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HomeMy WebLinkAbout01/24/1983 Meeting M I NUT E S e City Council Dinner/Work Session Eugene Conference Center January 24, 1983 5:00 p.m. PRESENT: Emily Schue, Cynthia Wooten, John Ball, Freeman Holmer, Brian Obie, Betty Smith, Dick Hansen, Mark Lindberg, City Councilors; Gretchen Miller, former City Councilor; Micheal Gleason, City Manager, Dave Whitlow, Assistant City Manager; Marjorie Beck, Council/Community Services Director; Kess Corssmit, Bill Guenzler, Terry Smith, CH2M Consultants; Pat Hocken, Chairperson and City Representative of Metro- politan Wastewater Management Commission; Bill Pye, General Manager of MWMC; Gary Wright, Lane County Representative to MWMC; Warren Wong, Finance Director; Barbara Bellamy, Public Information Director; Don Allen, Director of Public Works; Doug Cook, Public Works. I. lNTRODUCTlON TO REGIONAL AND LOCAL SEWER RATE STUDlES Copies of the Regional and Local Sewer Rate Studies and copies of overhead illustrations were distributed. e Mr. Allen introduced Bill Guenzler. Mr. Guenzler introduced members of the Metropolitan Wastewater Management Commission. MWMC is an intergovernmental agency, which recently conducted a rate study to determine a set of rates for customers of the Regional Wastewater Collection and Treatment facilities. The MWMC staff proposes operation of a wastewater plant capable of treating water to a new standard and that will serve the entire urban growth boundary that was recently adopted. Part of the rate change is local, which relates to the operation of storm sewer and sanitary collection systems. A capital proposal is included to help fund the Westside Sanitary Sewer System. That sewer system will solve a severe capacity problem and will be expanded suffi- ciently to address 2/3 of the vacant industrial land for the City. Another capital component will provide a constant repair program to prevent unwanted water from entering the sewer system. The proposal provides a grant match plan for providing capital for the Santa Clara and River Road trunk sewer systeln. The proposal includes a $10.50 per month sewer rate through December, 1984. Mr. Guenzler outlined the process for the proposed regional rate. The Waste- water Commission authorized CH2M Hill to do an economic analysis for the rates with assistance from Price Waterhouse. That report was acted upon by MWMC and they recommended to the Springfield and Eugene City Councils that each City Council pass an ordinance that implements the rate. Springfield has directed staff to prepare an ordinance which includes the rate. A city of Eugene public hearing is scheduled on February 14, and the MWMC proposed that testimony be heard on the local rate and the regional rate. lf the ordinance passes, the Springfield Utility Board and Eugene Water & Electric Board would collect fees and disperse those to Springfield and Eugene. e MINUTES--Eugene City Council Work Session January 24, 1983 Page 1 e e e II. REGIONAL RATE STUDY Mr. Corssmit said CH2M Hill has been involved in many rate studies. The generalization may be made that what is happening locally is typical nation- wide. Treatment rates have increased because of Environmental Protection Agency local requirements. Consequently, new technology has been installed and the cost is becoming evident. Because of a large amount of grants EPA has given to local communities, the present rates are based on 75% capital. The total capital cost is over $100,000,000. However, from now on, most communities will not be able to get those grants, and consequently, the rates to pay for facilities will be much higher. Mr. Corssmit said two major reasons for the Regional Rate Study are the required revenues increase now that the facilities are built, and will begin to be operated. At the beginning of the study, interest at the regional level was on rates based on Single-family residential use. The City and County are on different fiscal years, and data did not match. March 1, not January 1, is a realistic target for implementing rates. It became evident during the first month of the study that a flow-based rate would not be easy to implement. A major policy issue is that EWEB and SUB are in the business of selling water and not in the business of selling less water. A flow-based rate would be imple- mented for conservation purposes and there would be less incentive for customers to use more water. EWEB was vocal and if water sales are reduced, a negative impact on their financial rating will result. Those are serious consequences of a rate hike. Administrative and mechanical problems of implementing flow-based rates include inability to begin new rates in 1983. 1984 could be the target year. Mr. Corssmit highlighted Table 2-2, which covered the approved and projected MWMC operation and maintenance costs. Mr. Corssmit explained Table 2-9, covering the annual revenue requirements. He highlighted the user charge revenue requirements in Table 2-10. Mr. Corssmit summarized Table 3-3 which covered two-year rates with uniform residential flat rate. Responding to a question, Ms. Hocken said two flat rates for multi-family and single residents would not be fair because of differences in those dwellings. The MWMC is interested in a flow-based rate because it would be more fair. A flow-based rate is a targeted goal, and cooperation from utilities is necessary. Mr. Pye said the MWMC has heard why the utilities don't want to use flow-based rates, but have not heard what the real problems are. Flow-based rates may not be worth it. However, the flow-based rate will be actively pursued. Mr. Corssmit said up until now, EWEB was not being reimbursed for billing expenses. There would be no problem with having EWEB charge their expenses out for billing adjustments. Responding to a question, Ms. Smith said most ~JMC members felt it best to take the necessary step to $10.50 rather than one increase now, and another increase in seven months. The Eugene and Springfield City Councils discussed the procedure, and one step is the preference of the two elected bodies. MlNUTES--Eugene City Council Work Session January 24, 1983 Page 2 e e e Mr. Wright said the $10.50 step is necessary to generate revenue by September 30 to balance the budget, Responding to a question, Mr. Corssmit said industries are all individually monttored and are billed accordingly. The proposed rate would increase by approximately 2.2 times the old rate for everyone, including commercial, residential and industrial users. The old BOD charge was $2.30 and would become $6.30 for residential users. The same rate increase would apply to commercial and industrial users. Responding to another question, Mr. Corssmit said commercial users are charged at a rate according to how much water they use rather than a flat rate. As long as water dirtiness loadings are known, commercial customer rates vary. lf the dirtiness is not known, they will be charged on the basis of the amount of water being used. III. LOCAL RATE STUDY Mr. Smith said the two components of the study are operation and maintenance, and capital. Regarding the operation and maintenance portion of the study, the local rate is designed to pay for operation of sanitary collection service, storm sewers, and drainage channels. Eugene has been funding operation main- tenance of storm sewers and drains out of the sewer user fee charge for some time. Obligations to the EPA affect the local charge and the regional charge. The section of the study on operation and maintenance charges uses the same process to arrive at a rate change, as does the regional process. Regarding capital, Mr. Smith said Public Works staff is suggesting that an additional $1 million be budgeted from existing sewer utility fund capital reserves for the West Eugene Sewer Project to keep local rates lower. Public Works staff is aSking City Council to increase development charges by a special trunk levy so the user fee does not have to be greatly increased. Staff requests a sufficient increase in sewer user fees to provide matching funds for a grant proposed for the River Road/Santa Clara interceptors. There are two important properties of the financing plan that are not apparent. They are recovery costs for capital projects, and composition of total revenues. One of the capital projects Staff is proposing to fund is the West Eugene Sewer Project with two phases funded in this program. The Department of Environmental Quality will provide grant money to fund addi- tional capital to assist Eugene development a pressure main to provide service to Santa Clara and River Road. DEQ has listed the project for fully extending services on the State Priority List, making the project eligible for $7 million in construction funds. When asked if $7 million and State priority ranking remain if Santa Clara tried to incorporate, Mr. Smith replied that they would remain. Matching funds are needed by both Santa Clara or the City to obtain the grant. The proposed financing plan provides matching funds. MlNUTES--Eugene City Council Work Session January 24, 1983 Page 3 e e e Mr. Gleason said the City is the only agency with the funds to secure the grant during this funding cycle. Mr. Smith said matching funds are $2-1/3 million. He said, included in the program is sanitary sewer rehabilitation. The oldest sewer components in the City are 75 years old, and sewer components are expected to last 100 years. Therefore, major replacements are not needed at this time. He described current methods of funding sewers and the proposed funding method. He said a one-half-cent sewer trunk levy was established in 1948 and has not been increased. However, construction costs have increased by a factor of nine. To keep property owners participating in total cost of sewers equal to 1948, the trunk levy must be raised 2.5 cents per square foot. Staff is also recommending the trunk levy be increased annually to keep pace with the cost of building sewers. Along with a 2.5-cent trunk levy, a 90-cent sewer capital projects and user fee is needed. Mr. Smith said Table 5 explains that the existing sewer customer base primarily fronts the money for the projects in the beginning, and over a long period of time, those monies are recovered. Responding to a question, Mr. Smith said the special trunk levy does not pro- duce a burden on new development. Mr. Gleason emphasized the breakdown of the proposed total sewer user fee charge. The percentages are: regional charge--60%; sanitary operation and maintenance--16%; storm sewer operation and maintenance--14%; Santa Clara and River Road--less than 2%. Responding to a question, Mr. Smith said an increased charge to 2.5 cents per square foot, or 10% in total assessment for sewers is a small increase compared to 24 cents total. lt is a five-fold increase in the trunk levy, but only a 10% increase in the total assessment for sewers. Responding to a question, Mr. Guenzler said Springfield has a $1.40 per month per residential customer charge devoted to capital projects, as compared to the 90-cent proposal for Eugene. Ms. Wooten asked if the City Council of Springfield was commited to working with SUB to arrive at a date in the future to transfer to a residential flow-based system of rates. Mr. Pye responded if the SUB and staff can work out apparent problems as they are presented, a flow-based system can be synchronized. Ms. Smith said Chris Larson, on the Springfield City Council and MWMC is highly interested in promoting a flow-based rate change. Mr. Wright summarized con- cerns expressed by Springfield concerning a flow-based rate charge. Responding to a question, Ms. Hocken said the proposal is to measure how much water people use from November to March each year, and to set the rate for that year on that usage, so water use is not monitored in the summer. Mr. Guenzler said one disadvantage of a residential flow-based system is that it would require billing staff. MlNUTES--Eugene City Council Work Session January 24, 1983 Page 4 e e e Ms. Wooten asked if historical data from cities that have switched from a flat fee to a flow-based fee system reflected that higher use rates balance out those who use less, in terms of total revenue. Mr. Corssmit said a handfull of communities in Oregon use a flow-based rate. EWEB and SUB have not increased water sales for ten years, while costs have increased. Concern about a major increase in rates exists. What will happen is uncertain. In the past, impact has not been significant in other communities. However, local increases in the past of 20 or 30% is different than doubling or tripling the charge. The billing agency, MWMC and the cities of Eugene and Springfield will determine what the impact is. Working together and developing more information will increase the probability of flow-based rates being accepted by billing agencies next year. Mr. Allen said the study does not provide storm sewer capital outlay money which will have to be dealt with later. The City is coming to the end of general obligation bond indebtedness for Bethel Danebo. Responding to a question, Mr. Corssmit said comparison of user fees with other communities is difficult because general obligation bond indebtedness is not known. Neither is it known when other cities have to jump to their next increase. Furthermore, the quality of their program is unknown. A $10 fee is about average. The meeting was adjourned. (Recorded by Lois Enman.) ~_a~ //~ - MINUTES--Eugene City Council Work Session January 24, 1983 Page 5