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AGENDA ITEM REVIEW FORM |
6.D.
Regular City Council Meeting
- Meeting Date:
- 03/24/2021
- Department Head:
- Jorge Perez
- Submitted By:
- Jorge Perez, Billing & Collections Manager, Finance Department, Billing & Collections
Action Requested:
Motion
ITEM:
Discussion and possible action an any and all matters regarding the proposed agreement between the City of San Luis, Arizona and Willdan Financial Services to assist the city in providing a water, wastewater and sanitation cost of service and rate update. (Jorge Perez, Billing & Collections Manager)
SUMMARY:
Background:
It is customary for cities and towns to review their utility rates every five (5) to ten (10) years and make any rate adjustments necessary to maintain and improve infrastructure and operations for the residents of the city. Cities contract expert economists as guides to study this complex area of predicting future needs of the city as well as analyzing for any shortfalls in funding from the past.
Back in 2013, the city adopted a five-year utility rate increase plan that was intended to help the water, wastewater, and solid waste enterprise funds become self-sustainable. At that time, the revenues were not sufficient to cover the maintenance and needed improvement expenses. Rate adjustments were necessary to promote the continued growth of the community. The adoption of the rate increases has helped the enterprise funds to invest in new infrastructure to improve the quality of the services that the city provides to its residents. The last increase from the previously mentioned plan was done back on July 1st, 2017.
The city is currently experiencing tremendous growth in residential population but is also experiencing some commercial and industrial growth in east San Luis. The Public Works Department is foreseeing a need for new infrastructure in the near future to be able to provide the services that are being requested in this growing part of the city. Needs will be largely required in water and wastewater systems.
Staff is contemplating the option of a new utility rate and service analysis to be conducted by a professional economist firm. We are looking for guidance on how to properly handle the growth and pay for the future capital investments that are needed in San Luis. Studies that were done in the past, like the one adopted in 2013, did not include the option of an industrial service fee/rate. This is also an answer that we are hoping to obtain from the study.
CIP Forecast:
Capital improvements being forecasted by public works include the possible expansion of both (west and east) wastewater treatment plants as well as increasing the water capacity/production by adding well sites to east San Luis.
Staff roughly estimates the west wastewater plant expansion cost at around $14 million. The east wastewater plant expansion cost will depend on the approach of the utility rate study (what type and volume of growth are expected/needed). In terms of water production and capacity, staff is seeking to invest in a new water well site for east San Luis with cost estimates ranging between $3 and $4 million, again depending on the scope of the utility rate study. Staff is also seeking to invest in an additional water well site at the Public Works yard, where half of the infrastructure is already there; this cost is estimated at about $1.5 million.
Item Proposal/Request:
This item was presented to the Mayor and City Council during the Work Session held on March 3, 2021. Direction to staff was to proceed to conduct a rate study to see where is the city standing regarding utility infrastructure needs and provide for an updated rate schedule based on those needs.
The Billing and Collections division is in receipt of an agreement proposal to provide an update for water, wastewater and solid waste rates from Willdan Financial Services, Inc. for $19,000.00. Staff recommends approval of the contract/agreement as allowed by the San Luis City Code, Section 36.08 Professional Services.
Willdan Financial Services, Inc. contains professionals with decades of experience in water and wastewater utility operations and economic/financial management. This professional firm has also been serving the City of San Luis as rate consultants for the past 15 years. Willdan has also completed similar engagements for over 30 cities in Arizona, and hundreds of cities throughout the USA.
It is customary for cities and towns to review their utility rates every five (5) to ten (10) years and make any rate adjustments necessary to maintain and improve infrastructure and operations for the residents of the city. Cities contract expert economists as guides to study this complex area of predicting future needs of the city as well as analyzing for any shortfalls in funding from the past.
Back in 2013, the city adopted a five-year utility rate increase plan that was intended to help the water, wastewater, and solid waste enterprise funds become self-sustainable. At that time, the revenues were not sufficient to cover the maintenance and needed improvement expenses. Rate adjustments were necessary to promote the continued growth of the community. The adoption of the rate increases has helped the enterprise funds to invest in new infrastructure to improve the quality of the services that the city provides to its residents. The last increase from the previously mentioned plan was done back on July 1st, 2017.
The city is currently experiencing tremendous growth in residential population but is also experiencing some commercial and industrial growth in east San Luis. The Public Works Department is foreseeing a need for new infrastructure in the near future to be able to provide the services that are being requested in this growing part of the city. Needs will be largely required in water and wastewater systems.
Staff is contemplating the option of a new utility rate and service analysis to be conducted by a professional economist firm. We are looking for guidance on how to properly handle the growth and pay for the future capital investments that are needed in San Luis. Studies that were done in the past, like the one adopted in 2013, did not include the option of an industrial service fee/rate. This is also an answer that we are hoping to obtain from the study.
CIP Forecast:
Capital improvements being forecasted by public works include the possible expansion of both (west and east) wastewater treatment plants as well as increasing the water capacity/production by adding well sites to east San Luis.
Staff roughly estimates the west wastewater plant expansion cost at around $14 million. The east wastewater plant expansion cost will depend on the approach of the utility rate study (what type and volume of growth are expected/needed). In terms of water production and capacity, staff is seeking to invest in a new water well site for east San Luis with cost estimates ranging between $3 and $4 million, again depending on the scope of the utility rate study. Staff is also seeking to invest in an additional water well site at the Public Works yard, where half of the infrastructure is already there; this cost is estimated at about $1.5 million.
Item Proposal/Request:
This item was presented to the Mayor and City Council during the Work Session held on March 3, 2021. Direction to staff was to proceed to conduct a rate study to see where is the city standing regarding utility infrastructure needs and provide for an updated rate schedule based on those needs.
The Billing and Collections division is in receipt of an agreement proposal to provide an update for water, wastewater and solid waste rates from Willdan Financial Services, Inc. for $19,000.00. Staff recommends approval of the contract/agreement as allowed by the San Luis City Code, Section 36.08 Professional Services.
Willdan Financial Services, Inc. contains professionals with decades of experience in water and wastewater utility operations and economic/financial management. This professional firm has also been serving the City of San Luis as rate consultants for the past 15 years. Willdan has also completed similar engagements for over 30 cities in Arizona, and hundreds of cities throughout the USA.
RECOMMENDATION / SUGGESTED MOTION:
I MOVE TO APPROVE THE PROFESSIONAL SERVICES CONTRACT WITH WILLDAN FINANCIAL SERVICES IN THE AMOUNT OF $19,000.00 AS PRESENTED.
Fiscal Impact
- IS THERE FISCAL IMPACT ASSOCIATED WITH THIS ITEM:
- YES
- CITY/STATE/FEDERAL FUNDS:
- CITY
- TOTAL:
- $19,000.00
- BUDGETED AMOUNT:
- $20,000.00
- AVAILABLE AMOUNT TO TRANSFER:
- N/A
- ACCT NAME & GL#/REMAINING BALANCE BEFORE PURCHASE:
- PUBLIC WORKS WATER CONTRACTUAL SERVICES / ACCOUNT 300-302-80000 / $68,895.33 PUBLIC WORKS WASTEWATER
FISCAL IMPACT STATEMENT (IF THIS IS A BUDGET TRANSFER, YOU MUST ATTACH THE BUDGET ADJUSTMENT FORM):
This expense is to be split three (3) ways into the Water, Wastewater and Solid Waste enterprise accounts. A budget transfer will be needed to fulfill the expense under the solid waste account.
Public Works Water Contractual Services / Account 300-302-80000 / $68,895.33
Public Works Wastewater Contractual Services / Account 310-311-80000 / $24,215.03
Public Works Solid Waste Contractual Services / Account 320-321-80000 / $3,830.43
Public Works Water Contractual Services / Account 300-302-80000 / $68,895.33
Public Works Wastewater Contractual Services / Account 310-311-80000 / $24,215.03
Public Works Solid Waste Contractual Services / Account 320-321-80000 / $3,830.43