HomeMy WebLinkAbout2.b. Water Rates4ROSEMOUNTEXECUTIVE SUMMARY
CITY COUNCIL
City Council Work Session: December 15, 2010
AGENDA ITEM: Water Rates
AGENDA SECTION:
PREPARED BY: Andrew J. Brotzler,l
PE, City Engineer
AGENDA NO. 2.0.
Jeff May, Finance [director
ATTACHMENTS: Letter from Crossc�oft
Community
Homeowners Association, DNR Sumrrhary
of
APPROVED BY:
Conservation Rates
DAI
RECOMMENDED ACTION: Discussion
ISSUE:
In July 2008, the Minnesota Department of
suppliers that each City must adopt a water
to being permitted for a new well or increa:
Utility Commission and City Council to dei
conservation, but also maintain adequate re
our water system. These rates were approv
approved. Since that time the Crosscroft C
City staff this past summer and again this f:
meters. The attached map shows the Cros,
meters that water the entire community inc
Crosscroft Community HOA is that it is nc
of the 150 individual properties because all
irrigation meters.
Staff was pleased that the communications 1
respect that people were analyzing what iml
the new rates were adopted last December,
meters in residential areas.
BACKGROUND:
Water rates
Natural Resources (DNR) notified public water
onservation rate structure by January 1, 2010, or prior
in appropriations. In response, City staff worked with
lop new water rates that not only promote water
-nue to support the maintenance and operating costs of
1 in December of 2009 when our fee resolution was
mmunity Homeowner Association initially approached
with concerns over the increased cost for its irrigation
roft community and the configuration of its irrigation
ding all individual lots. The primary issue raised by the
receiving the benefit of the tiered rates for the watering
ater is controlled by the HOA through the four
we had with the residents was successful in the
the new rates could potentially have on them. When
F had not done any specific analysis of irrigation
In December, 2009 the following rates were approved by the City Council:
\ENG 0103- Water -Sewer Rate Study \20101215 CWS Water Rates Summary.docx
Residential
Quarterly usage lions
Rates*
0-10,000
$0.90
10,001 — 30,000
$1.10
30,001 — 60,000
$1.40
60,001 — 100,000
$1.90
> 100,000
$2.75
*per thousand gallons
Commercial /Industrial
Quarterly usage (gallons)
Rates*
0-100,000
$1.05
100,001 — 200,000
$1.30
200,001 — 300,000
$1.60
> 300,000
$2.00
*per thousand gallons
Along with the implementation of tiered rates, the City Council approved an increase in the fixed
rate from $8.90 per quarter to $10.00 per quarter. The water surcharge, which helps to fund system
expansion, is not proposed to increase.
Based on the concerns raised by the Crosscroft community, Staff reviewed what other surrounding
communities do for irrigation meters and went back to the models to come up with an alternative
for irrigation meters in an effort to be fair and consistent. The following are the changes that staff
proposed and the Council approved earlier this year:
Residential
Quarterly usage (gallons)
Rates*
0-10,000
$0.90
10,001 — 30,000
$1.10
30,001 — 60,000
$1.40
> 60,000
$1.90
*per thousand gallons
Commercial /Industrial
Quarterly usage (gallons)
Rates*
0-100,000
$1.05
100,001 — 200,000
$1.30
200,001 — 300,000
$1.60
> 300,000
$2.00
*per thousand gallons
For the residential rates the top tier was removed and for commercial /industrial nothing changed.
However, a new rate was proposed for all irrigation meters (residential, commercial /industrial,
institutional, etc.) to be a flat rate of $2.00 per thousand gallons for all water used. This allowed for
consistent billing for all irrigation meters, both residential and commercial, that staff felt would be a fair
amount to charge and would be in line with what other communities are doing with irrigation meters.
When our new analysis of revenue from irrigation meters and these changes were plugged into the
model it actually showed a significant increase in our total projected revenues. A big reason for this is
that the original models did not look at irrigation meters separately but rather lumped them in with the
various other types of meters (residential, commercial /industrial) and used averages in projecting the
total projected revenues. Irrigation meter revenue is a larger component of our revenue than was
shown by the averaging technique used in last year's model. As a result, there will be no negative
impact on the water system financial projections as a result of the changes proposed above. By creating
a separate class — irrigation — it hopefully allows our model to be more accurate in its projections.
With the changes above that were approved by Council, the Crosscroft Community Homeowners
Association still opines it is not being treated fairly. The attached letter highlights these concerns and
suggests an alternative solution. Staff has discussed this issue in great detail both earlier in the year and
again recently. From these discussions, the primary issue is how not only the Crosscroft Community
Homeowners Association irrigation meters are viewed but how all irrigation meters for associations
that represent multi- family properties are viewed. For example, if consideration is given to distribute
water usage from the four irrigation meters in Crosscroft to the 150 individual units for purposes of
G: \ENGPROJ \ENG 0103 - Water -Sewer Rate Study \20101215 CWS Water Rates Sumttmary.docx
billing to provide the benefit of the tiered rates, thereby reducing the cost; should the same
consideration be given for other multi - family properties with association controlled irrigation meters.
To this matter, there is a philosophical consideration whether the Crosscroft Community is similar to a
single - family neighborhood or a multi- family neighborhood. In a single - family neighborhood,
properties are individually responsible for watering which 1) allows individual control for the amount of
water used; and 2) water used for irrigation is billed in addition to the domestic use in the home with
the use billed up through the tiered rates. This in effect results in an overall lower cost for irrigation to
an overall neighborhood such as the Crosscroft Community. In a multi- family neighborhood where an
association controls the irrigation, use of water for irrigation is metered separately from the domestic
use in the home and is currently billed at the highest flat rate of $2.00 /1000 gallons. For multi- family
neighborhoods, there is no application of tiered rates for irrigation.
At this time, Staff is seeking Utility Commission and City Council input on the fairness and equity of
the current basis for billing irrigation meter usage to multi- family properties. Depending on how the
Commission and Council view the Crosscroft Community and its system for irrigation, there are a
number of options that may be considered.
The first option is do nothing. With this option, the irrigation meter usage for the Crosscroft
Community and all other irrigation meters would continue to be billed at the adopted irrigation meter
rate.
A second option is to do nothing at this time and during the scheduled review of water rates in 2011
(for 2012 rates) evaluate modifications to the tiered rates and irrigation rate to address the presented
equity concern.
A third option would be to consider eliminating the irrigation meter rate for residential properties and
calculating the irrigation usage accounting for the number of units served so the benefit of the tiered
rate system is realized; thereby initially lowering the cost for irrigation usage. As water usage for
irrigation is a significant percentage of the City's overall water use, while not yet modeled it is
anticipated that with this option all rates or at least the upper tiered rates will need to increase to
maintain the City water utility revenue needs.
Should Council consider the last option, it should be noted that there are constraints with the current
utility billing system that would necessitate manual calculations to implement this option. During the
development of the tiered rate system in 2009, the capabilities of the City utility billing system were
taken into account to ensure that the final rate structure could be billed with the system.
SUMMARY:
At this point in time staff is looking to the Utilities Commission and the City Council to provide
direction to staff on how they would like to proceed.
3
CROSSCROFT AT EVERMOOR HOMEOWNERS ASSOCIATION, INC.
Water Rate Conversation Structure Discussion
December 1, 2010
TO: Mayor Droste & Rosemount Council Members
President Mulhern & Utilities Commission Members
Crosscroft at Evermoor (CC) is a planned neighborhood developed by DR Horton in 2002. It's
completely built out today with 150 owner occupied single family free standing homes. Our
community is comprised of active 55+ homeowners who enjoy amenities such as a clubhouse,
pool, recreation facilities, green space & walking trails, as well as the management of common
interests via a homeowners association (HOA).
Our HOA has been working on and off with City staff since we became aware of the State's
intention to request cities such as ours adjust water consumption usage rates in order to better
encourage water conservation. Our homeowners have been supportive of conservation efforts in
general and applaud the State's initiative to better manage our collective water (and other)
resources. In line with the State's mandate we have encouraged our homeowners to be mindful of
water usage. In addition, our HOA has established a 10 water required' professionally managed
prairie area (instead of installing sod and other water intensive vegetation) and has this year
upgraded all of our irrigation controllers from 'builder grade' to state -of- the -art environmental units
that both detect any irregular usage (leaks, etc.) and modulate water usage with real time
solar /humidity /wind /temperature sensors. Our irrigation contractor is also verifying every month
the proper operation of every head in the system, with standing instructions to repair those that
are out of spec. We're expecting these efforts to pay off with a year- over -year reduction in
consumption around or greater than 10 %. Although our usage is significantly less this year than in
2009, much of that reduction can be attributed to the abundant rainfall we received from April
through October.
When we first began investigating the State's mandate earlier this year, it's fair to say that
understanding the changes required presented challenges in interpretation and implementation for
everyone. To say the last six months have been evolutionary and presented learning opportunities
would also be accurate. I'm sure that City staff found new challenges as they worked to implement
the State requirement utilizing existing billing platforms, and I know we at CC did not have a clear
understanding of how the changes and interpretations could be best applied to our slightly unique
situation. But over this period, and with lots of study on everyone's part, we all have a much
clearer understanding today of the intent of the statute, and how it can be equitably applied to the
entire homeowner base in Rosemount. We are here today to share what we've learned and discuss
options that will work for both of us.
December 1, 2010 Page 1
CROSSCROFT AT EVERMOOR HOMEOWNERS ASSOCIATION, INC.
Water Rate Conversation Structure Discussion
Our work with City staff and consultation with outside organizations for interpretational guidance
have allowed us to identify two primary areas that we'd like to address.
CC has a somewhat unique situation of being comprised of 150 individual homeowners in
single family detached homes that happen to share a common infrastructure as far as
irrigation is concerned. Whereas a typical single family homeowner in Rosemount may have
a second water meter for their irrigation needs, in our case several houses share the same
meter. Although we've not confirmed it with DR Horton, it's likely that this arrangement
was developed to reduce their construction costs, and from the City's perspective it also
reduces the number of irrigation meters in our neighborhood from 150 to 4. Today our
shared meters are being billed based on the total k- gallons used instead of dividing that
number by the number of houses they actually serve.
2. All homeowners in Rosemount today participate in the State's conservation effort whether
they are taking a shower, doing the laundry, washing their car, or watering their lawn. As
with other cities in the State, it costs more to do these tasks post statute, and the sliding
scale puts everyone in compliance with the new mandate. Our homeowners do all of those
things too, but our shared irrigation meters (today) cause them to be singled out and
penalized compared to the rest of the residents in Rosemount. CC residents participate in
the sliding scale when they're washing clothes, or doing the dishes, but not when they're
watering their lawns. Residents outside our development, regardless of whether they have
one meter for the household that includes lawn watering (with no sewer offset) or two
meters with one for household (including sewer charges) and one for irrigation have their
usage charge based on the total K -gal usage for that account. Put another way, the
conservation- encouraging rate structure applies to all their usage; and there isn't a
separate/different rate that applies to their irrigation meter. Our goal is to insure fairness
and a level playing field for our homeowners. We're not looking for special treatment, just
the same treatment as everyone else in the community.
We recognize that fitting new statues into existing structures and policies is not an easy thing, and
are grateful for the time and effort everyone has put toward identifying and understanding the
complexities of this situation. We welcome an opportunity to work with City staff to determine and
establish an equitable billing model that puts CC homeowners into the same structure as those on
(for example) Shannon Parkway. As a first step toward that goal, we propose the following:
CC has 5 irrigation meters. Four of the five are used exclusively for homeowner lawns. The
fifth waters common area property that is not considered homeowner lawns, and therefore
beyond the scope of this discussion.
The four homeowner meter controllers are zoned so that that we know how many and which
homes each waters.
Dividing each homeowner meter's usage by the number of homes reveals the K -gal per
house rate for that time period.
December 1, 2010 Page 2
CROSSCROFT AT EVERMOOR HOMEOWNERS ASSOCIATION, INC.
Water Rate Conversation Structure Discussion
That number of K -gals identifies how it fits into the sliding scale, and would be the rate for
that meter for that period.
o As an example, our account 510061.00 billed 523 K -gal in a recent cycle. There are
13 homes served by this meter /controller, so dividing by 13 reveals a usage per
home of 40.23 K -gal. Applying the billing tiers yields: 10k ($9.00) + 20k ($22.00) +
11k ($15.40) = $46.40 which times 13 homes = $603.20
CC is ready and willing to work with City staff to set up a process by which the City can, with
minimal effort during the billing run, recognize how many (and which if desired) homes are served
by each meter. If we can aid the process further by contributing monthly calculations or other
data, we're glad to do that; and are open to other suggestions as they arise.
We are grateful for this opportunity to review the path this issue has taken over the past year, and
move toward a solution that will benefit the City and all of our homeowners. Please feel free to
contact us with additional questions, or if there is some other way we can assist.
Respectfully,
Larry Baker, Treasurer
Crosscroft at Evermoor HOA
December 1, 2010 Page 3
Conservation Rates
Minnesota Statutes, section 103G.291, was amended in 2008 to include a requirement for public water
suppliers serving more than 1,000 people to adopt a water rate structure that encourages conservation:
Minnesota Statutes, section 103G.291, subd. 4. Conservation rate structure required. (a) For the purposes of
this section, "conservation rate structure" means a rate structure that encourages conservation and may include
increasing block rates, seasonal rates, time of use rates, individualized goal rates, or excess use rates. The rate
structure must consider each residential unit as an individual user in multiple - family dwellings.
(b) To encourage conservation, a public water supplier serving more than 1,000 people in the metropolitan area, as
defined in section 473.121, subdivision 2, shall use a conservation rate structure by January 1, 2010. All remaining
public water suppliers serving more than 1,000 people shall use a conservation rate structure by January 1, 2013.
(c) A public water supplier without the proper measuring equipment to track the amount of water used by its users, as of
the effective date of this act, is exempt from this subdivision and the conservation rate structure requirement under
subdivision 3, paragraph (c).
In addition, Minnesota Statues, section 103G.291, was further amended to read:
Subd. 3. Water supply plans; demand reduction. (c) Public water suppliers serving more than 1,000 people must
employ water use demand reduction measures, including a conservation rate structure as defined in subdivision 4,
paragraph (a), unless exempted under subdivision 4, paragraph (c), before requesting approval from the
commissioner of health under section 144.383, paragraph (a), to construct a public water supply well or requesting
an increase in the authorized volume of appropriation. Demand reduction measures must include evaluation of
conservation rate structures and a public education program that may include a toilet and showerhead retrofit
program.
A conservation rate structure must be employed before requesting well construction approval for a public
water supply well or before requesting an increase in permitted volume for their water appropriation permit.
Examples of Conservation Rates:
Commercial and industrial rates can be based on cost of service and do not necessarily need to be the
same rate as that used for residential water users.
Below are examples of rate structures that encourage conservation. Many variations and combinations of
these examples are possible.
NOTE: Rate structures often include a service charge (base rate) and a volume based charge. Service
charges may cover fixed costs (capital improvements) and the volume charge is often for operation and
maintenance costs. Volume charges usually use units of 1,000 gallons or 100 cubic feet (748 gallons).
Increasing Block Rates: Cost per unit increases as water use increases within specified "blocks" or
volumes. The increase in cost between each block should be significant enough (25% or more and 50%
between the last two steps) to encourage conservation.
Example: 0 -6,000 gallons = $2.50/1000 gallons
6,000 - 12,000 gallons = $3.15/1000 gallons
12,000- 24,000 gallons = $4.00/1000 gallons
Above 24,000 gallons = $6.00/1000 gallons.
Seasonal Rates: The rate per unit increases in the summer to encourage the efficient use of water during
peak demand periods caused by outdoor water uses. Seasonal rates can take the form of a surcharge added
to the normal rate or a separate fee schedule for winter and summer periods.
Example: Surcharge method - $1.00 /1000 gallons is added on top of the regular fee schedule for all
water use between May 1 and October 1.
Page 1
Conservation Rates
Page 2
Time of t.lse Rates: Water rates are higher at times of the day when water use demands are high. This rate
requires specialized meters that can monitor water use during specified segments of time, for instance,
every 15 minutes.
Example: Water rates are reduced by $0.75 for customers that agree not to use water for certain
purposes or over a set volume of water during certain times of the day or periods of high
water demands.
Individualized Goal Rate (Water Budget Rate): A rate with tailored allocations developed for each
customer. The rates increase as the allocation is used or exceeded by the customer. The allocation is
generally based upon winter or January use.
Example: A family of four used 6,200 gallons in January. Summer use is higher than January use so a
factor is applied to determine a summer allocation (1.5 x 6,200 gallons = 9,300 gallons).
0 -6,000 gallons = $2.50/1000 gallons
6,000 -9,300 gallons = $2.75/1000 gallons
9,300- 18,600 gallons = $4.00/1000 gallons. (Allocation is exceeded.)
Above 18,600 gallons= $6.00/1000 gallons.
Excess Use Rates: Cost per unit increases greatly above an established level in order to trigger a strong
price signal that discourages excessive use. This rate is similar to an increasing block rate but with much
higher charges for the larger volume blocks.
Example: 0 -6,000 gallons = $2.50/1000 gallons
6,000- 12,000 gallons = $3.15/1000 gallons
12,000- 24,000 gallons = $5.00 /1000 gallons (Excessive Use Rate)
Above 24,000 gallons = $7.50/1000 gallons (Excessive Use Rate)
Multiple— Family Dwellings: Total water use in a multiple - family dwelling, which has only one water
meter for the entire dwelling, may exceed that of a single - family dwelling. The statute does not require
individual water meters for each residential unit within a multiple - family dwelling; however, the required
conservation rate at which the multiple - family dwelling's water use is billed must consider the number of
residential units within that multiple - family dwelling.
Example: A four -plex uses a total of 18,000 gallons per month or approximately 4,500 gallons per residential
unit. Water use for each residential unit falls within the first block (0 -6,000 gallons) of the above Excess Use
Rate example. A rate of $2.50/1000 gallons would apply up to a total use of 24,000 gallons for the multiple -
family dwelling. Thereafter, the rate increases according to the rate schedule, always considering each
residential unit as an individual user.
Non - conservation rate examples:
Declining (Decreasina) Block Rates: The cost per unit of water (cubic foot or gallon) decreases as the water
use increases beyond the basic block. This rate structure provides no incentive to conserve because the cost
of water per unit decreases with increased use.
Flat Rates: A set fee allows the use of an indefinite amount of water. This rate structure is used where water
is unmetered and provides no incentive to conserve water because cost is unrelated to volume used.
Uniform Rates: The cost per unit is the same regardless of the volume used. This rate structure is considered
conservation neutral.
Service Charge (Base Rate) that includes a Minimum Water Volume: The inclusion of a minimum volume
of water in the service charge (base rate) discourages conservation especially if the minimum volume
exceeds average customer usage.
Conservation Rates 3 12010.pdf