UTILITIES COMMISSION REGULAR MEETING
BANDON CITY HALL
March 13, 2016
Utilities Commission Minutes – March 16, 2016Page 1 of 1
COMMISSION:Matt Winkel, Chair
Sheryl Bremmer
Linda Olsen
Patricia Soltys
Daniel Graham
Mary O’Dea
Bob Berry
Madeline Seymour, Council Liaison
Brian Vick, Council Liaison
Mary Schamehorn, Mayor
Utilities Commission Minutes – March 16, 2016Page 1 of 1
Utilities Commission Minutes – March 16, 2016Page 1 of 1
STAFF:Christopher Good, City Manager
Richard Anderson, Public Works
Harry Staven Sandra Messerle, Minutes Clerk
Utilities Commission Minutes – March 16, 2016Page 1 of 1
OTHER: Barbara Negherbon, Dyer Part.
Utilities Commission Minutes – March 16, 2016Page 1 of 1
1.CALL TO ORDER
- Roll Call: The meeting was called to order at 3:00 p.m. by Chair Winkel. Roll call was taken with those present and absent as shown above.
2. APPROVE MINUTES
- Chair Winkel noted that the minutes from the previous meeting were unavailable for approval, so proceeded to the next agenda item.
3.DISCUSSION
A.Chair Winkel explained that one of the key reasons for calling this Commission meeting at the request of City Manager Christopher Good was for the Commission to discuss utility rates and potential increases, prior to the Budget Committee meeting to be held on Monday of next week. Following that brief explanation, Chair Winkel recognized City Manager Good.
City Manager Good explained that City Finance Director Harry Staven had worked hard to put together a few projected options for utility rate increases to address the widening financial gap between increasing maintenance expenses and the current minimum water rate structure. City Manager Good distributed a spreadsheet with the proposed options, while explaining that the water services income against expenses have been running at a deficit for some time. He noted that as with other services, the City is dipping into reserves each year, which is not sustainable. City Manager Good says the City needs to address these shortfalls, including consideration of possible rate increases.
City Manager Good said that one thing the Commissioners would notice right away on the spread sheet are $360,000 of necessary improvements to the system that will need to come out of the water services fund. He noted that the $360,000 figure for improvements includes the seismic retrofit for the water tank that the City wanted to get done in the past year, but was unable to because the bid came back so high, as well as the new filter media at a cost of $120,000 roughly. Those are the two large capital improvements, City Manager Good said, that need to be addressed as soon as possible; and a rate increase is what is needed to address those issues, as well as other immediate and future ones.
City Manager Good then asked Harry Staven to walk the Commission through potential rate increase scenarios A, B and C.
Finance Director Staven noted that the process begins with realizing the City’s water utility serves a little over 2,100 customers, and the historical trend is that the City is adding about 19 new customers per year. So, Finance Director Staven noted, as the Commissioners review the numbers for fiscal years 2017 through 2020, those increases services provided are factor into the revenue and expense side, equating with roughly $6,000 per year.
Finance Director Staven concurred with City Manager Good’s assessment, that the City water service is operating less than optimal, and that gap is about $106,000. So what they are proposing is that the service should operate at a total revenue stream of $700,000 per year, rather than the current $600,000 level. And, he noted, that following the immediate need for $360,000 in capital improvements factored into the first year, he is assured by operators that no other major improvements should be coming up within the next five years. This would give the City a good trend moving forward, he noted, providing the water service future capitalexpense funds in reserve. He further recommends that in the future, the City tie the water rates into some type of index, such as the consumer price index, to maintain a positive trend moving forward.
Staven further explained that the options models provided to the Commission are over the next five years. He reminded Commissioners that if they wanted to move forward with a ballot measure, they would not have the benefit of a full year’s increased revenue this coming year. So, only six months of increased revenue are factored into the first year options totals.
Currently, Finance Director Staven noted, the current resident minimum water bill is $13.50; we need to be cognizant of what is feasible to our consumers. Plan A is very simple, noted Staven – the current water rate would be increased by $10.00 across the board to everyone. With this option, at the end of five years, the City would have a reserve for the service of $474,000 for capital improvements. Each customer would pay a minimum rate of $23.50, which would include the first 2,000 gallons utilized at no additional charge.
Proposal B, Finance Director Staven noted, increases the base rate by half as much, $5.00, but also charges each resident for every gallon used. This would make the minimum bill $18.50, plus an additional charge for each gallon utilized. Staven projects that at the end of the five-year period, the City water capital improvement fund would be $96,000.
Finance Director Staven went onto explain that Proposal C is a mix of considerations. It proposes to increase the base utility rate by $.50 annually, and charge for each gallon of water a resident utilizes. This allows revenue of $75,000 generated for a future capital improvement fund. In the first year, the utility would realize a loss of $106,000; but every year thereafter, it would be in the black moving forward till it reaches a point that the City water utility would be operating in the optimal $700,000 range, rather than the less than optimal $600,000 of today.
He noted that the waste water plant operates at a revenue of $700,000, widely disparate from the $600,000 of the water services budget. Staven noted that due to the electrical costs of water treatment, it is not uncommon for waste water treatment to run a little higher than water delivery systems. But he explained, a typical municipal variance between the two is about 15% maximum, and right now, we are not even close. He would like to see that differential be closer.
Staven continued that under Plan C, the minimum rate would be $14.00 in the first year, going up $.50 in annual increments, and climbing up to $16.00.
In conclusion, all of these options, Finance Director Staven noted for the Commissioners, fall well below the area’s other municipal rates, while allowing the utility to operate at an optimal sustaining level.
On the capital improvements impact, Finance Director Staven utilized a price index which calculated $.20 to $.30 on the base rate; and $.11 through $.15 on the per thousand gallon of use. So that would allow, Staven explained, instead of a $.50 increase annually on the base rate, it would allow a $.35 to $.45 increase each year.
City Manager Christopher Good said it is important to note that both Plan B and Plan C call for a usage charge beginning with the first gallon. Currently, Good noted, the customer pays $13.50 minimum charge, and receives the first 2,000 gallons of use at no additional charge. He just wants to make sure that everybody understands that charging per gallon will make a difference in the monthly bill to the consumer.
Chair Winkel asked for clarification under Plan C – how does the minimum charge get from $13.50 now, with annual increases of $.50 per year, to $16.00 in six (6) years, without consumption charges?
Staven responded that consumption usage is $1.30 per thousand gallons.
Chair Winkel queried, “So if I use up to 2,000 gallons, right now I pay $13.50?”
Staven responded in the affirmative.
But, Chair Winkel said, “If we go with Plan C, I would pay $14.00 minimum charge, with the same water usage would be an additional $2.60?” Finance Director Staven responded in the affirmative.
Chair Winkel then called on Commissioner Bob Berry, as he understood that Commissioner Berry was working on a proposal of his own on the water rates. Commissioner Berry responded that he had begun work on such a proposal, but set it aside and did not complete it.
Chair Winkel asked the Commissioners if anyone else had questions for the staff before he further addressed his questions. There being none, Chair Winkel proceeded with his additional questions beginning with Plan A.
As questions were addressed, there was extensive Commission discussion for Finance Director Staven regarding the rate options spreadsheet, and seeking clarification on the numbers and proposed options.
Chair Winkel noted that according to his rough calculations, Plan A represented a 74% increase in minimum household water rates, if each stayed under the 2,000-gallon allowance. But, he continued, for a large commercial consumer, it equates with only a 7% increase. Overall, Chair Winkel continued, it appears to be a 54% increase. Plan A could put the City closer to where it ought to be in the “middle of the pack,” Chair Winkel said in relationship to a little bit higher rate than in Reedsport, Coos Bay and Myrtle Point, yet lower than the higher rates in Coquille, Port Orford and Powers.
Mayor Mary Schamehorn then queried why a 10% base rate increase would raise $257,000, but a $5.00 base rate increase, which would be half of that, would only raise $64,000.
Consensus appeared to be that one line item was based upon a full year’s revenue, while another was based upon a half year’s revenue; instead of $257,000 for Plan A the first year, that line item of revenue should read $125,000. But, Mayor Schamehorn, cautioned, the revenue line item for Plan B should read $64,000 plus whatever the projected usage charges would be for that time period.
In the interim, Chair Winkel called to the Commission’s attention that the more a plan is shifted to a charge for consumption model, the more the burden is shifted to the customer. He added that he doesn’t know how a 74% increase for small households would play to the voters, while only increasing the rates 7% for large commercial customers.
Chair Winkel also asked for clarification on the CPI items noted on the spreadsheet. City Manager Good responded that the notation refers to the two immediate Capital Improvement needs he addressed in his opening remarks – the seismic retrofit and the filter media. The designation should read “CIP” (for Capital Improvement Program) rather than “CPI.”
Commissioner Berry then inquired, as Mayor Schamehorn had earlier, why in Plan A, the proposed $10.00 base rate increase would raise $125,000, but the Plan B $5.00 base rate increase of $64,000 does not reflect additional monies for a projected water use charge.
Finance Director Staven concurred with the oversights as pointed out by Mayor Schamehorn and Commissioner Berry. He offered to excuse himself from the meeting to quickly correct the spreadsheet, then distribute it with corrections to the Commission during the meeting.
Chair Winkel asked Finance Director Staven if he would also be certain, in making those changes, to utilize the same increment of time in the comparison, because one plan option utilizes six months in the calculation of the first year, while the other utilizes twelve months. Staven agreed.
Commissioner Berry went on to say that he had been prepared to support Plan A for its simplicity and revenue advantage, but if Plan B could get a little closer to the revenue needed with the additional figures for usage charges, he might be more inclined to consider that option.
In the absence of Finance Director Staven, Commissioner Graham asked City Manager Good if he could project a minimum household increase under Plan B. Essentially, City Manager Good indicated, Plan B increases the base rate by $5.00 per month, plus charge $1.30 per thousand gallons for each gallon used – the overall increase then for the minimum rate customer who utilizes up to 2,000 gallons would be $7.60 per month.
Commission members then asked if the $474,000 of projected revenue might be wrong as well. Then Commissioner Berry noted that if the computed figures are not accurate, if the benefits and costs are not easily understood, the City is going to have a hard time selling an increase to the voters. The voters want plain, simple and concise arguments.
Chair Winkel reminded City Manager Good that the last time the Commission met, the general consensus was for the staff to come forward with a monetary figure of what exactly is needed. These are pretty substantial increases, he noted, albeit different methodologies for getting to them, but they each have different impacts. Is there a figure of what is needed?
City Manager Good responded that he thought showing the cumulative impact would be an answer to that question; but of course, he added, that is not much of an answer if the numbers are not right. But he noted that Plan B is the one that projects an ultimate revenue of $100,000, which brings them closest to zero without “over-feeding the kitty.”
Chair Winkel responded that it might be a good approach to first address what is needed, then develop the strategies to get there; in other words, if your calculations show that we need over $250,000 per year, then that could be accomplished either by a $10 per year increase or whatever. Rather than focus on the methodology, we need to determine the amount needed before figuring out how to get there.
City Manager Good responded that on the spreadsheet, with no change in minimum rate structure, the City will have a shortfall of $410,000 for the 2016-17 fiscal year. The shortfall numbers for subsequent years are also shown in the graph, he noted.
When asked by Commissioner Patricia Soltyswhat constitutes the projected annual shortfalls, City Manager Good noted that they are the result of the gap between operations costs against revenue income. Commissioner Soltys requested confirmation that for fiscal year 2016, they need to cover the $106,000 annual shortfall plus the $360,000 capital improvements. City Manager Good affirmed.
Commissioner Soltys noted that while the City needs to take care of the seismic retrofitting of the water tank and the filter media, the City also needs an emergency generator at the power plant. She emphatically expressed concerns that if there would be a loss of Bonneyville Power for any reason, the City its residents would be without water. Commissioner Soltys urged City Manager Good to put the need and the cost of a generator for the power plant into the capital improvements budget. She noted that it is her understanding the generator would be needed to pump water up from the holding pond and to power the facility.
Commissioner Berry asked employee Jim Youravish’s thoughts on this. Mr. Youravish responded that if they were to lose power for more than three days, the City would be out of water. He said in the winter time, if there were an ice storm or Bonneville Power failure, the City could possible get by for a week; but if it were to happen at this time of year, with everyone beginning to water outside, it would be about three days till the City would be out of water.
Mr. Youravish cautioned that while one generator would be helpful, it would actually take more. There are two pump stations for the creeks themselves, then there is the Middle Pond, and finally, the plant. They run on three separate circuits.
He projected that the City could get by with one large generator for the middle pond and power plant, and a smaller generator for the lower one. That is Mr. Youravish’s understanding, he said, but he noted that he is not an engineer.
Discussion followed about size and number of generator needs, particularly in regards to the reservoir.
Commissioner Cheryl Bremmer then asked City Manager Good about the budgeted revenue from operations. Does it take into account any human factors? Plan A, she noted, with a $10 increase on the minimum rate per household appears regressive. For low income customers who receive assistance with their bills, are those factors included in the numbers?
City Manager Good responded affirmatively. The City takes that money in, then turns it over to Oregon Coast Community Action (ORCCA) and they administer that program for the City.
Chair Winkel clarified that the monies are part of the Low Income Energy Assistance Program.
The question was also raised if City Manager Good had any stats on how many households utilize the full 2,000-gallon allowance currently. He did not have that figure, but Commissioner Berry said the figure would be skewed by the number of residents who don’t live in the community during the winter, but do leave their water turned on.
Whether the proposed increases are regressive or not, Councilor Brian Vick said, we have to find a way to fund the deficits and needs of the utility.