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HomeMy WebLinkAboutItem 07 Setting Local and Regional Wastewater and Stormwater User Fees Effective July 1, 2016 AGENDA ITEM SUMMARY Meeting Date: 5/2/2016 Meeting Type: Regular Meeting Staff Contact/Dept.: Matt Stouder Staff Phone No: 541-736-1006 Estimated Time: 10 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: SETTING LOCAL AND REGIONAL WASTEWATER AND STORMWATER USER FEES EFFECTIVE JULY 1, 2016 ACTION REQUESTED: 1) Conduct a public hearing on local and regional wastewater and local stormwater user fees. 2) Adopt A RESOLUTION OF THE CITY OF SPRINGFIELD SETTING LOCAL AND REGIONAL WASTEWATER (SEWER) USER FEES AND LOCAL STORMWATER (DRAINAGE) USER FEES AS SET FORTH IN THE SPRINGFIELD MUNICIPAL CODE. ISSUE STATEMENT: Each year, the City Council reviews and establishes the rates for local wastewater and stormwater user fees and adopts regional wastewater user fees set by the Metropolitan Wastewater Management Commission. Council action is needed to establish new user fees for FY 16-17. ATTACHMENTS: 1. Resolution 2. Council Briefing Memorandum from April 25, 2016 work session DISCUSSION/ FINANCIAL IMPACT: Each year, the City Council reviews and establishes the rates for local wastewater and stormwater user fees. These rates are established to provide adequate revenue to fund operation and maintenance (O&M) of Springfield’s wastewater (sanitary sewer) and stormwater systems, and a portion of the Capital Improvement Program (CIP) for each program. The Council also adopts the user fees set by the Metropolitan Wastewater Management Commission (MWMC) for the Regional Wastewater Program. The City Council reviewed and discussed options for local wastewater and stormwater user fee adjustments at its April 25, 2016 work session. Detail on the discussed options is provided in Attachment 2. Council provided guidance to staff to prepare a resolution based on Option 2 for both wastewater and stormwater services. Staff has prepared a schedule of user charges for a public hearing, based on the 2.5% increase in the local wastewater user fees and a 3.5% increase in the local stormwater user fees. In addition, the Council was informed that the MWMC adopted a 2.0% increase in the regional wastewater user fees that also needs to be incorporated into the schedule of user charges for FY 16-17. Staff continues to explore options to reduce pressure on user fees while continuing to meet environmental and regulatory standards. A successful strategy will take multiple years to implement and will, in part, depend on the City’s ability to significantly reduce reliance on user rates as a source of capital, by improving the ability of System Development Charge (SDC) revenues to fund a greater portion of the capital investment. This could reduce and/or defer the need to rely on future debt financing and reduce the importance of providing coverage for debt service as an operating budget constraint in the long-term financial forecast. Attachment 1, a resolution establishing the local and regional wastewater and local stormwater user fees for FY 16-17, is provided for Council consideration. Staff requests that the Council act on the resolution following the public hearing. ATTACHMENT 1 Page 1 of 2 RESOLUTION NO.________ A RESOLUTION OF THE CITY OF SPRINGFIELD SETTING LOCAL AND REGIONAL WASTEWATER (SEWER) USER FEES AND LOCAL STORMWATER (DRAINAGE) USER FEES AS SET FORTH IN THE SPRINGFIELD MUNICIPAL CODE. WHEREAS, the City of Springfield has established a system of wastewater and stormwater drainage sewer systems; and WHEREAS, under the Intergovernmental Agreement (IGA) entered into by the City of Springfield, the City of Eugene and Lane County in February, 1977, and as subsequently amended, the Metropolitan Wastewater Management Commission (MWMC) constructs, operates, and maintains the regional sewerage facilities, as described in the IGA; and WHEREAS, the costs related to operation, maintenance and certain capital improvements of the local and regional wastewater sewer systems, and the local stormwater drainage systems are funded through user fees; and WHEREAS, Sections 4.206 (3) and 4.208 (2) (a) (i) and (ii) of the Springfield Municipal Code authorize the setting of wastewater and stormwater charges by resolution of the Council; and WHEREAS, the MWMC approved Resolution 16-07, adopting the Regional Wastewater Program Budget and Capital Improvements Program for fiscal year (FY) 2016-2017, and Resolution 16-06, adopting a new schedule of user fees for FY 16-17 operations and capital programs, on April 8, 2016, after reviewing the proposed Resolutions in a series of public meetings and public hearings; and WHEREAS, Section 8(c) of the MWMC IGA obligates the City to “adopt user charges required by 40 CFR 35.929 in an amount not less than adopted by the Commission”; and WHEREAS, the schedule of sewer user fees, attached as Exhibit “A,” and incorporated herein, is needed to collect revenues necessary to fund the operations, maintenance and certain capital improvements of the local and regional wastewater (sewer) system and the local stormwater drainage system in FY 16-17. NOW, THEREFORE, BE IT RESOLVED by the City of Springfield as follows: 1. The City of Springfield Schedule of Local and Regional Wastewater (Sanitary Sewer) User and Local Stormwater (Drainage) Fees, which is attached as Exhibit “A,” is hereby adopted and shall take effect with bills rendered on or after July 1, 2016. 2. This Resolution shall take effect upon its adoption by the Council and approval by the Mayor. ADOPTED by the Common Council of the City of Springfield this _____ day of May, 2016, with a vote of _____ for and _____ against. ________________________________ Christine L. Lundberg, Mayor ATTEST: ______________________________ Amy Sowa, City Recorder ATTACHMENT 1 Page 2 of 2 EXHIBIT A Wastewater (Sanitary Sewer) Beginning with bills rendered on or after July 1, 2016 Wastewater charges shall be as follows: LowMediumHighVery HighSuper High StrengthStrengthStrengthStrengthStrength 400*800*1200*1600*Over 1600* MWMC$1.872$2.515$3.665$5.200$6.740$8.276 City of Springfield$3.338$3.338$3.338$3.338$3.338$3.338 Total$5.210$5.853$7.003$8.538$10.078$11.614 * Average total biological oxygen demand and suspended solids in milligrams per liter (mg/L) Base Charge: A regional (MWMC) monthly base charge of $12.58 is applied to each account Wastewater Monthly Fee Schedule Wastewater Flow-Based Fee (per unit - 748 gallons) Residential Customer Commercial / Industrial Customers Stormwater (Drainage) Beginning with bills rendered on or after July 1, 2016 Stormwater charges shall be as follows: * 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 total Commercial rate displayed above, an Administrative Fee of $1.625 per account is applied Stormwater Monthly Fee Schedule ** Commercial ATTACHMENT 2 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 2 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 2 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 2 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 2 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 2 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.