HomeMy WebLinkAboutItem 02 Flat Monthly Wastewater Rates AGENDA ITEM SUMMARY Meeting Date: 5/27/2014
Meeting Type: Work Session
Staff Contact/Dept.: Matt Stouder/DPW Staff Phone No: (541) 736-1006
Estimated Time: 20 minutes
S P R I N G F I E L D C I T Y C O U N C I L Council Goals: Provide Financially Responsible and
Innovative Government Services
ITEM TITLE: FLAT MONTHLY WASTEWATER RATES
ACTION
REQUESTED:
Provide feedback and direction to staff regarding whether additional time and
resources should be spent investigating moving to a flat monthly wastewater fee for residential customers.
ISSUE STATEMENT: Should the City continue to charge for local wastewater services based on an individual customer’s metered usage or consider changing to a flat monthly charge
for residential customers?
ATTACHMENTS: 1) Council Briefing Memo
DISCUSSION/ FINANCIAL
IMPACT:
Council has expressed an interest in investigating the merits of billing residential
customers for local wastewater services based upon a flat monthly rate. Currently,
the City bills local wastewater services to customers based upon the volume of wastewater used per account.
Of the total local wastewater accounts in Springfield, 91%, or 16,750, are residential accounts. Residential customers account for 60% of local wastewater
user fee revenues. In FY 14-15, revenue from local wastewater user fees is
projected at $4,118,400 for residential customers. Given these assumptions, and assuming no change in the level of wastewater services provided by the City, a flat
residential wastewater user charge of $20.49 could be expected when dividing the
total revenue by the number of accounts. The average residential account in Springfield currently pays approximately $19.07 per month, based upon an account
average of 4500 gallons of wastewater used per month. In this scenario, residential customers who place the lowest demand on the
wastewater system would see the greatest increase in monthly charges and those customers who place the greatest demand on the wastewater system would realize the greatest cost reduction in wastewater charges. Further information on the
impacts of moving to a flat wastewater fee is discussed in Attachment 1.
Should the Council wish to consider moving forward with the next steps of
implementing a flat wastewater rate billing system, several factors would need further exploration. These include having staff perform a refined analysis of
residential customer usage data, further conversations with the Springfield Utility
Board, a detailed evaluation of the costs associated with Springfield assuming utility billing services, and communication and outreach with Springfield residents
regarding factors driving associated changes to the wastewater rate structure.
M E M O R A N D U M City of Springfield
Date: 5/27/2014
To: Gino Grimaldi COUNCIL
From: Len Goodwin, DPW Director
Matt Stouder, Environmental Services Manager
Katherine Bishop, Senior Finance Analyst
BRIEFING
Subject: Flat Monthly Wastewater Rates MEMORANDUM
ISSUE: Should the City continue to charge for local wastewater services based on an individual customer’s
metered usage or consider changing to a flat monthly charge for residential customers?
COUNCIL GOALS/
MANDATE:
Provide Financially Responsible and Innovative Government Services
BACKGROUND:
Council has recently expressed an interest in investigating the merits of billing residential customers for local
wastewater services based upon a flat monthly rate. Currently, local wastewater services are billed to all customers in Springfield based upon the volume of wastewater services used per account.
To provide context to aid the Council in considering this issue, it is helpful to provide background information on general utility billing practices. In the utility industry, customer charges associated with utility services are
commonly related to the cost of providing services based upon the measured demand placed on the service.
This is driven by the habits and choices of the individuals using the services provided, as well as the number of people in the household. As demand for the service increases or decreases, the associated usage (water, power,
sewer, etc.) increases or decreases, and the result is reflected on the customer’s bill. Charges based on metered
usage provide a benefit to the customer, allowing them the flexibility to make choices that can reduce their bill. For example, replacing an older washing machine or dishwasher with a high efficiency model would allow the
customer to realize a benefit in reduced water use on their water and wastewater bill. In addition, the metered
usage is a benefit that provides the utility provider with data to measure changes in usage and to distribute charges equitably between customers.
In the wastewater industry, it is common to apply wastewater charges based on the volume of services provided; however some agencies also include a base charge plus a volume charge. Of the 15 Oregon utility
agencies that Springfield includes in its annual rate comparison, one agency (Gresham) bills on a residential flat wastewater basis. The 14 other wastewater service providers charge based on the individual customer’s metered demand placed on the system. Gresham is in the process of evaluating a change from their current flat
wastewater rate structure to a volume based wastewater rate structure, which will include a significant capital investment in the acquisition and implementation of a new utility billing system.
DISCUSSION:
Of the total local wastewater accounts in Springfield, 91%, or 16,750, are residential accounts. Residential
customers account for 60% of local wastewater user fee revenues. In FY 14-15, revenue from local wastewater user fees are projected at $6,864,000, of which $4,118,400 will come from residential customers. Under the
existing rate structure, the average monthly wastewater usage for a residential account in Springfield is approximately 4,500 gallons per month, which equates to an average local wastewater charge of approximately $19.07 per month. The amount for a flat user fee can be determined by dividing the projected
ATTACHMENT 1
PAGE 1 OF 3
residential revenue by the number of residential accounts. This calculation yields a flat residential wastewater
user charge that would be $20.49 monthly.
While staff does not have household data available for residential accounts, it is assumed that households with 2
or fewer people at home would pay more monthly than they are currently billed, while households with 3 or
more people would pay less. Stated another way, residential customers currently using 6 units or less of wastewater would be billed a greater amount for local wastewater services than they are currently and
customers using 7 units or greater would be billed less. The table below displays the current residential flow based charges in comparison to an estimated residential flat wastewater charge.
Under a flat user fee scenario, residential customers who place the lowest demand on the wastewater system would see the greatest increase in monthly charges and those customers that placed the greatest demand on the
wastewater system would realize the greatest cost reduction in wastewater charges.
Utility Billing Service Charges
The Springfield Utility Board (SUB) provides utility billing services for the City of Springfield through an existing Intergovernmental Agreement (IGA). In the most recent full fiscal year for which information is available (FY 12-13), actual costs billed to Springfield by SUB for local stormwater and wastewater billing
services are displayed in the table below.
Current Estimated
FY 14-15 Monthly FY 14-15 Monthly Increase (decrease) Increase (decrease)
Billing Units Gallons Flow Based Charge Flat WW Charge Monthly Annual
1 748 $3.18 $20.49 $17.31 544.7%$207.74
2 1,496 $6.36 $20.49 $14.13 222.4%$169.61
3 2,244 $9.53 $20.49 $10.96 114.9%$131.47
4 2,992 $12.71 $20.49 $7.78 61.2%$93.34
5 3,740 $15.89 $20.49 $4.60 28.9%$55.20
6 4,488 $19.07 $20.49 $1.42 7.5%$17.06
7 5,236 $22.25 $20.49 ($1.76)-7.9%($21.07)
8 5,984 $25.42 $20.49 ($4.93)-19.4%($59.21)
9 6,732 $28.60 $20.49 ($8.11)-28.4%($97.34)
10 7,480 $31.78 $20.49 ($11.29)-35.5%($135.48)
11 8,228 $34.96 $20.49 ($14.47)-41.4%($173.62)
12 8,976 $38.14 $20.49 ($17.65)-46.3%($211.75)
13 9,724 $41.31 $20.49 ($20.82)-50.4%($249.89)
14 10,472 $44.49 $20.49 ($24.00)-53.9%($288.02)
15 11,220 $47.67 $20.49 ($27.18)-57.0%($326.16)
18 13,464 $57.20 $20.49 ($36.71)-64.2%($440.57)
21 15,708 $66.74 $20.49 ($46.25)-69.3%($554.98)
24 17,952 $76.27 $20.49 ($55.78)-73.1%($669.38)
Measured Wastewater
Volume Difference
Percentage
By Service Type FY 13 Annual Monthly AVG Share
Local Stormwater $75,394 $6,283 46%
Local Wastewater 87,126 7,261 54%
Total $162,520 $13,543 100%
ATTACHMENT 1 PAGE 2 OF 3
Should the Council wish to consider moving forward in investigating whether or not to implement a flat
wastewater rate for residential customers, a conversation with SUB would be necessary regarding billing services. If the City were to elect to implement its own billing services program, staff estimates an additional
2.0 full time equivalents (FTEs) would be necessary to support program oversight, supervision, and appropriate
program software/hardware. Together with the associated initial investment cost of program software, staff estimates the City would not receive a financial benefit by providing its own utility billing services.
Potential Next Steps
Should the Council wish to further explore the concept of a flat residential wastewater user fee, the likely next
steps would include:
Conducting a detailed analysis of the residential customer usage data to better determine the number of customers who would see an increase/decrease in charges to more fully understand the impacts of such a
rate structure change.
Further discussions with Springfield Utility Board to identify cost adjustments, if any, for billing services with a flat residential charge for City wastewater services.
Developing and evaluating the costs associated with billing services provided by the City of Springfield
along with an evaluation of any associated fiscal impacts to user rates. Costs would include operating
materials including billing statements, envelopes and postage, etc.
Discussions with the partnering agencies of the MWMC to identify concerns and/or unintended
consequences for the City, the MWMC and/or its customers.
Communication and outreach with Springfield’s customers to include the factors driving a potential change
in the residential wastewater rate structure and associated impacts to identify the level of support and/or concern from our residential community.
RECOMMENDED ACTION: Provide feedback and direction to staff regarding whether additional time and resources should be spent investigating moving to a flat monthly local wastewater fee for residential customers.
ATTACHMENT 1 PAGE 3 OF 3