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HomeMy WebLinkAboutItem 01 Wastewater and Stormwater User Fees FY 2016-17 AGENDA ITEM SUMMARY Meeting Date: 4/25/2016 Meeting Type: Work Session Staff Contact/Dept.: Katherine Bishop/DPW Staff Phone No: 541-726-3674 Estimated Time: 30 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: WASTEWATER AND STORMWATER USER FEES FY 2016-17 ACTION REQUESTED: Staff seeks Council direction establishing local wastewater and stormwater rates. ISSUE STATEMENT: User fees for local and regional wastewater and local stormwater are reviewed by the Council annually as part of the City’s budget development process. Staff is in the process of developing user fees for consideration and adoption by Council later this spring. The Metropolitan Wastewater Management Commission (MWMC) approved a schedule of Fiscal Year 2016-17 (FY 16-17) regional wastewater user charges on April 8, 2016 and will forward them to the cities of Springfield and Eugene for implementation. ATTACHMENTS: 1. Council Briefing Memo 2. Wastewater & Stormwater Program User Fees Rate Trend 3. Rate Comparison Charts DISCUSSION/ FINANCIAL IMPACT: Each year, staff presents proposed user fee rates for local wastewater and stormwater programs to Council. These fees are established to provide adequate revenue to fund operations and maintenance, capital improvement programs, debt service payments, and meet environmental permit requirements for the City. In addition to local user fees, MWMC develops regional user fees to support the Regional Wastewater Program. On April 8, 2016, the MWMC adopted the FY 16-17 regional user fees with a 2.0% rate change that will increase the typical residential customer’s monthly bill by $0.49. Last year, Council approved a 3.7% stormwater rate change along with a rate forecast projecting a 3.7% increase in FY 16-17 and a 3.5% in FY 17-18. Additionally, Council approved a 2.5% rate change last year for wastewater along with a rate forecast projecting a 2.0% increase in FY 16-17 and FY 17-18. Staff has prepared FY 16-17 rate options for further discussion and Council consideration, with Option 2 being the recommended option. The options show the combined change to local wastewater (assuming 6.684 units or 5,000 gallons) and stormwater user fees for a typical residential customer: Option 1(basic service level) includes a 2.7% user fee rate increase in FY 16-17, resulting in a $0.94 monthly increase, which includes a local wastewater increase at $.044 and a stormwater increase at $0.50 monthly, as discussed in Attachment 1. Option 2 (Recommended) (basic service level with pay-as-you go financing plan) includes a 2.9% user fee rate increase in FY 16-17 resulting in a $1.02 monthly increase, which includes a local wastewater increase at $0.54 and stormwater at $0.48 monthly, as discussed in Attachment 1. Option 3 (basic service level with greater level of pay-as-you go financing plan) includes a 3.2% user fee rate increase in FY 16-17 resulting in a $1.13 monthly increase, which includes a local wastewater increase at $0.65 and stormwater at $0.48 monthly, as discussed in Attachment 1. A public hearing on the option Council selects is scheduled for May 2, 2016. ATTACHMENT 1 Page 1 of 6 M E M O R A N D U M City of Springfield Date: 4/25/2016 To: Gino Grimaldi COUNCIL From: Anette Spickard, Development and Public Works Director Matt Stouder, Environmental Services Manager Katherine Bishop, ESD Program Manager Tonja Kling, ESD Management Analyst BRIEFING MEMORANDUM Subject: Wastewater and Stormwater User Fees FY 2016-17 ISSUE: User fees for local wastewater and stormwater services are reviewed annually by the Council as part of the City’s budget development process. Staff is in the process of updating the local user fees for Council consideration, and is seeking direction at the April 25, 2016 work session. A public hearing is scheduled for May 2, 2016. Additionally, the Metropolitan Wastewater Management Commission (MWMC) approved a schedule of FY 16-17 regional wastewater user fees on April 8, 2016 and will be forwarding them to Springfield and Eugene for implementation. COUNCIL GOALS/ MANDATE: Provide Financially Responsible and Innovative Government Services To fund services associated with the City’s wastewater and stormwater programs and adopted Capital Improvement Program (CIP), a revenue plan that includes an increase in user fees for FY 16-17 has been prepared for Council consideration. Revenues generated from user fees fund ongoing system maintenance, investments in capital improvements to replace existing infrastructure and accommodate new development, meet revenue bond covenants, ensure environmental and regulatory requirements are met, and maintain operating and capital reserve levels. BACKGROUND: As part of the budget development process, the City develops an annual CIP and operating budget for the local wastewater and stormwater programs. These programs face many challenges including; fixed operating and maintenance costs that are based on the size of our system regardless of usage (and wastewater generated), capital project costs that are impacted by inflation rates higher than the Consumer Price Index, and costs to comply with Federal and State environmental mandates. To meet these challenges, the city develops the CIP, operating budget, debt service obligations, and reserve levels as established by the Council which are then used to determine the annual funding requirements. Primary funding sources include wastewater and stormwater user fees (for operating and capital expenses), and system development charges (SDCs) for capital only expenses. In addition to the local fees, MWMC establishes regional wastewater charges to fund the Regional Wastewater Program. The services the City provides in the local programs are vital to economic development activity and the health and safety of the City’s local waterways, and are often taken for granted by users. That said, recent surveys of Springfield residents (by both the City and the MWMC) indicate “promoting economic development, maintaining a healthy environment and overall water quality” are a very high priority. A brief description of the City’s local wastewater and stormwater programs is discussed below: ATTACHMENT 1 Page 2 of 6 Local Wastewater Program The wastewater system serving the City of Springfield has two components: (1) a local wastewater collection system, and; (2) a regional conveyance, treatment and disposal system. The local system is comprised of over 240 miles of collection pipelines and 17 pump stations, which are owned and operated by the City of Springfield. Operations and maintenance of the local collection system is funded entirely by revenue from local wastewater user fees. In addition, user fees are the primary source of funding for the City’s CIP, which provides for system preservation, major rehabilitation, and expansion to support growth and development. Through previous rate actions, revenues for this program have stabilized and current and projected CIP priorities have been programmed based upon moderate and incremental rate increases. Local Stormwater Program The local stormwater management services are an important part of the community’s effort to improve water quality, protect fish habitat and recreational opportunities, and protect properties and infrastructure from flooding. The City’s National Pollutant Discharge Elimination System (NPDES) Stormwater Permit and Council adopted Stormwater Management Plan implement Federal and State water quality standards and guide the delivery of stormwater services for the community. The City’s storm drainage system includes 206 miles of stormwater pipe, 6,520 catch basins, and 30 public water quality facilities (including the Mill Race Stormwater Facility, which requires ongoing inspection, maintenance and vegetation control). In addition, street sweeping and leaf cleanup support surface stormwater quality activities that address permit compliance. Stormwater operations and maintenance services are funded entirely by revenue from the stormwater user fees. User fees are a primary source of funding for the maintenance, rehabilitation and preservation of the City’s stormwater capital infrastructure assets. The current and projected stormwater CIP program is based upon moderate and incremental rate increases. PROPOSED LOCAL WASTEWATER AND STORMWATER USER FEE OPTIONS Proposed FY 16-17 user fee options are discussed below for a typical residential monthly bill (assuming 6.684 units or 5,000 gallons of wastewater generated per month). The following options are presented for discussion and Council consideration. Option 1: Combined Local Wastewater and Stormwater User Fee – 2.7% increase The table below displays the proposed combined rate increase as a percentage (2.7%) and dollar amount ($0.94) for a typical residential monthly bill. The level of projected rate change for future years is also displayed, with 2.6% in FY 17-18 followed by incremental increases in the forecast. Option 1 funds basic system operations, maintenance and regulatory obligations, as well as the Council approved FY 16-17 CIP. The proposed rate changes are aligned with the prior year rate forecast, while considering customer activity trends including a reduction in generated wastewater volumes. Stormwater rates consider the projected impact of an upcoming NPDES permit renewal that will result in an increased service level to meet more stringent regulatory and environmental requirements. For the typical residential customer, Option 1 includes a monthly increase of $0.94 per month for combined local services. This option displays the lowest rate increase that will fund basic program activities, meet current debt service obligations, provide contributions necessary to fund the capital program, and continue programs required to meet permit requirements. ATTACHMENT 1 Page 3 of 6 Option 2 (Recommended): Combined Local Wastewater and Stormwater User Fee – 2.9% increase The table below displays the proposed combined rate increase as a percentage (2.9%) and dollar amount ($1.02) for a typical residential monthly bill. The level of projected rate change remains moderate with incremental increases throughout the forecast. Option 2 is $0.08 greater monthly than Option 1 for the typical residential monthly bill, and $0.11 less monthly than Option 3. Option 2 fully funds existing system operations, maintenance and regulatory obligations, as well as the Council approved CIP. Option 2 also provides a more responsive forecast to the continued and projected decrease in wastewater volumes by users, and positions the City to better mitigate revenue losses when major system users close their doors or make major modifications to their business practices. Option 2 takes into consideration the Engineering News-Record (ENR) Construction Cost Index (CCI) data relative to inflation on construction materials and labor. The ENR CCI rate of inflation is generally higher than the Portland-Salem All Urban Consumers (CPI-U) inflation index, and more closely aligned with costs associated with the City’s capital construction projects. 16-1717-1818-1919-2020-21 ProposedProjectionProjectionProjectionProjection Local Wastewater Services Avg. Monthly Residential Bill22.21$ 22.65$ 23.22$ 23.91$ 24.75$ Local Rate Increase2.0%2.0%2.5%3.0%3.5% Avg. Mo. Residential Increase0.44$ 0.44$ 0.57$ 0.70$ 0.84$ Stormwater Services Avg. Monthly Residential Bill14.11$ 14.61$ 15.12$ 15.65$ 16.27$ Local Rate Increase3.7%3.5%3.5%3.5%4.0% Avg. Mo. Residential Increase0.50$ 0.50$ 0.51$ 0.53$ 0.62$ Local Wastewater & Stormwater Combined Avg. Monthly Residential Bill36.32$ 37.26$ 38.34$ 39.56$ 41.02$ Local Rate Increases Combined2.7%2.6%2.9%3.2%3.7% Local Rate Increases0.94$ 0.94$ 1.08$ 1.22$ 1.46$ Combined Local Wastewater and Stormwater FY 16-17 Rates and Forecast - Option 1 Fiscal Year 16-1717-1818-1919-2020-21 ProposedProjectionProjectionProjectionProjection Local Wastewater Services Avg. Monthly Residential Bill22.31$ 22.87$ 23.56$ 24.27$ 25.11$ Local Rate Increase2.5%2.5%3.0%3.0%3.5% Avg. Mo. Residential Increase0.54$ 0.56$ 0.69$ 0.70$ 0.84$ Stormwater Services Avg. Monthly Residential Bill14.09$ 14.58$ 15.09$ 15.69$ 16.32$ Local Rate Increase3.5%3.5%3.5%4.0%4.0% Avg. Mo. Residential Increase0.48$ 0.49$ 0.51$ 0.60$ 0.63$ Local Wastewater & Stormwater Combined Avg. Monthly Residential Bill36.40$ 37.45$ 38.65$ 39.96$ 41.43$ Local Rate Increases Combined2.9%2.9%3.2%3.4%3.7% Local Rate Increases1.02$ 1.05$ 1.20$ 1.31$ 1.47$ Combined Local Wastewater and Stormwater FY 16-17 Rates and Forecast - Option 2 Fiscal Year ATTACHMENT 1 Page 4 of 6 Option 2 allows for larger transfers to capital reserves (particularly in wastewater) to position the City to delay future financing and move towards a pay-as-you-go utility. Pay-as-you-go (cash) investments in capital infrastructure projects are more cost effective than a future revenue bond issuance or loans that include financing interest expenses and additional cash reserve requirements over a 20-year term. For reference, the recent 2009 local sewer revenue bond sale total expenses exceeded $34 million, for a principal amount of $23 million. As shown in the table above, Option 2 includes a greater rate increase for wastewater services over the five year forecast, with the projected stormwater service rate change slightly less than with Option 1 in FY 16-17, and anticipates an increase in stormwater permit standards within the forecast and an increased level of service to meet future permit requirements. Option 3: Combined Local Wastewater and Stormwater User Fee – 3.2% increase The table below displays the proposed combined rate increase as a percentage (3.2%) and dollar amount ($1.13) for a typical residential monthly bill. The level of projected rate change is greater for wastewater services when compared to options 1 and 2 to generate a greater level of pay-as-you-go capital investments thereby deferring future financing and associated interest expenses. Option 3 includes a slightly greater rate increase and forecast for wastewater services, when compared to options 1 and 2. Stormwater service rates remain the same in Option 3 as Option 2. Option 3 is ($0.19) greater monthly for local wastewater and stormwater combined than Option 1 and ($0.11) greater monthly than Option 2 for the typical residential monthly bill. Option 3 provides a greater level of transfers to the local wastewater capital reserves, to be able to move towards pay-as-you-go-financing, and to defer future financing and associated interest expenses with the local wastewater system and investments in capital infrastructure. The stormwater service rates in Option 3 are the same as proposed in Option 2. WASTEWATER PROGRAM FUNDING AND RATE HISTORY: Wastewater user fees on customers’ monthly bills have a local (Springfield) and regional (MWMC) component. In FY 15-16, for a typical residence using 6.684 units or 5,000 gallons per month, the local wastewater bill is $21.77. The combined typical wastewater bill, including the regional component is 16-1717-1818-1919-2020-21 ProposedProjectionProjectionProjectionProjection Local Wastewater Services Avg. Monthly Residential Bill22.42$ 23.10$ 23.79$ 24.62$ 25.61$ Local Rate Increase3.0%3.0%3.0%3.5%4.0% Avg. Mo. Residential Increase0.65$ 0.68$ 0.69$ 0.83$ 0.99$ Stormwater Services Avg. Monthly Residential Bill14.09$ 14.58$ 15.09$ 15.69$ 16.32$ Local Rate Increase3.5%3.5%3.5%4.0%4.0% Avg. Mo. Residential Increase0.48$ 0.49$ 0.51$ 0.60$ 0.63$ Local Wastewater & Stormwater Combined Avg. Monthly Residential Bill36.51$ 37.68$ 38.88$ 40.31$ 41.93$ Local Rate Increases Combined3.2%3.2%3.2%3.7%4.0% Local Rate Increases1.13$ 1.17$ 1.20$ 1.43$ 1.62$ Combined Local Wastewater and Stormwater FY 16-17 Rates and Forecast - Option 3 Fiscal Year ATTACHMENT 1 Page 5 of 6 $46.37. Residential customer bills are used as a benchmark for wastewater rates because the volume and strength of the wastewater generated is similar within the customer class. The usage (and therefore the bills) of commercial and industrial users vary significantly because their wastewater volume and strength varies greatly. In FY 15-16 the Council increased local wastewater user fees by 2.5%, which followed a 3% increase annually in FYs 14-15 and 13-14, and a 4% increase in FYs 12-13 and 11-12. Also in FY 11-12, a right- of-way use fee of 3% (of total user fee revenue collected) was implemented and is assessed annually. In FY 15-16 local wastewater user fees are projected to generate approximately $7,080,000, while SDC revenues are expected to generate approximately $800,000. The FY 15-16 budget includes $2.48 million to fund the local capital program, and just over $1.7 million in annual debt service payments. The $22.8 million wastewater revenue bond issued in 2009 is fully expended, and the revenue bond debt obligation continues through 2029. A history of the local and regional user fees over the last several years is provided in Attachment 2. STORMWATER PROGRAM FUNDING AND RATE HISTORY: In FY 15-16, the current residential stormwater fee is $13.61. For commercial customers, rates are calculated on the percentage of impervious area on the property as well as the total square footage of the property. Commercial properties include a base fee (per 1,000 square feet of property), as well as an impact fee based on the amount of impervious surface on the property. FY 15-16 stormwater user fees are projected to generate approximately $6.3 million, while revenues from SDCs are projected at $240,000. The FY 15-16 budget includes $925,000 to fund the capital program, and approximately $706,000 in annual debt service payments. The $10 million stormwater revenue bond issued in 2010, includes bond proceeds that are currently programmed in the City’s FY 16-17 Capital Budget. The stormwater bond debt obligation continues through 2031. In FY 15-16, the Council increased stormwater user fees by 3.7%, which followed a 4% increases annually in FYs 14-15, 13-14 and 12-13, and a 3% increase in FY 11-12. Also, In FY 11-12, a right-of- way use fee of 3% (of total user fee revenue collected) was implemented and is assessed annually. A history of the stormwater user fees over the last several years is provided in Attachment 2. REGIONAL WASTEWATER USER FEES: At the March 11, 2016 MWMC meeting, staff presented the Preliminary FY 16-17 Regional Wastewater Program Budget and Capital Improvement Program, and proposed regional wastewater user fee rates. Based on discussions and input provided by the Commission, staff returned to the Commission on April 8, 2016 at a public hearing where the Commission adopted resolutions recommending a 2.0% user fee increase in FY 16-17, and the Regional FY 16-17 Budget for implementation by the cities of Eugene and Springfield. The table below shows the adopted FY 16-17 regional wastewater user fees. 16-1717-1818-1919-2020-21 AdoptedProjectionProjectionProjectionProjection Avg. Monthly Residential Bill25.09$ 25.97$ 27.01$ 28.09$ 29.21$ Regional Rate Increase2.0%3.5%4.0%4.0%4.0% Avg. Mo. Residential Increase0.49$ 0.88$ 1.04$ 1.08$ 1.12$ Avg. Annual Residential Increase5.88$ 10.54$ 12.46$ 12.96$ 13.48$ MWMC Regional Wastewater FY 16-17 Adopted Rates and Forecast Fiscal Year ATTACHMENT 1 Page 6 of 6 With the recommended Option 2 including a local wastewater rate change of 2.5% ($0.54/month), a proposed stormwater rate change of 3.5% ($0.48/month), and the MWMC adopted regional wastewater rate change of 2.0% ($0.49/month), the typical residential bill (assuming 6.684 units or 5,000 gallons of wastewater generated) would increase by $1.51 monthly resulting in a combined overall increase of 2.5%. RECOMMENDED ACTION: Staff has carefully considered the funding requirements associated with the proposed FY 16-17 budget and recommends Council consider a local wastewater rate increase of 2.5% and a stormwater rate increase of 3.5% (Option 2). If adopted, the proposed increases will provide sufficient revenues in FY 16-17 to continue to defer the need for future financing, maintain adequate debt service coverage, meet strict environmental regulations and NPDES Permit requirements, fund necessary capital improvements and system maintenance obligations, and provide quality services to existing customers and new development. Staff requests Council’s consideration, comments and direction on the proposed rate changes. The schedule of wastewater and stormwater fees, including the regional MWMC adopted rates for FY 16-17, will be reviewed and considered at the public hearing currently scheduled for May 2, 2016. ATTACHMENT 2 Page 1 of 2 WASTEWATER PROGRAM USER FEES AND RATE TREND: Wastewater user fees on customers’ monthly bills have a local (Springfield) and regional (MWMC) component. In FY 16-17, based on a typical residence using 6.684 units or 5,000 gallons per month, the local wastewater bill would be $22.31. Local wastewater charges are currently $3.338 per billing unit (748 gallons) for all customer types. The combined typical residential wastewater bill, including the regional component is $47.40. Residential customer bills are used as a benchmark for wastewater rates because the volume and strength of the wastewater generated is similar within the customer class. The regional wastewater charges vary significantly for commercial and industrial customers based on the wastewater volume and strength of discharge to be treated and disposed, and therefore the bills vary greatly. $ Monthly Year09-1010-1111-1212-1313-1414-1515-1616-17 Regional$19.91$20.91$21.74$22.61$23.30$24.12$24.60$25.09 Local$16.96$18.50$19.24$20.01$20.61$21.24$21.77$22.31 Total$36.87$39.41$40.98$42.62$43.91$45.36$46.37$47.40 % Rate Increase Category09-1010-1111-1212-1313-1414-1515-1616-17 Regional18%5%4%4%3%3.5%2%2% Local14%9.1%4%4%3%3%2.5%2.5% Total16.1%6.9%4%4%3%3.3%2.2%2.2% $ Rate Increase Category09-1010-1111-1212-1313-1414-1515-1616-17 Regional$3.04$1.00$0.83$0.87$0.69$0.82$0.48$0.49 Local$2.08$1.54$0.74$0.77$0.60$0.63$0.53$0.54 Total$5.12$2.54$1.57$1.64$1.29$1.45$1.01$1.03 ATTACHMENT 2 Page 2 of 2 STORMWATER PROGRAM USER FEES AND RATE TREND: In FY 16-17, the local residential stormwater fee would be $14.09. The table below displays the rate history for stormwater residential monthly charges and rate changes over the last several years. A commercial stormwater customer with 41% to 70% of impervious area is categorized as a heavy user and with a 3.5% rate change in FY 16-17 would pay $3.068 per 1,000 square feet of property plus an administrative fee of $1.625 per month. For example, a monthly charge for a customer with 1.5 acres of impervious surface (approximately 65,340 square feet) would be $202.09. Commercial customer rates will vary depending on the size of the property and the amount of impervious area. Category09-1010-1111-1212-1313-1414-1515-1616-17 Monthly Bill$9.84$11.32$11.66$12.13$12.62$13.12$13.61$14.09 % Increase14%15%3%4%4%4%3.7%3.5% $ Increase$9.84$1.48$0.34$0.47$0.49$0.50$0.49$0.48 * Residential: $14.09 Very HeavyHeavyModerateLightUndeveloped >70% 41-70%20-40%<20%0% Base Fee per 1,000 sq ft$1.636$1.636$1.636$1.636$0.000 Impact Fee per 1,000 sq ft$2.456$1.432$0.411$0.000$0.000 Total Rate per 1,000 sq ft$4.092$3.068$2.047$1.636$0.000 *Residential includes single family residential and duplex households **Commercial is based on percentage of property development (impervious surface) **In addition to the Commercial rates above, an Administrative Fee of $1.625 per account is applied monthly Stormwater Monthly Fee Schedule ** Commercial ATTACHMENT 3 Page 1 of 1 RATE COMPARISON CHARTS: The wastewater and stormwater fee comparison charts below reflect a typical residence using 6.684 units or 5,000 gallons per month for wastewater. The fee amounts are based on adopted rates as of February 1, 2016.