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ITEM 11 |
City Council Memorandum Management Services Memo No.
22-041
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Date: |
May 12, 2022 |
To: |
Mayor and Council |
Thru: |
Joshua H. Wright, City Manager Dawn Lang, Deputy City Manager - CFO |
From: |
Matthew Dunbar, Budget and Policy Assistant Director |
Subject: |
Final Adoption of Ordinance No. 5007 Amending Chapter 50, Sections 50-11, 50-12, and 50-15, and Chapter 44, sections 44-4, 44-5, 44-6, and 44-7, of the Code of the City of Chandler to Change Certain Water, Wastewater, Reclaimed Water, and Solid Waste Fees Effective July 1, 2022 |
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Proposed Motion: |
Move City Council adopt Ordinance No. 5007 amending Chapter 50, sections 50-11, 50-12, and 50-15, and Chapter 44, sections 44-4, 44-5, 44-6, and 44-7, of the Code of the City of Chandler to change certain Water, Wastewater, Reclaimed Water, and Solid Waste Fees effective July 1, 2022. |
Background: |
As required by the City’s Financial Policies, a Cost of Service (COS) study and review of current Water, Wastewater, Reclaimed Water, and Solid Waste Enterprises were conducted as part of the Fiscal Year (FY) 2021-22 Budget process. The review of the current financial situation and future requirements determined that rate increases were required for FY 2022-23 for each utility. In addition to determining the amount of revenue required for each utility, the analysis also included a COS study that looked more closely within the water and wastewater utilities to determine how much each customer class should be paying for services provided. The results of the COS study showed that, over time, customer classes’ demands have changed and there are some customer classes paying more than their share of the required costs and others paying less than their share. In lieu of applying “across the board” rate increases to generate the revenue needed for the Water and Wastewater Systems, the COS study results will be incorporated over time to get each customer class back into alignment while generating the necessary additional revenue for each utility. The impact of the FY 2022-23 rate changes are summarized below and on the attached schedules, which show comparisons between existing rates and proposed rates for each category. Water Rates: The financial plan review resulted in a determination that an overall water utility revenue increase of 2% is required for FY 2022-23. The revenue increase of 2% is necessary to meet current and future financial commitments, specifically to cover additional debt service costs tied to expansion of facilities. Based on the COS study, rate increases vary by customer class to start moving the customer classes back into alignment. Rate increases recommended for each classification are: Single Family 1.27%, Multi-Family 1.83%, Non-Residential 3.79%, Landscape 5.88%, and Industrial 4.33%. Outside City rates will continue to be calculated using the current differentials of 1.4 times the inside City rates. Wastewater Rates: The financial plan review resulted in a determination that an overall wastewater utility revenue increase of 4% is required for FY 2022-23. The revenue increase of 4% is necessary to meet current and future financial commitments, specifically to cover additional debt service costs tied to new construction and expansion of facilities. Based on the COS study, rate increases vary by customer class to start moving the customer classes back into alignment. The proposed 1.21% increase for single family customers will result in the monthly household wastewater bill increasing $0.33, from $27.32 per month to $27.65 per month. Multi-family customer rates will increase 8.3%, or $0.81 per unit, and non-residential customer rates will increase 6.88%. Outside City rates will continue to be calculated using the current differentials of 1.6 times the inside City rates. Reclaimed Water Rates: The financial plan review resulted in a determination that an FY 2022-23 rate increase of 8% is necessary to meet current and future financial commitments, as well as recommendations currently shown in the Water and Wastewater system costs. The proposed 8% increase for all customers will result in a new rate of $0.75 per 1,000 gallons, up from the current $0.69 for all metered users. Outside City rates will continue to be calculated using the differential of 1.4 times the inside City rates. Solid Waste Rates: The financial plan review resulted in a determination that the FY 2022-23 rate increase of 6% is necessary to meet current and future financial commitments, specifically increases to the third-party solid waste provider contract reflecting consumer price index and fuel adjustments. Along with the proposed rate change are policy and fee changes discussed below that will generate enough additional revenue to reduce the recommended 6% increase to 3.4%, which will result in the Solid Waste portion of the utility bill increasing $0.61, from $17.95 per month to $18.56 per month for covered residences without alleys. In addition to the rate increases included in this Ordinance, there are three fee and/or policy changes recommended as part of a separate resolution, also on this City Council meeting agenda, that utilize system efficiencies to generate necessary revenues: (1) The Resolution will add a $1.61 monthly fee to all covered residences which have alley collection. (2) The Resolution will change the number of No Charge Bulk pick-ups from one every six (6) weeks to two (2) per calendar year, with additional collections being charged a fee. (3) The Resolution will change the fees for use of the Recycling Solid Waste Collection Center (RSWCC) from no cost for covered residences to two (2) no charge visits for loads up to 400 pounds per calendar year for covered residences, with additional visits or the weight over the first 400 pounds being charged a fee as identified in the resolution. Approved and tentatively adopted on April 28, 2022. |
Discussion: |
In accordance with State Statutes, the Official Notice of Intention to Increase Certain Water, Wastewater, Reclaimed Water, and Solid Waste rates was approved by Council on February 24, 2022 (attached), posted on the City’s website, and published in the Arizona Republic newspaper showing the date, time, and place of the Public Hearing. As is also required by State Statutes, a copy of the documents supporting the revised Water, Wastewater, Reclaimed Water, and Solid Waste fees were filed with the City Clerk for public review 30 days prior to the hearing, which was also held on April 28, 2022. From January through March of 2022, City staff conducted public outreach using a 12-minute video produced by the Communications and Public Affairs (CAPA) Department, postcards targeted to alley customers, three public meetings, and discussions with key stakeholders and partners. Extensive background material was also posted on the City’s website to provide easy access for citizens and businesses. |
Financial Implications: |
The financial plan reflects revenue increases needed of 2% for Water, 4% for Wastewater, 8% for Reclaimed Water, and 3.4% for Solid Waste Enterprises. These increases will cover additional debt service costs needed to finance infrastructure, anticipated contract cost increases, and ensure the enterprise funds continue to meet reserve amounts established by the City financial policies and by debt covenants. |
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