Print All

CITY COUNCIL REGULAR MEETING AGENDA

REGULAR COUNCIL MEETING
WEDNESDAY
JULY 3, 2024

COUNCIL CHAMBERS
211 WEST ASPEN AVENUE
3:30 P.M.

All City Council Meetings are live streamed on the city's YouTube page
(https://www.youtube.com/@FlagstaffCityGovernment)

***PUBLIC COMMENT***

Verbal public comments not related to items appearing on the posted agenda may be provided during the "Open Call to the Public" at the beginning and end of the meeting and may only be provided in person.

Verbal public comments related to items appearing on the posted agenda may be given in person or online and will be taken at the time the item is discussed.

To provide online verbal comment on an item that appears on the posted agenda, use the link below.

ONLINE VERBAL PUBLIC COMMENT

Written comments may be submitted to publiccomment@flagstaffaz.gov. All comments submitted via email will be considered written comments and will be documented in the record as such.

CALL TO ORDER

NOTICE OF OPTION TO RECESS INTO EXECUTIVE SESSION

Pursuant to A.R.S. §38-431.02, notice is hereby given to the members of the City Council and to the general public that, at this regular meeting, the City Council may vote to go into executive session, which will not be open to the public, for discussion and consultation with the City's attorneys for legal advice on any item listed on the following agenda, pursuant to A.R.S. §38-431.03(A)(3).

ROLL CALL

NOTE: One or more Councilmembers may be in attendance through other technological means.

MAYOR DAGGETT
VICE MAYOR ASLAN
COUNCILMEMBER HARRIS
COUNCILMEMBER HOUSE

COUNCILMEMBER MATTHEWS
COUNCILMEMBER MCCARTHY
COUNCILMEMBER SWEET

PLEDGE OF ALLEGIANCE, MISSION STATEMENT, AND LAND ACKNOWLEDGEMENT

MISSION STATEMENT

The mission of the City of Flagstaff is to protect and enhance the quality of life for all.

LAND ACKNOWLEDGEMENT

The Flagstaff City Council humbly acknowledges the ancestral homelands of this area's Indigenous nations and original stewards. These lands, still inhabited by Native descendants, border mountains sacred to Indigenous peoples. We honor them, their legacies, their traditions, and their continued contributions. We celebrate their past, present, and future generations who will forever know this place as home.

Consideration and Adoption of Resolution No. 2024-30 and Ordinance No. 2024-19: A Resolution of the Flagstaff City Council declaring as a public record that certain document filed with the City Clerk and entitled "Water Services Rates Code Changes" and An Ordinance of the City Council of the City of Flagstaff, amending the Flagstaff City Code Title 3, Business Regulations, Section 3-10-001-0008 License Fees and Title 7, Health and Sanitation, Chapter 7-02 Wastewater Regulations, and Chapter 7-03 Water Regulations, by adopting by reference that certain document entitled "Water Services Rates Code Changes"; providing for penalties, repeal of conflicting ordinances, severability, and establishing an effective date

STAFF RECOMMENDED ACTION:

Adopt Resolution No. 2024-30
Read Ordinance No. 2024-19 by title only for the final time
City Clerk reads Ordinance No. 2024-19 by title only (if approved above)
Adopt Ordinance No. 2024-19

ADJOURNMENT

CERTIFICATE OF POSTING OF NOTICE

The undersigned hereby certifies that a copy of the foregoing notice was duly posted at Flagstaff City Hall on                , at                    a.m./p.m. in accordance with the statement filed by the City Council with the City Clerk.

Dated this                   day of                                          , 2024.

__________________________________________
Stacy Saltzburg, MMC, City Clerk

THE CITY OF FLAGSTAFF ENDEAVORS TO MAKE ALL PUBLIC MEETINGS ACCESSIBLE TO PERSONS WITH DISABILITIES. With 48-hour advance notice, reasonable accommodations will be made upon request for persons with disabilities or non-English speaking residents. Please call the City Clerk (928) 213-2076 or email at stacy.saltzburg@flagstaffaz.gov to request an accommodation to participate in this public meeting.

NOTICE TO PARENTS AND LEGAL GUARDIANS: Parents and legal guardians have the right to consent before the City of Flagstaff makes a video or voice recording of a minor child, pursuant to A.R.S. § 1-602(A)(9). The Flagstaff City Council meetings are live-streamed and recorded and may be viewed on the City of Flagstaff's website. If you permit your child to attend/participate in a televised Council meeting, a recording will be made. You may exercise your right not to consent by not allowing your child to attend/participate in the meeting.

CITY OF FLAGSTAFF

STAFF SUMMARY REPORT

To:

The Honorable Mayor and Council

From:

Erin Young, Water Resources Manager

Co-Submitter:

Shannon Jones, Water Services Director

Date:

07/02/2024

Meeting Date:

07/03/2024

TITLE:

STAFF RECOMMENDED ACTION:

Adopt Resolution No. 2024-30
Read Ordinance No. 2024-19 by title only for the final time
City Clerk reads Ordinance No. 2024-19 by title only (if approved above)
Adopt Ordinance No. 2024-19

Executive Summary:

This action adopts an ordinance increasing water, sewer, and reclaimed water user and service fees, and water and sewer capacity fees. The charges are increased over five years to adequately fund operations, maintenance, debt repayment, and replacement projects contained in the ten-year capital improvement program per Council direction.

Financial Impact:

Water, wastewater, and reclaimed water utility rates and fees and water and wastewater capacity charges will be phased in over a 5-year period. The new rates for Year 1 would take effect on September 1, 2024:

Year 1: September 1, 2024 through December 31, 2025
Year 2: January 1, 2026 through December 31, 2026
Year 3: January 1, 2027 through December 31, 2027
Year 4: January 1, 2028 through December 31, 2028
Year 5: January 1, 2029 through December 31, 2029

Policy Impact:

The City is proposing modifications to the water, wastewater, and reclaimed water rates and rate structures, increasing water and sewer capacity fees, and increasing miscellaneous water charges, to meet cost recovery requirements for services provided to specific customers. The impact on the combined utility bill for water and wastewater service was carefully considered in determining the appropriate balance between the proposed rate changes and debt financing. Based on the ten-year financial plans, a synopsis of cost impacts is explained below:

Water
The water enterprise fund is impacted by multiple cost factors over the five-year planning period including:

Operating cost increases for treatment chemicals due to scarcity and supply challenges.
Operating cost increases for contractual services necessary for treating raw water.
Increasing costs for replacing and repairing aging infrastructure.
Surface water treatment plant upgrades to improve water source resiliency and maintain water quality.
Increasing costs required for drought preparedness through watershed health.
Additional operations and trades staff to support a growing community, and capital improvement program development.
Operating cost increases for personnel services and benefits.
Adjustments to water capacity fess and revenues to align fee per single family equivalent (3/4-inch meter equivalent) with current level of service requirements, growth-related shares of past infrastructure investments and planned capital improvements, and preparations for sustainable future water supplies.
While Water Services proposed to decrease the base fee from 29% cost recovery to 25% cost recovery, the overall increases to base fees are proposed to better reflect the recovery of fixed operating costs.
Increases to commodity rates are proposed to generate sufficient revenues to maintain the water fund as a self-sustaining enterprise, encourage efficient water use and urge conservation.
Condensing the Institutional customer class to the Commercial customer class to remove single-user categories from the customer class list.
Additionally, the ratios between water rate tiers are being adjusted to provide price incentives for efficiency indoors and re-setting the cost-of-service of providing water for outdoor water uses.

Wastewater
The wastewater enterprise fund is impacted by multiple cost factors over the five-year planning period including:

Operating cost increases for treatment chemicals due to scarcity and supply challenges.
Increasing cost for replacing and repairing aging infrastructure.
Maintenance cost increases of system infrastructure due to deferred maintenance due to a lack of funding and increased system demand.
Operating cost increases for personnel services and benefits.
The introduction of base fees are proposed to reflect the recovery of fixed operating costs and adjusted for the cost-of-service to each customer class.
Adjustment to the wastewater capacity fees and revenues to align the fee per single family equivalent (3/4-inch meter equivalent) with current level of service requirements including solids treatment capacity, growth-related shares of past infrastructure investments and planned capital improvements, and preparations for future wastewater treatment expansions.
Adjustments to volumetric rates are proposed to reflect the cost of wastewater loadings by customer class and generate sufficient revenues to maintain the wastewater fund as a self-sustaining enterprise.

Overall, from FY 2025 through FY 2029, the water, wastewater, and reclaimed water base fee and volumetric rate changes are forecasted to generate an increase in average annual revenue of up to $1.7 million or 9.4% in the water fund, $1.7 million or 12.5% in the wastewater fund, and $102,000 or 8.1% in the reclaimed water fund and become effective September 1, 2024. Details of the increase are provided in a written report with data supporting the changes on file with the City Clerk and posted to Flagstaff's Rate Study webpage at www.cleanwaterflagstaff.com.

Water and Wastewater Miscellaneous Charges
To address cost recovery, to meet the City's financial policy that charges recover all direct and indirect costs of service, miscellaneous charges are assessed to specific users of the service so that general rate payers do not bear the burden.

Previous Council Decision or Community Discussion:

On April 16, 2024 Council adopted a Notice of intention to increase water, sewer, and reclaimed water rates or rate components, fees, or service charges

Water Services has presented on various elements of the rate study to City Council beginning February 2023. The videos of these meetings are available on the City's Rate Study website cleanwaterflagstaff.com from the "View Past Meetings" tab. Here is a list of all meetings where staff presented to City Council on the Rate Study:

February 21, 2023 Discussion regarding a rate and fee study for water, reclaimed water, and wastewater funds.
March 7, 2023 Consideration of a Contract for Professional Services with Stantec Consulting Services, Inc
September 5, 2023 Introduction of the Rate Study Team
December 12, 2023 Water, Wastewater, and Reclaimed Water Rate Study Presentation 1 of 2 on Capacity Fees and Misc. Fees
January 23, 2024 Water, Wastewater, and Reclaimed Water Rate Study Presentation 2 of 3 on Capacity Fees and Misc. Fees
February 6, 2024 Water, Wastewater, and Reclaimed Water Rate Study Presentation 3 of 3 on Capacity Fees and Misc. Fees
February 13, 2024 Introduction to Water, Wastewater, Reclaimed Water Rate Design
April 2, 2024 Follow-up discussion from the March 25, 2024 City Council - Water Commission Joint Meeting
April 16, 2024 Notice of intention to increase water, sewer, and reclaimed water rates or rate components, fees, or service charges
May 16, 2024 Council special worksession; presentation from Water Services Director on the operational needs of the Division
May 21, 2024 Presentation from Stantec on Financial Model Assumptions; Direction from Council on changes to assumptions
June 4, 2024 Staff presentation on the results of Council's Direction; Council directed staff to proceed with changes for the June 18 Public Hearing

Joint meetings of the Flagstaff City Council and Water Commission were held on the following dates. The videos of these meetings are available on the City's Rate Study website cleanwaterflagstaff.com from the "View Past Meetings" tab.

October 23, 2023 Discussion and Direction on the Rate Study Financial Plans
March 4, 2024 Wastewater Rate Design Workshop & Direction on Rate Design
March 25, 2024 Water & Reclaimed Water Rate Design Workshop & Direction on Rate Design

Presentations were provided to the Water Commission about the Rate Study on the following dates. The videos of these meetings are available on the City's Rate Study website cleanwaterflagstaff.com from the "View Past Meetings" tab.

August 7, 2023 Introduction of Stantec Team
September 21, 2023 Rate Study Update on Task 2
October 19, 2023 Rate Study Financial Planning Scenarios Presentation and Discussion
November 16, 2023 Rate Study Approach for Capacity Fee Calculations, Cost Allocations, Misc. Fees
December 14, 2023 Update on Capacity Fee Calculations, Cost Allocations, Misc. Fees
January 18, 2024 Water, Wastewater, and Reclaimed Water Rate Study Presentation on Capacity Fees and Misc. Fees
February 15, 2024 Rate Design Discussions with Water Commission
March 21, 2024 Brief update from staff with questions for commissioners
April 18, 2024 Stantec provided the same presentation given to Council on April 16

Community Meetings

Water Services held a Water Rate Study Informational Meeting on December 7, 2023. This was a public information meeting available as a dial-in (spanish or english) or WebEx. Video is available on cleanwaterflagstaff.gov
Water Services held a drop-in meeting on Capacity Fees at its Administrative Offices on January 30 & 31
Water Services tabled at the Downtown Community Library on April 1 from 5-7 pm; Jay Lively Ice Arena on April 3 from 5-7 pm
Water Services tabled at Science Saturday at Willow Bend on April 6, Joe Montoya on April 10 from 10-noon
Water Services held a drop-in event at the East Flagstaff Community Library on April 8, 2024 from 5:30 to 7:00 pm
Water Services provided information on the rate study and held a tour at the Rio de Flag Water Reclamation Plant on April 13, 2024 at 10 am
Water Services tabled at Earth Day on April 20th from 11 am to 2 pm
Water Services were invited to introduce the rate study before a hike at Schultz Creek with Friends of the Rio de Flag on May 2 at 5 pm
Water Services tabled for the rate study during the Arizona Department of Environmental Quality community event on wastewater systems at the East Flagstaff Library on May 8, 2024 from 5:30 to 7 pm
Water Services held a drop-in event at the Aquaplex on May 18, 2024 from 11 am to 2 pm

Meetings to discuss various components of the Rate Study have been held with individual customers and community groups including the Greater Flagstaff Chamber of Commerce, Capstone Homes, Northern Arizona University, Snowbowl, a member of the Downtown Business Alliance, Historic Brewery, Joy Cone. Community "Roundtable" type discussions were held in September 2023. Staff also presented to the Economic Collaborative of Northern Arizona, Friends of Flagstaff's Future, and the City's Tourism Commission (April 25), Airport Commission (May 9), and Housing Commission (May 23). The community groups comprised representatives of the City of Flagstaff's commissions.

The City released a website for rate study information in October, 2023 at cleanwaterflagstaff.com. Between October and April, the website had over 2,800 views. The site had 2,966 views in April, and 4,188 views in May. A Water Rate Calculator was added to the site on April 16 and video on how to use the calculator is available on the website, released on May 24. Customers can leave comments from the website.

Water Services has emailed out notices throughout the study to multiple lists of customers and organizations, sharing information about Council or Commission meetings, and community meetings, to customers monthly. The City's Public Information Office issued press releases related to the rate study, on October 16, 2023, December 12, 2023, February 29, 2024, and March 28, 2024. A notice of the June 18 and July 2 public hearing dates are scheduled for the Daily Sun.

Options and Alternatives to Recommended Action:

Council may elect to change elements of the rate study. Doing so would result in a time and dollar increase change order on the contract with Stantec and delay the public hearing process.

Connection to PBB Priorities and Objectives:

Serve the public by providing high-quality customer service
Deliver outstanding services to residents through a healthy, well-maintained infrastructure system
Support and strengthen a robust, diverse, and sustainable economy
Promote, protect, and enhance a healthy, sustainable environment and its natural resources

Connection to Regional Plan:

Goal WR.2. Manage a coordinated system of water, wastewater, and reclaimed water utility service facilities and resources at the City level and identify funding to pay for new resources.
Goal WR.4. Logically enhance and extend the City's public water, wastewater, and reclaimed water services including their treatment, distribution, and collection systems in both urbanized and newly developed areas of the City to provide efficient delivery of services.

Connection to Carbon Neutrality Plan:

CR-2 Strengthen existing community systems to create resilience to both short-term shocks and long-term change.
WS-1 Improve water infrastructure and expand water reuse.
HS-3 Adequately fund services for disaster preparedness.
HS-4 Improve the resilience of public infrastructure and City facilities.

Connection to 10-Year Housing Plan:

None

Connection to Division Specific Plan:

Council-adopted Water Policies (Utilities Integrated Master Plan 2014)
Section A Finance Policies:
Policy A1.1, A1.2
Policy A3.1, A3.2, A3.3

Attachments:

Res. 2024-30

Water Services Rates Code Changes

Ord. 2024-19