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

300 Expenditures 6, 901, 200 7, 754,400 7, 638,900 8, 0343800 81432, 100 Shortfalls $ ( 14, 800) 843, 600) 675, 600) 1, 051, 600) 1, 444,800) Pursuant to the scope of this study three options where identified that could be implemented to eliminate the shortfalls — 1) reduce costs; 2) increase revenues; or 3) a combination of cost reductions and revenue increases. A fourth option of " do nothing" is outside the primary goals and objectives of this study. Investigations undertaken during this study process concluded that staff has, for all practical purposes, reduced costs and postponed expenditure to the extent that further expansion of this option would severely jeopardize the functionality of the Utility. Therefore, the challenge of this study was to forecast an equitable solution to provide revenue sufficiency for FY 2009/ 10 and the four succeeding fiscal years without jeopardizing the future stability of the Utility. The initial step in achieving revenue sufficiency involved determining the appropriateness of the existing rate structure to materially provide for just and equitable recovery of the fiscal requirements. The term " just" refers to a reasonable relationship existing between the charges for services and costs associated with such services ( i.e. costs associated with water services not being recovered from wastewater customers); whereas, the term " equitable" means that customers within similar classifications are subjected to the same rates, charges and fees ( i.e. customers with the same classification and gallonage are charged exact same amounts). The rate structure consists of the rate ES -1 1i29f ?. 01 U:Tinance.Rate StudytRate Study Report._Fsna €.doc 6- Executive Summary Water and Wastewater Rate Study components and the level to which they are involved in generating revenues ( as examples: the base charges increase pursuant to the number of units and meter sizes, and the inclining gallonage rates increase as gallonage amounts increase). An analysis was developed to test and illustrate these important requirements. The analysis accumulated data relative to the number of Units, Gallonage The results of this and Revenue from each customer class from the billing frequency analysis. analysis are summarized in Table ES 2 and illustrated in Graph ES 1. The results clearly confirm that the existing rate structure meets the criteria of being just and equitable. Table ES 2 Rate Structure Analysis i 2 Units Gallonage Revenue Water Amount Percent Amount Percent Amount Percent 83,047 67% 4583325 60% 1, 380, 100 57% Single Family 23415 20% 763523 10% 2361,600 10% Multi -Family Commercial 9% 1853036 24% 605, 000 25% 13,044 Multi -Commercial 440 4% 483612 6% 187, 100 8% Total 113946 100% 7683496 100% 2,408, 800 100% Wastewater 7, 706 70% 4233806 62% 2,585, 000 62% Single Family 13934 18% 713999 11% 505, 100 12% Multi -Family Commercial 890 8% 1343264 20% 789, 000 19% Multi -Commercial 418 4% 503219 7% 306, 300 7% Total 105948 100% 6803288 100% 4, 185, 400 100% 1.1. MonthlyMonthly AverageAverage 2.2. AnnualAnnual usageusage inin 1,1, 000s000s ofof gallons.gallons. GraphGraph ESES 11 RateRate StructureStructure AnalysisAnalysis 7070 %-%- 6060 %-%- 5050 %-%- 00 ww 00 4040 %% vv UU 30% 30% RrRr 20% 20% 10% 10% 0%0% MultiMulti - -FamilyFamily CommercialCommercial MultiMulti - - CommercialCommercial SingleSingle FamilyFamily UnitsUnits ® ® Gallonage Gallonage ElEl RevenueRevenue ESES - - 22 11 21;21; 2.2.41v41v UAFinance'UAFinance' RateRate SWdylRateSWdylRate StudyStudy Repor_Repor_ = = inai.inai. docdoc 7-7- Executive Summary Water and Wastewater Rate Study After significant reviews, conversations with staff and testing through dynamic modeling a solution a combination of rate adjustments affecting each rate structure was identified that included: 1) component; 2) the use of reserve funds for the CIP; and 3) strategic financing considerations to maximize improvements and minimize rate adjustments. Rate adjustment solution parameters were instituted to address the City' s policies for Life Line and conservation rates, maintaining reserve fund balances and compliance with bond ordinance and creditworthiness requirements. A focused goal of this study is the provision of a series of (multi-year) rate adjustments that provide sufficient revenues for current and projected fiscal requirements through FY 2013/ 14. The initial impact of the additional wastewater treatment costs from the County are scheduled to occur sometime just prior to mid FY 2009/ 10 and each fiscal year thereafter. Rate adjustments were designed to accommodate the scheduling of these increases and the need to maintain appropriate reserve balances. The proposed User Rates for FY 2009/ 10 and the four following years are shown in Table ES 3. Table ES 3 Multi Y - ear User Rate Adjustment Summary 2009/ 10 2013/ 14 Existing Mid Year 2010/ 11 2011/ 12 2012/ 13 Water Monthly Base Charge /Unit 3/ 4 inch meter $ 7. 60 $ 7. 72 $ 7. 83 $ 8. 06 $ 8. 30 $ 8. 55 Water Gallonage Rates per 1, 000 gallons Block 1 0. 00 0. 00 0. 00 0.00 0. 00 0. 00 Block 2