Full Text
Water and Sewer Rate Study Water and Sewer Rate Study Stakeholder Meetings Stakeholder Meetings Stakeholder Meetings Stakeholder Meetings Meeting No. 1 April 9, 2009 Pathways to Lasting Solutions © 2008 Malcolm Pirnie, Inc. All Rights Reserved ---PAGE BREAK--- Agenda Agenda Agenda Agenda g 1. Introductions 2. Stakeholder Group Mission 3. Background 4. Utility Infrastructure Overview Richard Elliot, Director of Public Works 5 Financial Planning 101 5. Financial Planning 101 6. Key Issues Facing the Utilities 7 Financial Plan Results 7. Financial Plan Results 8. Closing Comments Pathways to Lasting Solutions ---PAGE BREAK--- Introductions / Project Team Organization Introductions / Project Team Organization Introductions / Project Team Organization Introductions / Project Team Organization j g j g j g j g City Project Management Q lit A Stakeholder Committee Richard Elliott, Director Public Works Department Malea Brown, Director Administrative Svcs. Department City Project Management Quality Assurance John Gallagher, PE Stakeholder Groups Residential Commercial Administrative Svcs. Department Dennis Jackson, PE Project Manager Red Oak Management Wholesale University Ranching Financial Planning and Rate Design Isalah Rounds Lead Analyst Pathways to Lasting Solutions ---PAGE BREAK--- Stakeholder Group Mission Stakeholder Group Mission Stakeholder Group Mission Stakeholder Group Mission p The City of Laramie Stakeholder Committee has been created to: Allow citizens and stakeholders the opportunity to represent the community in the ratemaking process in a cooperative effort Provide valuable input to the City regarding water and Provide valuable input to the City regarding water and wastewater rates from the community and customer perspective Understand the challenges facing the utility, and how rates will g g y, be structured and implemented to help meet those challenges Educate the community and individual constituencies with respect to water and wastewater rate structures Pathways to Lasting Solutions ---PAGE BREAK--- Discussion Process Discussion Process Discussion Process Discussion Process All perspectives are valued The preferred deliberation process is collaborative problem solving Stakeholder Committee members will treat each other with respect (one person speaks at a time, etc.) Pathways to Lasting Solutions ---PAGE BREAK--- Stakeholder Committee Work Product Stakeholder Committee Work Product Stakeholder Committee Work Product Stakeholder Committee Work Product Summary of the scope and content of Stakeholder Committee's discussion Findings and conclusions – to be provided to City Council Council At the conclusion of this process, Red Oak and the City will provide a draft of these items for your the City will provide a draft of these items for your review. Pathways to Lasting Solutions ---PAGE BREAK--- Background Background Background Background g Water & Sewer Enterprise Funds are self-sufficient Examine the utilities as separate enterprise operations, and establish the future revenue requirements for each utility requirements for each utility. Develop a projection of cash flow and debt service coverage for the combined utilities over a ten-year study period. Study included three phases Phase I - Prepare Financial Plan Phase II - Cost of Service Analysis Phase III - Design Rates Pathways to Lasting Solutions Phase III - Design Rates ---PAGE BREAK--- Background: Background: Rate Study Uses A Sequential Approach Rate Study Uses A Sequential Approach Background: Background: Rate Study Uses A Sequential Approach Rate Study Uses A Sequential Approach Rate Study Uses A Sequential Approach Rate Study Uses A Sequential Approach Rate Study Uses A Sequential Approach Rate Study Uses A Sequential Approach Project Orientation Orientation Financial Plan Presentation to City Staff and Stakeholder Workshop 1 Workshop with Staff Cost Analysis Rate Design Finance Committee Stakeholder Workshop 2 Workshop 1 g Draft Report Stakeholder Workshop 3 City R i Final Report Final Presentation Review Pathways to Lasting Solutions ---PAGE BREAK--- Utility Infrastructure Overview Utility Infrastructure Overview Utility Infrastructure Overview Utility Infrastructure Overview Utility Infrastructure Overview Utility Infrastructure Overview Utility Infrastructure Overview Utility Infrastructure Overview Richard Elliott Richard Elliott Public Works Director City of Laramie Pathways to Lasting Solutions ---PAGE BREAK--- Water Distribution System Water Distribution System Water Distribution System Water Distribution System y 260-miles of pipeline to be maintained 15-miles installed prior to 1928, most installed before 1950 Majority of system is cast-iron pipe Soils in Laramie are corrosive to metal pipe Average replacement rate has been 1- mile/year y Minimum benchmark is 4-miles per year Pathways to Lasting Solutions ---PAGE BREAK--- Examples of Water Pipe from Laramie Examples of Water Pipe from Laramie Examples of Water Pipe from Laramie Examples of Water Pipe from Laramie p p p p System System p p p p System System Pathways to Lasting Solutions ---PAGE BREAK--- E R L k E R L k E R L k E R L k Emergency Response Leaks Emergency Response Leaks Emergency Response Leaks Emergency Response Leaks 140 160 180 80 100 120 140 20 40 60 80 Water Leaks/Year 0 20 2004 2005 2006 2007 2008 2009 * Pathways to Lasting Solutions ---PAGE BREAK--- Sewer Systems Sewer Systems Sewer Systems Sewer Systems y 160-miles of sanitary sewer pipe and 170- miles of storm water pipe to be maintained A f i i th t t Age of pipe mirrors the water system, most installed prior to 1950 Minimum benchmark for replacement is Minimum benchmark for replacement is 3.5-miles per year Replacement rate is < 1-mile per year Replacement rate is < 1-mile per year Pathways to Lasting Solutions ---PAGE BREAK--- Inside the Sanitary Sewers Inside the Sanitary Sewers Inside the Sanitary Sewers Inside the Sanitary Sewers y Pathways to Lasting Solutions ---PAGE BREAK--- Cost of Infrastructure Cost of Infrastructure Cost of Infrastructure Cost of Infrastructure Replacement costs for water or sewer $ pipe can exceed $300 per foot under asphalt Much of the system is undersized to serve the present needs (domestic and fire) fire) Condition of existing systems constrain f t re de elopment future development Pathways to Lasting Solutions ---PAGE BREAK--- Recent Activities Recent Activities Recent Activities Recent Activities Red Oak Consulting hired in 2008 to review City’s utility rate structure y y Question: What would it take to reverse trends of failing and inadequate infrastructure? Question: Does current rate structure need to be changed? Form Stakeholders Group of representative Form Stakeholders Group of representative citizens and rollout information at 3 meetings Provide final report with options and Provide final report with options and recommendations to City Council in mid-May Pathways to Lasting Solutions ---PAGE BREAK--- Schedule of Stakeholder Meetings Schedule of Stakeholder Meetings Schedule of Stakeholder Meetings Schedule of Stakeholder Meetings g Meeting April 9 – Financial Plan Meeting April 23 – Cost of Service Allocation Meeting May 7 – Rate Structure Design Pathways to Lasting Solutions ---PAGE BREAK--- FINANCIAL PLANNING FINANCIAL PLANNING FINANCIAL PLANNING FINANCIAL PLANNING FINANCIAL PLANNING FINANCIAL PLANNING FINANCIAL PLANNING FINANCIAL PLANNING Pathways to Lasting Solutions ---PAGE BREAK--- Study Scope Study Scope Study Scope Study Scope y p y p y p y p Financial Plan Forecasts revenues needed to meet projected costs p j Cost Analysis Determines cost basis for rate design Rate Design Rate Design Develops adequate, fair and understandable rates Pathways to Lasting Solutions ---PAGE BREAK--- Assumptions Assumptions Assumptions Assumptions p Beginning fund balance Description Water Amount Wastewater Amount Amount Amount Unrestricted Cash $6,369,268 $3,719,839 Accrued Vacation Pay (5,600) 7,700 One Year Annual Debt Service Payments (1,384,000) (931,000) 90 Days of O&M Expenses (868 000) (470 000) 90 Days of O&M Expenses (868,000) (470,000) Investments (restricted) (393,800) (1,000,000) One Percent of Fixed Assets (720 000) (313 000) One Percent of Fixed Assets (720,000) (313,000) Total Available Beginning Fund Balances $2,998,000 $1,013,500 Pathways to Lasting Solutions Balances ---PAGE BREAK--- Assumptions (cont.) Assumptions (cont.) Assumptions (cont.) Assumptions (cont.) p ( ) p ( ) p ( ) p ( ) 2009 budget generally the basis for cash flow projection Growth rate: 1% per year p y Inflation O&M expenses: 3.5% Routine capital, including vehicles: 4.0% Routine capital, including vehicles: 4.0% CIP: 10% Proposed bonds: 20 year, 5.0% Proposed state loans: 20 year 4 0% Proposed state loans: 20 year, 4.0% Investment income: 0.5% Targeted Reserves Operating Fund: 90 days of O&M expenses Capital Fund: 1% of fixed assets Pathways to Lasting Solutions ---PAGE BREAK--- Financial Planning Financial Planning – Revenue Sufficiency Revenue Sufficiency Financial Planning Financial Planning – Revenue Sufficiency Revenue Sufficiency g y g y Rate Revenue must be sufficient: To meet O&M, debt service, and capital requirements To meet established cash reserve or fund balance targets To meet legal debt service coverage requirements Pathways to Lasting Solutions ---PAGE BREAK--- Demand and Volume Projections Pricing Customer Growth Projections sion Financial Plan Alternatives Revenue Requirements Comprehensive Rate Report Funding Requirement Alternatives Final Decisions c g Strategies Capital Improvement nancial Vis Alternatives Rate Alternatives Analysis Alternatives Budget Analysis 0-year Fin rmation Decisions rmation Decisions Interactive Customized Model Forecast Assumptions udget And Billing Data 1 Presentations/Interactive Sessions with Staff and Stakeholders Infor Key Infor Key Pathways to Lasting Solutions ---PAGE BREAK--- Key Issues Facing the Utility and Key Issues Facing the Utility and Addressed in the Financial Plan Addressed in the Financial Plan Key Issues Facing the Utility and Key Issues Facing the Utility and Addressed in the Financial Plan Addressed in the Financial Plan Addressed in the Financial Plan Addressed in the Financial Plan Addressed in the Financial Plan Addressed in the Financial Plan Renewal and Replacement of Infrastructure Renewal and Replacement of Infrastructure Number of utility personnel (or “Employee Efficiency”) Monolith Ranch Expenses Indirect Cost Reimbursement to the General Fund V hi l Vehicles O&M Cost Control Pathways to Lasting Solutions ---PAGE BREAK--- Revenue Requirements for Each Utility Revenue Requirements for Each Utility Revenue Requirements for Each Utility Revenue Requirements for Each Utility Revenue Requirements for Each Utility Revenue Requirements for Each Utility Revenue Requirements for Each Utility Revenue Requirements for Each Utility D l i t f 10 t d Develop revenue requirements for a 10-year study period for water and wastewater operations Identify the level and timing of replacement funding Identify the level and timing of replacement funding options Recognize saving for aging infrastructure needs g g g g Identify loans required - update the cash flow analysis Pathways to Lasting Solutions ---PAGE BREAK--- Capital Funding Capital Funding Capital Funding Capital Funding p g p g p g p g Types of capital needs: Growth Needs: New demand System expansion System expansion Renewal and Replacement Needs: Provide for greater efficiency or system redundancy Replace assets that become obsolete, wear out or otherwise exceed their useful life Pathways to Lasting Solutions ---PAGE BREAK--- Financial Plan Supports a Water and Financial Plan Supports a Water and W t t CIP f $85 650 000 W t t CIP f $85 650 000 Financial Plan Supports a Water and Financial Plan Supports a Water and W t t CIP f $85 650 000 W t t CIP f $85 650 000 Wastewater CIP of $85,650,000 Wastewater CIP of $85,650,000 (2009 Dollars) (2009 Dollars) Wastewater CIP of $85,650,000 Wastewater CIP of $85,650,000 (2009 Dollars) (2009 Dollars) ( ) ( ) ( ) ( ) Pathways to Lasting Solutions ---PAGE BREAK--- Alternative Sources of Capital Financing Alternative Sources of Capital Financing Alternative Sources of Capital Financing Alternative Sources of Capital Financing Alternative Sources of Capital Financing Alternative Sources of Capital Financing Alternative Sources of Capital Financing Alternative Sources of Capital Financing U f User fees Federal, State grants and loans Specific Purpose Tax Specific Purpose Tax Bonding Plant investment fees Special Assessments Pathways to Lasting Solutions ---PAGE BREAK--- Financial Plan Summary Financial Plan Summary Financial Plan Summary Financial Plan Summary Findings summarized in April 9, 2009 Memorandum. g p , 10-year study period Cash flow of revenue and revenue requirements Reserves Operating Fund Capital Fund Capital Fund Annual revenue adjustments Debt service coverage g Pathways to Lasting Solutions ---PAGE BREAK--- Financial Forecast With Existing Financial Forecast With Existing Revenues (Rates) Revenues (Rates) Financial Forecast With Existing Financial Forecast With Existing Revenues (Rates) Revenues (Rates) Revenues (Rates) Revenues (Rates) Revenues (Rates) Revenues (Rates) Pathways to Lasting Solutions ---PAGE BREAK--- Annual Annual Revenue Revenue Adjustments Needed to Adjustments Needed to Sustain Financial Health Sustain Financial Health Annual Annual Revenue Revenue Adjustments Needed to Adjustments Needed to Sustain Financial Health Sustain Financial Health Sustain Financial Health Sustain Financial Health Sustain Financial Health Sustain Financial Health Year Water Wastewater 2009 0% 0% 2010 19% 18% 2011 17% 18% 2012 17% 17% 2012 17% 17% 2013 17% 16% Cumulative 91% 89% Pathways to Lasting Solutions ---PAGE BREAK--- Financial Forecast Under Financial Forecast Under Proposed Proposed Revenues (Rates) Revenues (Rates) Financial Forecast Under Financial Forecast Under Proposed Proposed Revenues (Rates) Revenues (Rates) Revenues (Rates) Revenues (Rates) Revenues (Rates) Revenues (Rates) Pathways to Lasting Solutions ---PAGE BREAK--- Stakeholder Meeting Schedule Stakeholder Meeting Schedule Stakeholder Meeting Schedule Stakeholder Meeting Schedule g Meeting Financial Plan – April 9, 2009 Meeting Financial Plan April 9, 2009 Meeting Cost of Service – April 23, 2009 Meeting Rate Design – May 7, 2009 Pathways to Lasting Solutions ---PAGE BREAK--- Closing Comments Closing Comments Closing Comments Closing Comments g Pathways to Lasting Solutions ---PAGE BREAK--- For Additional Information Contact For Additional Information Contact For Additional Information Contact For Additional Information Contact Dennis Jackson Dennis Jackson Project Manager [EMAIL REDACTED] Isalah Rounds Red Oak Consulting - Denver 100 Fillmore Street Suite 200 Isalah Rounds Analyst [EMAIL REDACTED] John Gallagher 100 Fillmore Street, Suite 200 Denver, CO 80206 Phone: (303) 316-6500 F (303) 316 6599 John Gallagher Principal, Quality Assurance [EMAIL REDACTED] Fax: (303) 316-6599 Pathways to Lasting Solutions ---PAGE BREAK--- Current Water Rates Current Water Rates Current Water Rates Current Water Rates Charge Amount Base Fee by Meter Size ¾” $ 13.67 1” $ 22.97 1 ½” $ 45 22 1 ½ $ 45.22 2” $ 73.21 3” $ 136.39 $ 4” $ 227.53 6” $ 455.14 8” $ 727.94 Metered Water Charge $2.30 per 1,000 gallons * Waterline replacement program charge of $4.24 is assessed to each meter in addition to the base charge. Pathways to Lasting Solutions g Outside city limits is $2.87 per 1,000 gallons. ---PAGE BREAK--- Current Residential Wastewater Rates Current Residential Wastewater Rates Current Residential Wastewater Rates Current Residential Wastewater Rates Charge Amount Charge Amount Base Fee – All Meter Sizes $ 9.83 Consumption Charge* $2.22 per 1,000 gallons * B d J F b d M h t ti f th * Based on January, February and March water consumption from the previous year usage for the residence. The average of the three months is the consumption used each month for the entire year. Pathways to Lasting Solutions ---PAGE BREAK--- Current Commercial Wastewater Rates Current Commercial Wastewater Rates Current Commercial Wastewater Rates Current Commercial Wastewater Rates Charge Description Amount Base Rate $9.83 Consumption Rate CA Restaurants $ 3.73 CB Bars & Taverns $ 4.75 CC Entertainment & Service $ 3.55 CD Laundries Schools & Stores $3 23 CD Laundries, Schools & Stores $3.23 CE Office Buildings $ 2.98 CF Hotels & Motels $ 2.59 CG Hospitals, Athletic Clubs, Apt, Daycares, Dorms, Residences $2.21 Pathways to Lasting Solutions