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EXECUTIVE SUMMARY
City Council Work Session: November 5, 2018
AGENDA ITEM: Water and Sewer Fixed Rate Phase-Out AGENDA SECTION:
Discussion
PREPARED BY: Christine Watson, Public Works Coordinator
Brian Erickson, PE Director of Public
Works/City Engineer
AGENDA NO. 2.c.
ATTACHMENTS: PowerPoint presentation APPROVED BY: LJM
RECOMMENDED ACTION: Direct staff to update the 2019 Schedule of Rates and Fees
with the rates from the Phase-Out models for water and sewer
BACKGROUND
At the October 2, 2018 work session, staff presented an alternate method of billing for water and sewer
that phases out fixed charges over the next three years. Staff presented that same information to the
Utility Commission in September, resulting in a recommendation from the Utility Commission that the
phase-out model be approved by Council. At the October work session, Council members asked for
further clarification about the plans for a water treatment plant and how those plans impact the current
water rate model (specifically the need, cost and timing of the construction). Because of the lack of
updated information available at the meeting, the fixed rate phase-out was to be considered by Council at a
later time.
Staff provided an update at the October 15, 2018 Utility Commission meeting about the Council’s desire
to delay the fixed rate phase-out until more is known about a future water treatment plant. After further
discussion, the Utility Commission reiterated its recommendation that the fixed rate phase-out begin in
2019 (regardless of when the water treatment plant is built), recognizing the following benefits of
eliminating the fixed rates:
• Reduced overall utility bill for low and average users
• Greater transparency in our billing methods, with easier-to-understand utility bills
• Greater opportunity for individuals to lower their utility costs through conservation
• Shifts the proportion of costs to the highest users who are putting the greatest strain on the
system
• No negative impact to the overall “bottom line” balance in the Water Utility or Sewer Utility
funds
The Water Utility fund balance has been increasing for several years in preparation for a future water
treatment plant. Although there are no definite plans for the timing or cost of that facility, it is prudent to
structure the rates so that the balance continues to steadily increase in order to fund as much of that
I:\City Clerk\Agenda Items\Approved Items\2.c. Water and Sewer Fixed Rate Phase-Out.docx
facility as possible without borrowing. Both the Standard and the Phase-Out rate models will
accommodate this goal. It should be noted that the phase out of the fixed rate is not proposed due to a
need for an increasing fund balance in the Water Utility fund, but rather to an effort to increase billing
transparency, provide greater opportunity to lower utility bills, and reduce the cost for low volume users.
Public Works staff is currently reviewing existing information regarding the future water infrastructure
improvements to include the ground storage reservoir, water treatment plant and future well needs.
Depending on the results of that review, a future request for proposals will be prepared for a feasibility
study for those needs.
Provided below is a summary of how the Standard and Phase-Out models will impact various users in
2019. The Phase-Out model will produce a substantial decrease for the average low user, a slight
decrease for the average user, a slight increase for the average high user, and a moderate increase for
the average business user, while having an almost neutral effect on the average residential user.
SUMMARY
The Standard and Phase-Out models have been discussed with the Utility Commission at two separate
meetings. During those discussions the Utility Commission supported the switch to the Phase-Out
models for water and sewer, a position that is also supported by staff. Staff is requesting a Council
recommendation to update the 2019 Schedule of Rates and Fees with the rates from the water and sewer
Phase-Out models as shown below:
I:\City Clerk\Agenda Items\Approved Items\2.c. Water and Sewer Fixed Rate Phase-Out.docx
2019 Water and Sewer Rates (proposed)
City Council Work Session
November 5, 2018
Reduced bills for low and average users
Greater billing transparency
Greater opportunity for users to reduce costs
Shifts costs to highest users
No overall impact to the fund balance
$1
$2
$3
$4
$5
$6
Millions Sewer Standard
Sewer Phase Out
$3
$4
$5
$6
$7
$8
$9
$10
Millions Water Standard
Water Phase Out
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
$5.0
20182019202020212022202320242025202620272028Millions Storm
2019 Standard 2019 Phase Out
24%
44%
32% Water
Sewer
Storm
18%
33%
49%
Water
Sewer
Storm
2019 Standard 2019 Phase Out
42.7%
57.3%
Fixed
Usage
28.6%
71.4%
Fixed
Usage
2019 Standard 2019 Phase Out
14.6%
85.4%
Fixed
Usage
8.3%
91.7%
Fixed
Usage
Questions