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HomeMy WebLinkAbout031207 CITY OF PORT TOWNSEND CITY COUNCIL MINUTES OF THE WORKSHOP SESSION OF MARCH 12, 2007 CALL TO ORDER AND PLEDGE OF ALLEGIANCE The City Council of the City of Port Townsend met in workshop session this twelfth day of March 2007, at 6:30 p.m. in the Port Townsend City Council Chambers of City Hall, Mayor Mark Welch presiding. ROLL CALL Council members present at roll call were Geoff Masci, Frank Benskin, Laurie Medlicott, Catharine Robinson, Michelle Sandoval, and Mark Welch. Scott Walker was excused. Staff members present were City Manager David Timmons, Public Works Director Ken Clow, Finance Director Michael Legarsky, and Legal Assistant Joanna Sanders. WATER AND SEWER RATE STUDY City Manager David Timmons explained that Councilmembers received a copy of the presentation on the cost of service analysis that was recently accomplished. It is primarily a reappraisal of the cost of the utility. The utility is financially in good shape and the study calls for a reallocation of costs among the various users. Aided by PowerPoint slides, FCS Group Senior Project Manager Angie Sanchez Virnoche provided an overview of the three key areas of the rate study process: Revenue Requirements; Cost of Service; and Rate Design. She also presented an evaluation of water and wastewater system development charges (SDCs). In explaining the revenue requirements she covered the following: No rate increase required for 2007-09, but the study proposes revisiting water and sewer rates in 2010. The proposed rate plan supports ongoing 0 & M needs of the system, projected capital improvements identified in the Capital Improvement Program (CIP), partial system depreciation allocations, a 30 - 45 operating fund minimum, and a contingency fund for 2% of system fixed asset value. She also provided an in-depth review of the Cost of Service process. This analysis proposed the creation of a new customer class - Government Enterprise (including Ft. Worden and the Port) - and recommended reallocating costs from the single family residential class to the government classes for water and to all other classes for sewer. Based on the rate plan and cost of service analysis a new proposed rate design was presented for each water and sewer customer class. Their review of SDCs showed that the current City Council Workshop Page 1 March 12, 2007 rates are probably low and could be increased by as much as 100% to cover anticipated capital expenses related to growth. Responding to questions about the timing of the rate review in 2010, Ms. Sanchez Virnoche explained this is a policy decision, but looking at today's expense versus revenue, the City is meeting its requirements. Mr. Timmons added that a decision on filtration/disinfection would be done in 2013-2014. A decision in 2010 on a rate increase would help support the needed capital improvements. To determine whether capital contingency reserves are adequate to meet emergency needs, Ms. Sanchez said they are confident the City will be able to use its reserves to meet any short-term needs. Much depends on how comfortable the City is with risk. Right now, the City is projecting the minimal acceptable level using both a 30-day operating fund minimum (water) and 45-day (sewer) and 2% of system fixed asset for the capital contingency fund (water and sewer). Addressing questions about system development charges, Ms. Sanchez explained that through system development charges new development pays a proportionate share of existing and future facilities. This excludes replacement projects - only growth-related capital projects. Over time, the water SDC fund would be used and would be zeroed out in 2011 based on current SDC charges. Mr. Timmons said 2010 would be a good time to analyze what would happen in the following two years and see what type of reinvestments are needed. There was Council discussion and questions for clarification about the grouping of customers into classes. Ms. Sanchez Virnoche noted that different customer classes place different demands on the system. The cost of service analysis determines the needs. There was concern about the residential class subsidizing new development and the government class. There was a discussion of the need to oversize the utility infrastructure to meet peak demands. A question was whether other communities subsidize commercial users to encourage economic development. Public Works Director Ken Clow also clarified the difference between an eight-inch pipe versus an eight-inch meter. Flow is constrained by the meter and the larger the meter the larger the flow capacity to a served property. In closing, Ms. Sanchez reminded that no rate adjustments are anticipated for the water or sewer utility in 2007 through 2009. There would be an update of the study in 2010. Cost of Service considerations are equity issues between customer classes. This is the first cost of service study completed for the City; and the cost of service adjustments could be phased-in over minimum three-year period. To expedite Council's discussion and direction, Mr. Timmons recommended that staff bring forward an ordinance for first reading based on the recommendations outlined in the study. Council could then schedule a public hearing and make specific policy recommendations for implementation. City Council Workshop Page 2 March 12, 2007 Mr. Masci asked to see the system development charges in a separate ordinance. He would also like to see the hospital in the Government Enterprise category. There was also interest by other Councilmembers for more information on moving the hospital into a different category. Mr. Masci asked for billing scenario sheets showing the percentage of increase. Mr. Timmons confirmed staff would come back to Council with two ordinances: one to address the water/sewer rates (with two options, one of which would classify the hospital as a government enterprise versus a government general class) and another to address the system development charges. He recommended the Council take action on this matter in May. ADJOURN There being no further business, the meeting was adjourned at 8:45 p.m. Minutes by: Joanna Sanders Legal Assistant Attest: Qm r~/i/zJ- Pam Kolacy, CMC City Clerk City Council Workshop Page 3 March 12, 2007