Print Staff Summary Report

10.A.

CITY OF FLAGSTAFF

STAFF SUMMARY REPORT

To:

The Honorable Mayor and Council

From:

Co-Submitter:

Erin Young, Water Services Manager, and Shannon Jones, Water Services Division Director

Date:

05/16/2024

Meeting Date:

05/21/2024

TITLE:

Water, Sewer, and Reclaimed Water Rates and Fees Study Special Work Session

DESIRED OUTCOME:

City staff and the City's Consultant, Stantec, are addressing questions from the City Council related to the assumptions used in the rate model. City staff and Stantec will facilitate a discussion on financial planning scenarios and how those might influence the outcome of the proposed rates for water, sewer, and reclaimed water rates and fees. The desired outcome is for the Council to provide their direction on the financial planning scenarios.

Executive Summary:

City staff and Stantec have been discussing the rate study components with the Water Commission and City Council since September 2023. There have been discussions about financial planning; capacity fees; rate design priorities; water, sewer, and reclaimed water rates; and miscellaneous fees. During today's presentation, City staff will provide an update to Council on the most recent outreach efforts that continue to provide awareness to the community about the rate study and the proposed rates. City staff will share information about the water services division, operations and maintenance, capital improvements, and the impacts of the proposed rates. This conversation will lead us to the four financial planning scenarios for Council consideration. This is a continuation of the discussion from May 16, 2024.

Information:

City Council and the Water Commission have committed a significant amount of time learning about the rate study process, policy strategies, financial planning, cost-of-service details, and potential rate designs to create the proposed water, sewer, and reclaimed rates. All of this information is available on the cleanwaterflagstaff.com website. The team of Stantec and City staff members have worked to build a rate calculator that is available on this website, so community members and businesses are able to see what their water and sewer bills may look like for the upcoming five years based on the proposed rates. The group has invested in radio, print, social media, and digital advertising to provide outreach and educational opportunities. In this presentation the team will share some of the outcomes of this outreach and what efforts will continue over the next few months.

During the last several months of meetings, there have been discussions about revenue needs and the opportunities available to meet those financial needs. City staff will spend time during today's presentation providing the operational details behind these numbers. Sharing how these revenues are used to maintain service and what happens when there are shortages or unexpected challenges. The capital improvement plan makes up a large portion of the water services revenue needs and City staff will provide an explanation of the approved, informed, and unfunded capital project lists and how this looks across the community. These future revenue needs are built upon assumptions and staff will provide background on how the assumptions in the rate model were derived based on today's experiences. Given altering these assumptions can result in different outputs, Stantec has created four financial planning scenarios to demonstrate how changing assumptions on growth, cost escalation, debt or CIP execution can alter the resulting proposed rates.

*Please note the attached financial planning scenarios presentation still includes drafts of updated rate projections and bill impacts. These will be finalized following the completion of Stantec's quality control review process.

Attachments:

Water, Sewer, and Reclaimed Water Rate Study

Financial Planning Scenarios

Rate Study Proposed CIP