City of Flagstaff, shared a bottle of purified, recycled water with each of the Councilmembers, noting that it was wastewater treated to reclaimed water and then purified for drinking.

Mayor Evans invited representatives of the Boy Scout troops to introduce themselves. Members of Troops 7027 and 7039 were present, working on their merit badge.

Planning Development Manager Tiffany Antol reviewed the Preliminary Plan for the Grand Summit Condominiums, noting that it includes ten existing units and two new units. It was unanimously recommended for approval by the Planning and Zoning Commission.

Vice Mayor Whelan asked the developer what price they may be. Mr. Natenberg address the Council stating that they have not done a marketing study, but they anticipate they will initially be priced under $300,000 per unit.

Moved by Councilmember Celia Barotz, seconded by Councilmember Charlie Odegaard to approve the Preliminary Plat for Grand Summit Condominiums, approximately 0.70-acre (34,347 square feet) in the Single-family Residential Neighborhood (R1N) zone into 12 condominium units.

Vote: 7 - 0 - Unanimously

Sustainability Specialist McKenzie Jones briefly reviewed a PowerPoint presentation which addressed:

RETHINK WASTE PLAN
PRELIMINARY GOALS
Waste Prevention
Waste Diversion
Climate Change
PHASED PLAN OF ACTION
Phase 1 - Years 1 - 3
     Set foundation; fill data gaps; establish baseline metrics
Phase 2 - Years 4 - 5
     Develop a strategic plan for achieving vision; update goals
Phase 3 - Years 6+
     Implement policies, programs, infrastructure recommended in Strategic Plan

Councilmember Overton said that this was exactly what he was referring to earlier, in that this proposal is an actionable item. He said that they are at 13% recycling; there is a lot of work they could get done. He said that he hoped they continued to think about the landfill closure fund and are considering alternatives.

Councilmember Odegaard agreed with Councilmember Overton, and asked Mr. Copley if Council would be looking at the recycling facility and how it was doing. Mr. Copley said that the MRF is the subject of significant interest to staff. They have a contract before them now with a unilateral right to renew.

Councilmember McCarthy asked for clarification on the 13% rate. Ms. Jones replied that 13% of their total waste stream is being recycled. She said that best case scenario would be around 75%.

Vice Mayor Whelan said that she knew they did not have any codes asking the high occupancy housing (HOH) to recycle, and asked why that was. Ms. Jones said that if the resolution is adopted they will be back within a few months with actual action items. They are working on items with the Solid Waste Division and will be bringing those back for Council consideration.

Moved by Councilmember Scott Overton, seconded by Councilmember Charlie Odegaard to read Resolution No. 2017-30 by title only.

Vote: 7 - 0 - Unanimously

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF FLAGSTAFF, ARIZONA ADOPTING THE RETHINK WASTE PLAN AND ESTABLISHING AN EFFECTIVE DATE

Moved by Councilmember Charlie Odegaard, seconded by Councilmember Celia Barotz to adopt Resolution No. 2017-30.

Vote: 7 - 0 - Unanimously

Water Services Director Brad Hill began a PowerPoint presentation, noting that it would be a joint presentation between the Water Services and Management Services Divisions.

OVERVIEW
Two-Fold
     Funding of current reclaimed system
     Funding as they plan for its future
Six capital projects; 2 are already funded

TONIGHT
First step in multistep process
Highlight existing Reclaimed Water (RW) policy pertaining to rates
Previous Council director - off-peak customer class
     6/27/2017 Meeting - direction give to eliminate Tier 2 declining rate

EXISTING POLICY FOR RW ENTERPRISE FUND COST RECOVERY
Policy C1.1 - RW expenses should equal its revenue - full cost
RW is a valuable water supply; helps offset need for additional water supply

EXAMPLE OF EXISTING POLICY FOR COST RECOVERY
Revenues       $800,000       Rates

Expenses       $600,000       Operations
                         200,000       CIP

                       $800,000       TOTAL

RATE ADJUSTMENT CONSIDERATIONS
RECLAIMED WATER RATE TIED TO 35% OF POTABLE WATER RATE
All Other Customers (except Off Peak)
     Phase-in increase of 7% year until 2020 (depends on which customer class they're in)
Off-Peak Customers
     Tier 1: Increase 6.2%/year in 2018, 2019, 2020
     Tier 2: 3-year phase out

Councilmember Putzova asked why there was a different rate increase between off peak and others. Mr. Hill replied that it goes back to the Water Commission Meeting of June 2017 where three options were discussed. The option that received a 4-2 approval was the one being presented.

Councilmember Putzova asked what the policy rationale was behind that decision. Mr. Hill said that the Chairman of the Water Commission was present and may be able to provide some insight. He said that, by code, off-peak was different because they can take water off peak, or overnight, and store it. He said that staff had presented a different increase of 4.4% but the Commission did not like that proposal.

Councilmember Putzova said that she wanted the rest of Council to understand that if they go with the proposed changes, they are increasing the gap between off-peak and other customers. Management Services Director Rick Tadder noted that by eliminating the Tier 2, and taking the lower rate and increasing it, that customer class is increasing two sets of rates.

Vice Mayor Whelan said that it seemed that they would want some type of incentive for customers to use water during offf peak times so they could provide more on-peak times.

Councilmember Odegaard said that with the off-peak customer they made a huge decision in phasing out the two tiers. That is a big jump for the City, and he thought they would want to make it as easy as possible that those on off-peak feel comfortable with making that change. Councilmember McCarthy said that when they take into account that they have eliminated Tier 2, it looks like they are increasing the difference between on and off-peak, but actually they are compressing them, or making them less, because off-peak is going up more.

Water Services Engineering Manager Ryan Roberts then continued the presentation.

CAPITAL IMPROVEMENT PROJECTS
Timeline

2018
Bushmaster Park Pump Station
Advanced Treatment Study

2019
RW Master Plan
RW Rate Study

2020
Replace 8" Pipeline Bottleneck

2022
Replace 2nd 2 Million Gallon Buffalo Park Storage Tank

BUSHMASTER PARK RECLAIMED PUMP STATION
ADVANCED TREATMENT FEASIBILITY STUDY & PUBLIC OUTREACH
RW MASTER PLAN

Vice Mayor Whelan, in returning to the Advanced Treatment Study, said that they seem to know they are going in that direction, and asked why they need a study to tell them to go in that direction. Mr. Roberts said that he was not sure they knew what direction they were headed in. If the cost of going to drinking water quality is over $100 million, there are a lot of wells that could be drilled for less. Mr. Hill added that this project is not to make a decision of "do or don't" but to provide the engineering to bring it to a class 4 equivalent, and to provide the public outreach component.

Councilmember Barotz asked where Red Gap Ranch fit into the conversation. Mr. Hill said that this study will, as in the Water Resources Program, look at a variety of long term water supplies available. They already have a feasibility on board now to take it to a level of engineering analysis. This will take this water supply to the same level of engineering analysis. He said that this will provide the ability to put numbers to that conversation and compar a per gallon/maintenance basis. Councilmember McCarthy said that they need to do that analysis so they can make informed decisions a few years out.

REPLACE 8" RECLAIMED PIPELINE BOTTLENECK
RW RATE STUDY

Management Services Director Rick Tadder then continued the presentation:

REVENUES AND EXPENSES

He said that they are recommending bond issuance for the large capital projects. Without it, they would not be able to do the bottleneck project until 2024. The offset to that is there is interest expense; over 20 years there will be $1.8 million in debt expense.

CHANGES TO CUSTOMER RATES

Councilmember Putzova asked what the off-peak customers would be paying in 2020 for potable water. Mr. Tadder stated that the off-peak customer does not have an equitvalent potable water rate.

Mr. Tadder then reviewed the quantities for the various residential tiers:

Tier 1          0 -   3,500 gallons
Tier 2   3,501 -   6,200 gallons
Tier 3   6,201 - 11,500 gallons
Tier 4  11,501+

Vice Mayor Whelan said that in every other aspect they are asked to treat everyone the same, yet they have commercial, manufacturing, NAU, residential, etc. at different rates. Mr. Hill said that it goes back to potable water customers. There is a tenet in rate setting that the impact of delivery is to the peak; that is why they have different classes. Since the RW rates have been a mirror of the potable rates, those customer classes have carried over.

Vice Mayor Whelan asked if it made sense to have three or four different categories at different prices. Mr. Hill reminded Council that at the beginning of the presentation, he mentioned that the discussion this evening was to address the next three years, not to address the broader policy decisions. They will vet those broader policy decisions in the Spring.

Councilmember Putzova asked if there was any legal reason why they would not be able to eliminate the off-peak customers. Mr. Solomon said that would be a policy decision. Mr. Tadder said that as far as Management Services, they received direction in June to keep in the same policy and that is what they built this presentation on. They are looking for the large rate discussions next Spring with the next rate study.

Councilmember McCarthy said that he would presume that the off-peak rate is lower because the customer is willing to take their water off-peak which saves the City money in infrastructure, storage, pipes, etc. In that case, it would make sense to give a discount.

Councilmember Putzova said that would be the same case with potable water and they do not have that. They are treating potable water customers differently from reclaimed water customers.

RATE COMPARISON OF OTHER CITIES (Based on WIFA data)

Councilmember Odegaard asked why Prescott was not included in the list. Mr. Hill said that he was not sure, but it may be that they did not respond to the survey from WIFA.  When they bring this back, they could try to include them in that presentation.

Councilmember Overton said that he was leery of the chart; it made no sense why Flowing Wells' reclaimed water would be 100% of potable water cost. Mr. Roberts noted that Flowing Wells does not have a reclaimed water system; they get it from Pima County.

The following individuals addressed Council regarding the item:

•Ward Davis, City resident and member of Water Commission, but his comments were his own
•Robert Vane

Comments received included:

•He thinks the current proposal is an acceptable proposal
••He was involved with this since the beginning and it was set up to be simple, where it could be done in-house; he was able to do it within a few hours.
•He did not do all of the CIP projects; 7.2% is what he got
•Normally a rate presentation includes the most affected customers and that is Continental
•Due to the reduce usage in not filling Lake Elaine, they would not be using Tier 2
•The discounted price for off-peak needs to be studied during the next study
•Does believe the Council should be able to move forward
•Urged Council to address two needs: 1) in financial it shows RW expenditures dropping $660,000 to $542,000 in the first year fo the plan, a 18% decrease; and 2) slide 7 shows a 7.2% per year for majority; off-peak was 6.2%; should treat them all the same

Mr. Tadder responded to the decreased revenue mentioned, stating that their revenue projects off their base revenues. The one large expense was a one-time expenditure.

Councilmember McCarthy asked for clarification on the statement that the customer would not get to the volume that would trigger Tier 2. Mr. Hill said that they have no idea; the operation of that customer is theirs, and they may want to ask them, otherwise they do not get into how they operate their system. Mr. Solomon noted that they may know what their volume is, but they cannot talk about specific data as it is protected under state statutes.

Councilmember McCarthy said that earlier in the evening he argued with Councilmember Putzova about how they would not be increasing the spread, but if there is a possibility that customers will not be using that much water anyway, then his argument would be invalid.

Councilmember Putzova said that what she is trying to understand is the reasoning why to increase the gap. Her inclination is that they should continue with the existing policy until they have a proper rate study. Mr. Copley added that it is purely a policy decision. If the Council decides to keep the rate the same they would need some mechanism in the rules for those days when the system could not handle the demand.

Councilmember Overton said that his takeaway is that they have done a good job going to the Commission, the public, to show the capital improvements. They all know there are policy discussions, but that will be considered at a later date. He was comfortable staying with the proposed rate increases. And, he appreciated the correlation back to the capital program. Councilmember Odegaard agreed.

Further discussion was held on whether to eliminate the off-peak. Mr. Hill noted that in order to do that they would need a Code change. Mr. Copley said that if they are anticipating a new paradigm, they have not considered new rules and they would have to look at that further.

Councilmember Putzova said that she would like to have a discussion at some point about whether the volume could trigger a rate change.

Dave Chambers, with Continental, said that there is a hearing next week before Judge Slayton. The Judge could order them to fill the lake this year. They do not have the funds to repair the lake. There will be another hearing in November to decide if there is a compromise that could be made, but right now it is up in the air. He said that there are times that they have had interruptions for two to three weeks. If they did not have lake storage, the City might be spending another $2 million for another storage tank. There is a tremendous advantage to having off peak rates.

John Malin, speaking as an individual and not as a Water Commissioner, said that the idea of the off-peak was by policy. Storage costs money. The Council is trying to lump someone who has storage with someone who does not. That is the reason they are getting a reduced rate. Currently water is discharged at the end of every day; it goes back into the aquifer. If someone is willing to buy it during the off-peak they should.

Councilmember Barotz said that in the interest of practicality, they need to make a decision; they need to increase the rates. She did appreciate the concerns about the disparity, and does agree that it should be reviewed during the rate study. She was not 100% comfortable, but she could live with it for now.

Councilmember McCarthy said that he was comfortable with the differential rate for off-peak customers, but did not know that he was comfortable with increasing the discount. He said that for this evening he would support staff's recommendation; they could tweak the differential in the future.

Vice Mayor Whelan said that she would like to tweak it now. She did not think that increasing the differential is a good move, and suggested a 7.2% across the board. Councilmember McCarthy said that he could live with that. Councilmember Putzova said that she would support that, keeping the policy spread between the two classes the same.

Mr. Tadder asked for clarification. He said that the differential between 2017 Tier 1 offf-peak and commercial is $1.59. Vice Mayor Whelan said that she would like to see the same percent difference.

Councilmember Overton said that he would like to stay with staff's recommendation. He asked if the differentcewas going to be worth the aggravation and this amount has not been vetted.

Councilmember Putzova said that she would like them to maintain the spread differential as it appears the Water Commission made an arbitrary decision.

Council requested that two versions be presented during the public hearing.

Mayor Evans said that she was happy with the proposal from the Water Commission, but she did want to honor the Council majority. She agreed 100% with Councilmember Overton in seeing what would be gained with such a change, understanding that they will be doing a rate study in the next two to three years.

Councilmember Barotz said that the core of her concern is that she feels she does not have a clear understanding of the Water Commission rationale. While she respects that they had meetings, the Council is accountable to the voters and has the discretion to not always vote with a recommendation from a commission.

Vice Mayor Whelan briefly explained her request and consensus of Council was to move this item forward to a future agenda.

Mayor Evans briefly reviewed her request and consensus of Council was to move this item forward to a future agenda.

Councilmember Odegaard said that his experience with the delegation from Sonora, Mexico was informative. He was told by one of the delegates that every day $7.3 million is spent by the Sonoran people in the United States. He said that they need to be mindful and respect each other as humans.

Councilmember McCarthy said that this week he attended a joint meeting with the Planning and Zoning Commission, touring the downtown regulating plan and they visited five areas. He said that it was worthwhile and thanked the Planning and Zoning Commission for inviting them. He said that they had some citizen groups, neighborhood activists, a developer; it was really good to have a cross section.

Mayor Evans reported that she and the Vice Mayor attended the Economic Development Tourism Forum. She said that Lori Pappas and Heidi Hansen presented about place-based tourism and what is being done in Flagstaff, along with the challenges.

She said that she was impressed with the Governor's Chief of Staff. It appeared that maybe attitudes are changing based on the fact that their relationships span the borders. She said that in Flagstaff, their top tourists come from Sonora, Mexico. Out of ten overnight guests, seven are from Mexico. The delegation noted that the hospitality in Flagstaff was incredible and they have not been treated with such love and respect. They were looking to bring as many tourists to Flagstaff and having tourists visit Mexico.

Mayor Evans reported that yesterday she and the Vice Mayor spoke with the Vice President of Amtrak. They noted that Flagstaff's Amtrak station was within the top 100 across the country. They have a new program and are assigning executives to two to three stations to become even more incredible. The Vice President chose Flagstaff and Salt Lake City.

Mayor Evans said that today she and the Vice Mayor, along with Councilmember Odegaard, attended the dedication of the outside classroom at Francis Short Pond. She said that Willow Bend and the BBB helped fund the space.

Mr. Copley thanked Economic Vitality Director Heidi Hansen and CVB Director Trade Ward for their fine work in helping with the Sonoran delegation.

Mr. Copley reminded everyone that next week's meeting would begin at 6:00 p.m. at the Murdoch Center, with Executive Session starting at 4:00 p.m. at City Hall.

 

The Regular Meeting of the Flagstaff City Council held October 17, 2017, adjourned at 8:07 p.m.