Fort Walton Beach Council agenda — 01-26-2010 Special-Utility Rate Study — reading text

AGENDA CITY OF FORT WALTON BEACH SPECIAL MEETING January 26, 2010 5: 00pm CALL TO ORDER PLEDGE OF ALLEGIANCE 1. APPROVAL OF AGENDA 2. ACTION - DISCUSSION 2. 1 Discussion - Presentation of Utility Rate Study findings and recommendations. Synopsis: The City' s Consultant, Mike Rocca from Brown & Caldwell, will be making the presentation. No action required. Finance Director) ADJOURNMENT Any person who decides to appeal any decision made with respect to any matter at this meeting will need a record of the proceedings, and for such purpose may need to ensure that a verbatim record of the proceedings is made, which record includes the testimony and evidence upon which the appeal is to be based. ( Chapter 286.0105 F.S.) The City of Fort Walton Beach adheres to the American with Disabilities Act and will make reasonable modifications for access to this meeting upon request. Please call City Clerk Helen Spencer at 850 -833- 9509 to make a request For Hearing Impaired dial the City Hall TDD # 850- 833 -9925 or 1- 800 -955- 8771 ( TDD) or 1- 800 -955 -8770 ( Voice). Requests must be received at least 48 hours in advance of the meeting in order to allow the City time to provide requested service. City Council Special Meeting January 26, 2010 City of Fort Walton Beach . Rate Study ate Stud'v - Whv do we need a Wqte Increase now? Addresses revenue sufficiency Bond Ordinance requires that the City maintain proper debt service coverage r Creditworthiness — the City must maintain adequate creditworthiness in order to qualify for financing, bond issuance, etc. Capital needs that must be addressed due to our aging System The System Potential failures — ultimately cost more money and could possibly have environmental effects 0 Pump Station # 1 emergency repairs 0 Pump Station # 1 Force Main —30 years old 0 2- 1/ 4" water main replacement 0 Kepner Drive Project 0 Oregon Drive Project 5 -Year CIP schedule — Necessary for addressing deficiencies in the current infrastructure Interlocal Agreement Increases operating expense by $ 2M - $ 2. 5M annually The Interlocal was the best alternative 0 High cost of renovating the Plant 0 The lease of the spray fields was unknown 0 The economy and the effect on Bond Issuance Rate Increase Designed so that the low -level users will experience less of an impact than the high -end users, thereby encouraging conservation and providing for just and equitable rates Initial increase will occur on April 1, 2010 and October 1, 2010 o Helps to ease the impact of the rate increase on the customers o Provides additional revenue needed in current FY o Attached chart shows the impact to a typical utility bill Comparison to other local Utilities 31 % of residential billings occur within the 2, 000 gallonage rate structure What happens if we do not implement the rate increase? Over the course of the next five years, approximately $ 41VI would need to be used from Net Assets No capital improvements would be made and the System would continue to deteriorate The City would be in violation of its current Bond Ordinances  Table ES 1 Revenue Sufficiency , Existing bates 2009/ 10 2010J11 2011/ 12 2012/ 13 2013/ 14 6, 886,400 4 6, 963,suu 4 6,) z5j, zuu 4 (),` Zil, .)VV Revenues 5 6, 910)8uu Expenditures 6, 901, 200 7, 754,400 7, 638,900 82034,800 8,432, 100 Shoftfalls 14,800) 843, 600) 675, 600) 1, 051, 600) 1, 444,800) Table ES 4 Typical Monthly Rate Increases Residential 3/ 4" Meter FY 2009/ 10 FY 2010/ 11 Increase Increase Gallona ae , Existing Apr 1, 2010 Amount Percent Oct 1, 2010 Amount Percent 0 24.26 24.63 0.37 1. 53% 24.99 0. 36 1. 46% 2,000 24.26 24.63 0. 37 1. 53% 24.99 0. 36 1. 46% 41. 31 45.02 3. 71 8.98% 48. 69 3. 67 8.15% 5,000 73. 00 82. 93 9. 93 13. 60% 3 92.75 9. 82 11. 84% 10,000 1500 107.75 124.53 16. 78 15. 57% 141. 10 16. 57 13. 31% Commercial 3/ 4" Meter 0 27.61 28.02 0.41 1. 48% 28.42 0.40 1. 43% 21000 27. 61 28.02 0.41 1. 48% 28.42 0.40 1. 43% 46.97 51. 17 4.20 8. 94% 55.36 4.19 8. 19% 51000 82.51 93. 68 11. 17 13. 54% 104. 82 11. 14 11. 89% 101000 1500 121. 11 139. 88 18. 77 15. 50% 158. 57 18.69 13. 36% 2-  Table ES 5 Monthly Service Bill Comparisons For 2009/ 10 4,000 Gallons of Water and Wastewater Water Wastewater Total Fort Walton Beach 10.96 24.42 35. 38 Existing 2009/ 10 ; Proposed April 1, 2010 11. 74 26.98 38.72 Other Utilities' Callaway 24.10 44.01 68. 11 Crestview 12.70 26. 50 39. 20 Destin Water Users, Inc. 13. 77 28.95 42.72 21. 55 31. 90 53.45 Mary Esther Niceville 18.70 24.95 43.65 Okaloosa County 18.21 31. 38 49.59 16. 32 33.01 49.33 Panama City Panama City Beach 15. 34 16.02 31. 36 Pensacola ( ECUA) 15. 81 20.68 36.49 Pensacola Beach(ECUA) 18. 11 28.60 46.71 Valparaiso 11. 77 17. 07 28.84 Other Utilities Average 16.94 27.55 44.50 1. Rates current as of November 19, 2009. 3-3-  CITY OF wow, WATER AND WASTEWATER MULTI -YEAR RATE STUDY REPORT January 2010 prepared by 850 Trafalgar Court, Suite 300 Maitland, Florida 32751 4- 850 Trafalgar Court Suite 300 Maitland, Florida 32751 Tel: ( 407) 661 -9500 Fax: ( 407) 661 -9599 www.brownandcaldwell. com January 21, 2010 Ms. Brandy Wunker Finance Director City of Fort Walton Beach 107 Miracle Strip Pkwy SW Fort Walton Beach, FL 32548 138309 Subject: Water and Wastewater Multi -Year Rate Study Report Dear Ms. Wunker: Pursuant to out agreement, Brown and Caldwell conducted a water and wastewater rate study for the City of Fort Walton Beach. This Report provides the analysis, findings, conclusions and recommendations of the study together with discussions, tables and schedules to support and document the study process. Professional care was used in identifying and utilizing data, assumptions and estimates such that the rate structure and rates reasonably represent the costs of providing services to customers within the City' s service areas. Thanks and appreciation is extended to the City of Fort Walton Beach for giving Brown and Caldwell this opportunity and to you and the City's fine staff that provided data and assisted in the understanding and development of critical data. Very truly yours, BROWN AND CALDWELL Marco H. Rocca, CMC Project Manager C o n s u l t a n t s E n v i r o n m e n t a- d E n g i n e e r s&  WATER AND WASTEWATER RATE STUDY EXECUTIVE SUMMARY This Report identifies appropriate cost recovery recommendations to achieve revenue sufficiency for Utilities water and wastewater services provided by the City of Fort Walton Beach ( the " City ") Department (the " Utility "). Additionally, the Utility's five year Capital Improvement Program (CIP) is scheduled to be funded from several sources including contributions, reserve funds, grants and long term debt that is dependent on amounts derived from operating revenues. The methodology debt service and used in the study process provides for just and equitable recovery of expenses, renewals to operate and maintain water and wastewater services through user rates, fees and charges. The recommendations herein are consistent with requirements of Florida Statutes, common law relative to water and wastewater ratemaking, and City policies. The primary purpose of this rate study is to address revenue sufficiency in light of the dramatic changes to operations resulting in material cost increases due to: 1) the decommissioning of wastewater treatment and disposal facilities with future wastewater services provided through an agreement with Okaloosa County; 2) regulatory requirements; 3) power and chemicals; and 4) the slowdown in the local economy responding to national economic conditions. This study has identified that although significant reductions in expenses were made by staff wherever feasible, the pending impact of payments to the County for wastewater services, together with the continued costs of power and chemicals, and need for renewal of facilities results in material operating shortfalls as illustrated below in Table ES 1. Table ES 1 Revenue Sufficiency - Existing Rates 2009/ 10 2010/ 11 2011/ 12 2012/ 13 2013/ 14 Revenues $ 6, 886, 400 6, 910, 800 6, 963, 300 6, 983, 200 6, 987,