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HomeMy WebLinkAbout05/13/1985 Meeting e. e ~ " M I NUT E S Eugene City Council Dinner Session Eugene Conference Center May 1 3, 1 985 5:30 p.m. PRESENT: Cynthia Wooten, Debra Ehrman, Dick Hansen, Ruth Bascom, Freeman Holmer, Roger Rutan, Jeff Miller, Emily Schue, councilors; Mike Gleason, City Manager; Bob Deis, Susy Wagner, Finance; Christine Andersen, Bill Guenzler, George Jessie, Public Works; Dave Whitlow, City Manager1s Office; Barb Bellamy, Public Information Director; Kees Corssmit, CH2M Hill; Dick Briggs, Eugene Chamber of Commerce; Jim Boyd, Register-Guard. Ms. Wooten opened the meeting and introduced Mr. Guenzler, who presented an overvi ew of regi onal sani tary sewer rates and a user fee rate proposal. He said EWEB collects both regional and local rate money. The local funds are sent to the City of Eugene for maintenance of sewers, and the regional funds are forwarded to the City of Springfield. Of the $10.50, local rates account for $4.20, and regional rates are $6.30. Mr. Guenzler said the Springfield reserve fund totals $3.9 million, and the administrative expense related to the fund is charged to the sewer fund, but the charge is not for fund manage- ment, per see Mr. Hansen asked whether the surplus was related to the different rates for residential and other customers. Mr. Guenzler said the surplus was probably a result of making fewer expenditures than had been expected. Mr. Guenzler said local rates are set by each of the cities, depending on revenue necessary for sewer maintenance. Regional rates are studied and recommended by MWMC to city councils, which then pass ordinances on rates. Mr. Guenzler said councils are required by the MWMC agreement to pass rates no lower than those required by the commission. He also said MWMC usually bases its recommendations on customer characteristics, such as average flow. Mr. Guenzler discussed regional rates for treatment, which he said involve separate issues and actors than those for local rates. He said the process usually begins with a study of revenue requirements, followed by collecting the costs which are necessary to run the utility. Those are then allocated to flow, biological oxygen demand, and suspended solids, and an equation is developed based on a percentage of total expenses for each factor. Every customer is then charged according to those equations, with some measured by flow, and with single residential customers, for example, charged based on an average flow. Mr. Rutan asked what criteria were used to determine whether a business is given a flow-based or flat rate. Mr. Guenzler said every non- residential user has a measured flow rate, and he said the MWMC agreement MINUTES--City Council Dinner Session May 13, 1985 Page 1 e includes customers in the cities of Eugene and Springfield, with a few excep- tions outside city limits. He also said there is a possibility that customers in the River Road/Santa Clara area could be included. Mr. Guenzler added that apartment owners are given the option of flow-based or flat rates, and approx- imately 80 percent of them have chosen flow-based. Mr. Guenzler presented a slide showing the breakdown of costs in terms of suspended solids, biological oxygen demand, and flow, and multiplying those to come up with the monthly charge. He added that administration was usually the problematic area. He also showed a slide of current and proposed regional rates. He said the proposal would continue the current average-flow flat rates for single-family dwellings until July 1, 1986, when flow-dependent rates would be enacted. He said the current charge of $6.30 would be reduced to an average of $4.50, based on an average flow of 5,800 gallons. Mr. Guenzler said the proposed charge was based on new information from the Wastewater Plant, which had lowered costs for biological oxygen demand and increased costs for suspended solids. Medium-strength customers, like laundries, grocers, and motels, would be charged $1.61/month plus $.71/1,000 gallons, which is about the same as, or lower than, present costs. - High-strength customers, such as restaurants, bakeries, and food processors, would be charged $1.14/1,000 gallons. Mr. Guenzler said high-strength cus- tomersl costs probably would be equal to, or possibly greater than, present costs. Septage rates would go from $30/1,000 gallons to $39/1,000 gallons. The eight large industrial customers would continue to be charged based on specific strengths as measured by a laboratory and on specific flows. Mr. Guenzler said cost differences for that group varied among individual customers. Mr. Guenzler showed a pie chart of revenues and expenditures. He said 73 per- cent of MWMC revenues would come from user charges, while about 14 percent would come from the $3.9 million reserves. On the expense side, 61 percent goes for treatment plant operation and maintenance. Ms. Ehrman asked about billing costs. Mr. Guenz1er said they are based on a figure of $.28 per bill. Mr. Holmer asked why MWMC costs were so high with construction com- pleted. Mr. Guenz1er said much of that cost was related to a grant reim- bursement. Mr. Guenzler said the regional rate proposal meant lower costs for most customers except for about 290 high-strength customers, whose costs could be higher. He introduced Mr. Deis, who presented an indirect cost allocation plan. Mr. Deis said the issue of indirect costs had been a topic of discussion by the MWMC board and in public testimony. He outlined how the indirect costs were identified and why they were recovered. He said indirect costs are .e MINUTES--City Council Dinner Session May 13, 1985 Page 2 e e - identified by using the Federal indirect cost plan, which is reviewed by the Federal government every year for conformance with Federal guidelines and for equitable allocation of indirect costs. Mr. Deis said every City develops an indirect cost plan to recover overhead costs. For example, for an attorney's fee, the typical breakdown is about 30 percent direct costs and about 70 percent overhead costs. Mr. Deis said the first step in the cost plan is to divide all City divisions into two categories--central support (divisions that provide services to other City divisions) and operating (divisions that provide services to the general public). Mr. Deis described how indirect costs are allocated by department. He said total central support costs are added to department and divisional adminis- trative costs to come up with total indirect costs. Total indirect costs are divided by total direct costs to yield the indirect rate for every division within the City. The Maintenance Division of Public Works, which includes the regional treatment plant, has an indirect rate of 23.77 percent. Responding to Mr. Hansen's question, Mr. Deis said indirect costs are included in the current $6.30 rate. Mr. Deis said recovering indirect costs reimburses the general fund and the local sewer fund for overhead costs. Mr. Holmer asked about the range of indirect rates. Mr. Deis said departments varied, ranging from 60-100 percent for police to 15-20 percent for the lowest. He added that indirect rates for most departments run about 30-60 percent. Mr. Guenzler said those cities that do not include indirect cost reimburse- ments have made a decision to subsidize sewer service. He said he did not think that approach made sense for a regional facility. Ms. Bascom asked why rates were lower a few years ago. Mr. Guenzler said those rates had been suppressed and were depleting reserves. He also said the new treatment facility has higher standards and is more expensive than the old one. Mr. Gleason added that the facility has one of the most stringent stan- dards of any major regional plants in the country. Mr. Guenzler said a single dwelling charge of about $6 a month would allow balancing of revenues and expenditures, and he said the Wastewater Commission had recommended charging $4.50, with $1.50 to be made up by drawing down reserves over the next two years. Mr. Guenzler said they are hoping to improve upon the revenue requirement, but even if that does not occur, he said the reserves will still be sufficient for two more years without raising rates. Ms. Ehrman asked about the Countyls role and whether it has any indirect costs. Mr. Guenzler said the County has had some minor indirect expenses through its involvement with MWMC, but he added that direct activities were almost minuscule. MINUTES--City Council Dinner Session May 13, 1985 Page 3 e Mr. Rutan asked about the role of councilors. Mr. Guenzler said they were proposing that a policy decision would be made at a hearing on May 20. The recommendation will direct staff to prepare an ordinance enacting the rate. Mr. Gleason added that the costs were included in the Public Works budget, which previously had been reviewed by a subcommittee. Mr. Guenz1er said MWMC had additional reserves marked for specific purposes, including a replacement fund to take the plant to its designed life of 20 years. Ms. Bascom asked about the phase out of the old plant. Mr. Guenzler said the Springfield plant was shut down early last year, and minor maintenance is now being done by the City of Eugene until the City of Springfield decides what to do with it. LOCAL SEWER RATES Mr. Guenzler highlighted key issues related to local sewer rates. He said user fees began to be set aside for capital two years ago. The amount in the capital fund had been about $750,000 a year, and Mr. Guenz1er said a slight increase had been proposed. e He said customers have been charged for sanitary sewer maintenance and storm utilities at the same time. Another issue was how to charge the storm sewer portion of the bill. Mr. Guenzler said the proposal included costs for street sweeping as a storm sewer-related cost. As a final issue, Mr. Guenz1er cited a comparison of local and regional rates with those of other cities. Mr. Deis showed a slide on Program Needs and said it was basically a continua- tion of the maintenance program with the usual budget assumptions applied. Some areas that were added were street sweeping and capital. Mr. Guenz1er said a total of $10 million would be needed over two years, with a working balance of $700,000 a year. He also said Finance was forecasting almost no balance at the end of FY86. Mr. Holmer asked about the '84-85 information. Mr. Guenzler said he did not have that available but would prepare it for a future meeting. Mr. Hansen asked about the figures for indirect costs. Mr. Guenzler said indirect costs are not charged for capital, and he said the amount of indirect charged the local fund is only that indirect related to general fund support. Mr. Rutan asked whether the information would be available in writing. Mr. Deis said handouts and technical reports would be available after dinner. Mr. Gleason said the City tried to allocate the indirect rate using appro- priate cost-accounting methods and did not take advantage of the charge to the regional system, despite charges to that effect. He also said the portion of capital not allocated is intended for plant rehabilitation and reduction of ~ operating costs. MINUTES--City Council Dinner Session May 13, 1985 Page 4 e e e Mr. Guenzler showed a slide outlining Sanitary Capital Requirements and said projects not funded include the Highway 99 area, the Santa Clara/River Road urban reserve, and the urban reserve on the westside of Eugene. Projects for which funds are being saved include Prairie Road pump station, services in Bell Estates, and G1enwood Interceptor, which are expected to be funded in 1988 and 1990. Mr. Guenzler said committed projects and contracts include the River Road/Santa Clara Grant Project, other sewer rehabilitation work, and miscellaneous small projects throughout the city. He said the net capital requirement is $2.3 million over two years. Mr. Guenzler resented a slide of storm sewer capital requirements, saying many projects still were unfinished and needed to be dealt with before problems arise. He said another planning document on those projects is expected next year. Responding to Ms. Ehrman's question, Mr. Guenzler said sanitary sewers carry waste to be treated at the plant, while storm sewers carry runoff that is not treated. Mr. Guenzler showed a slide of Sewer Utility Program Costs for FY86-87. Ms. Bascom noted that the Amazon pipe project was not included in the last slides. Mr. Guenzler agreed and said that project would cost an additional $100,000. Mr. Guenzler explained his formula for figuring a rate of $.98/ 1,000 gallons if costs are spread according to water use. That would mean raising the local rate from $4.20/month to $5.70/month. Ms. Schue asked about the 30t difference between the wastewater management rates of $4.80 and $4.50. Mr. Guenzler said they had been derived using the various pieces of information available. He added that capital projects still were subject to change. Mr. Guenzler also said the City attempts to set rates approximately equal to those of Springfield, even though the services are a little different. Ms. Ehrman asked what the Springfield rates were. Staff said Springfield was looking at the $5.70 rate, which would mean an average total rate of about $10.20. Responding to Mr. Ho1merls question, Mr. Guenzler said street sweeping was included in the general fund budget for FY85. Mr. Holmer asked what would be done with the extra general fund money. Mr. Gleason said $1 million in fixed income would be spent to decrease the number of service reductions necessary to balance the budget. He added that the capital budget, which had been frozen, was separate. Mr. Guenz1er said the slides attempted to show the effects on local customer charges of changing from a basic fee of $.89/1,000 gallons to $.98/1,000 gallons. Mr. Miller asked whether the figures covered all the projected sewer needs for the next few years. Mr. Guenzler said it covered all but the storm sewers. Mr. Gleason said some facilities are only built to meet 20-year storm MINUTES--City Council Dinner Session May 13, 1985 Page 5 e requirements, while requirements specify building for 100-year storms. He said planning money would get that started, and he added that another reason for the shift was to get away from property tax support in favor of user fees. Mr. Guenz1er said two methods besides the flow-based had been examined, but neither was as accurate or as easily implemented as flow-based. He said the recommendation would be to continue to allocate the entire pie based on sanitary sewer flow, and over the next two years, additional input would be provided. Ms. Bascom asked about measurement. Mr. Guenz1er said single-family dwellings would be measured for water flow in the winter and charged that sanitary rate all year. He said some cities had tried measuring runoff, but that was not administratively feasible, since EWEB does not keep that information. Mr. Hansen asked how long storm sewer charges had been included on water bills. Mr. Guenz1er said it had been done that way for as long as he knew of. Ms. Schue said if the residential flow base will become effective in the summer of 1986, publicity should begin in about the fall of 1985, so that residents know they will be setting household standards during the winter of 1985. e Mr. Guenzler said the Portland area has a basic single family charge of $7.70, plus a fairly complex system for industrial customers. Portland also has a separate charge for storm sewers. He said Sa1emls charge is $10.30. Mr. Gleason said he had talked with Mark Gardner, an administrator in Portland, who had pointed out that their treatment standards are different and the full overhead is not distributed, rather a utility tax and a business and occupation tax help to cover overhead. Ms. Ehrman asked whether EWEB costs were expected to increase with the flow-based charges. Mr. Guenz1er said there may be some one-time expenses, but the only other administrative costs would be for City staff assistance with customers' bills. Ms. Wooten said a public hearing on regional rates as proposed by MWMC would be held on May 20. The council recommendation would then be made to staff to draft the ordinance implementing the rates. The local rate portion was to be considered at the same time. Mr. Hansen asked what would happen if street sweeping were not included in the rate. Mr. Gleason said it would affect the amount of cuts needed to balance the budget and would aggravate the issue. Mr. Hansen said he did not want to include the street sweeping costs as he did not feel they were related to sewers or to water flow. Ms. Bascom said she felt there was a logical connection, as leaves not swept up off the streets could clog the sewers, which had happened in her neighborhood. Ms. Wooten said leaf pick-up already was included in sewer fees. e MINUTES--City Council Dinner Session May 13, 1985 Page 6 e e e Ms. Ehrman said she thought more information was needed. Mr. Hansen requested more information on the relation between street sweeping and water consumption. Mr. Holmer requested specific information about what would be cut without the additional tax. Ms. Wooten asked what would happen when the conversion to flow-based rates was complete in July 1986. She also asked what would compensate for there being no change to single-family dwellings, and she said she wanted more information to make sure there were no service cuts to consumers. The meeting was adjourned at 7:25 p.m. W~S) MINUTES--City Council Dinner Session May 13, 1985 Page 7