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ITEM 15 |
City Council Memorandum Management Services Memo No. 22-039
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Date: |
February 24, 2022 |
To: |
Mayor and Council |
Thru: |
Joshua H. Wright, City Manager Dawn Lang, Deputy City Manager - CFO Andy Bass, Deputy City Manager John Knudson, Public Works and Utilities Director |
From: |
Matthew Dunbar, Budget and Policy Assistant Director |
Subject: |
Adoption of Notice of Intention to Increase Certain Water, Wastewater, Reclaimed Water, and Solid Waste Rates and Set the Date for Public Hearing. |
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The City of Chandler manages Water, Wastewater, Reclaimed Water, and Solid Waste utilities that are each set up as separate self-supporting enterprise funds. The City’s Financial Policies require a utility rate analysis to be completed annually based on a ten-year financial projection as part of the budget process to ensure rates are adequate to fund operations, capital, debt service, bond covenants, and reserves. Additionally, utility cost of service consultant studies are performed every 4-5 years to review utility rate structures and demands on systems. To prepare for the FY 2022-23 budget, the City engaged a consultant to conduct a Cost of Service (COS) study for the Water, Wastewater, Reclaimed Water, and Solid Waste utilities beginning in 2020. The intent of the Water, Wastewater, and Reclaimed Water study was to ensure each customer class (single-family, multifamily, non-residential, landscape, and industrial) was contributing to the cost of operation in proportion to their demand on the system. As a result, the increases proposed are not the typical across-the-board increases but vary by customer class depending on the results of the study. The Solid Waste utility was also a part of the COS study, but as the City only provides services to residential customers, the focus was on services offered as part of solid waste operations where the use of those services was shown to have some inequity. In general, Chandler is projecting the need for rate increases in each of the Water, Wastewater, and Reclaimed Water enterprises to fund debt service costs related to capital system maintenance as infrastructure ages to ensure quality and safe systems, new and expanded facilities that serve everyone in Chandler, as well as increased ongoing operating costs such as chemicals and electricity. The rate increase for the Solid Waste utility is needed to cover anticipated contract and operating increases, including costs related to the current transfer station facility and the former landfill (now the Paseo Vista Recreation Area). Fees for use of bulk collection, Recycling and Solid Waste Collection Center (RSWCC) for certain items, and alley collection are being recommended to minimize the overall rate increase needed for all residents. The attached information paper (titled Proposed Utility Rate Changes), shows that single-family customers will see only a very slight increase in their water and wastewater rates effective July 1, 2022. As a result of the COS Study, other customer classes will see varying increases based on their impact on the systems. Outside City rates will continue to be calculated using the current differentials of 1.4 times the Inside City rates for water and reclaimed water, and 1.6 times the Inside City rates for wastewater. If the City Council supports moving forward with the proposed rate changes after the Public Hearing on April 28, 2022, Council will then consider an Ordinance introduction on April 28, 2022, and final adoption on May 12, 2022. City staff has engaged in an extensive public outreach program beginning in January 2022 to ensure all users of these services have the information pertaining to the resulting impact of their planned City utility costs, especially since the COS adjustments mean rate increases vary by customer class. One of the key elements of the public outreach is a short video produced by the Communications and Public Affairs (CAPA) Department, which has been shared through the Chamber of Commerce to businesses, through social media to increase public awareness, and in public meetings. Public outreach has also included three staff-led open meetings (virtual and in person) where attendees were able to ask questions about the rate changes and related projects. The City website, chandleraz.gov/proposedutilityrates, also included a public comment button that allowed residents to provide feedback throughout the process. If Council approves the Notice of Intention (NOI), it will be posted on the City’s website on February 25, 2022. In accordance with State Statute, the City will also publish the notice in the Arizona Republic newspaper showing the date, time, and place of the Public Hearing. Also, as required by State Statute, a copy of the documents supporting the revised Water, Wastewater, and Reclaimed Water fees will be filed with the City Clerk for public review for 30 days prior to the public hearing. The utility financial plans reflect a necessary revenue increase in FY 2022-23 of 2% for the Water Enterprise, 4% for the Wastewater Enterprise, 8% for the Reclaimed Water Enterprise, and 3.4% for the Solid Waste Enterprise, as well as fee changes related to services in alleys, bulk collection, and the RSWCC. These increases will cover additional debt service and operating costs due to new and expanded infrastructure, and maintain the financial integrity of the various enterprises, including debt service coverage and cash reserve policy requirements over the next fiscal year. |