HomeMy WebLinkAboutItem 07 Proposed Resolution Setting Local and Regional Wastewater User Fees
. AGENDA ITEM SUMMARY
SPRINGFIELD
CITY COUNCIL
Meeting Date:
Meeting Type:
Department:
Staff Contact:
Phone:
Estimated Time:
June 2, 2008
Regular Session
Public Works e~
Susie Smith q)'7
726-3697
10 Minutes
ITEM TITLE:
PROPOSED RESOLUTION SETTING LOCAL AND REGIONAL
WASTEWATER USER FEES
1) Conduct a public hearing on local and regional wastewater user fees.
2) Consider adopting A RESOLUTION OF THE CITY OF
SPRINGFIELD COMMON COUNCIL SETTING LOCAL AND .
REGIONAL SEWER USER FEES AS SET FORTH IN THE
SPRINGFIELD MUNICIPAL CODE.
ACTION REQUESTED:
ISSUE STATEMENT:
At current rates, the local and regional wastewater user fees will not
produce sufficient revenue to fully fund the proposed fiscal year (FY) 08-
09 budgets for these funds. Council action is needed to establish new rates
for FY 08-09.
ATTACHMENTS:
Attachment A - Resolution establishing a schedule of local and regional
wastewater user fees.
Attachment B - Council Briefmg Memorandum reviewed by the Council at
its May 12,2008 work session.
Each year, the City Council reviews and establishes the rates for local
wastewater user fees. These rates are established to provide adequate
revenue to fund operation and maintenance (O&M) of Springfield's
sanitary sewer system, and a portion of the Capital Improvement Program
(CIP). The Council also adopts the user fees set by the Metropolitan
Wastewater Management Commission (MWMC) for the Regional
Wastewater Program.
The City Council reviewed options for a proposed local wastewater user
fee increase at its May 12,2008 work session. At that time, the Council
directed staff to prepare a schedule of user charges for a public hearing on
June 2nd, based on a 12.5% increase in the local wastewater user fees. ill
addition, the Council was informed that the MwMc adopted an 11 %
increase in regional wastewater user fees that also needs to be incorporated
into the schedule of user charges for FY 08-09. The Council Briefing
Memorandum reviewed at the May 12th work session is provided as
Attachment B for additional background and reference. Stormwater user
fee rates will be addressed at a later time.
DISCUSSION:
Attachment A, a resolution establishing the local and regional wastewater
user fees for FY 98-09, is provided for Council consideration. It is
requested that the Council consider acting on the resolution following the
public hearing. '
V:\ENVIROSV\BUDGET09\RATES 6-2-08 ~IS.DOC
RESOLUTION
NO.
A RESOLUTION OF THE CITY OF SPRINGFIELD COMMON COUNCIL SETTING LOCAL
AND REGIONAL SEWER USER FEES AS SET FORTH IN THE SPRINGFIELD MUNICIPAL
CODE.
WHEREAS, the City of Springfield has established a wastewater system; 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 (fv1WMC) 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 sanitary sewer 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 sewer charges by resolution of the Council; and
WHEREAS, the MWMC approved Resolution 08-06, adopting the Regional Wastewater
Program Budget and Capital Improvements Program for fiscal year (FY) 2008-2009, and
Resolution 08-07, adopting a new schedule of user fees for FY 08-09 operations and capital
programs, on March 27, 2008, 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 a~d regional sanitary sewer system in FY 08-09.
NOW, THEREFORE, BE IT RESOLVED by the Common Council of the City of Springfield as
follows: .
1) The City of Springfield Schedule of Sewer User Charges, which is attached as Exhibit l'A," is
hereby adopted and shaH take effect with bills rendered on or after July 1,2008.
2) This resolution shall take effect immediately upon adoption by the Council and signature by
the Mayor.
Adopted. by the Common Council of the City of Springfield this
day of June, 2008.
Mayor .
~~ E~~.l~
~?~ r:.?ft~i(~vErJ
ATTEST:
Amy Sowa, City Recorder
A t-.: -;- .r\ :~: ;'1
'.::. ~ u . ;\1\ \
~~~~_.._.~_ L~~
DATE: --~..L..~ \ C;) ~
OFFICE C:iT'{ PITORNEY
Attachment A
Page 1 of2
Exhibit A
Wastewater (Sanitary): i
Beginning with bills rendered on or after July 1, 2008 sanitary sewer charges shall be as follows:
Local Regional Total
Base Charge n/a $7.910 $7.910
Volume Charge Per Unit
Residential $2.228 $1. 1 77 $3.405
Low Strength $2.228 $1.581 $3.809
Medium Strength $2.228 $2.305 $4.533
High Strength $2.228 $3.270 $5.498
Very High Strength $2.228 $4.237 $6.465
Super High Strength $2.228 $ 5.2 04 $7.432
Attachment A
Page 2 of2
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M E M 0 RAN DUM CitJ1 of Springfield
Date: May 8, 2008 I
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To: . Gino Grimaldi, City Manag~r COUNCIL
From: Dan Brown, Public Works Director Q~ BRIE~G
Susie Smith, Environmental Services Manager $ I.
Subject: FY 08-09 Wastewater User Fees l\1EMO~UM
ISSUE:
Wastewater and stormwater user fees are reviewed and updated by the City Council annually.
This process occurs in conjunction with. adoption of the budget and Capital Improvements .
Program (CIP) to ensure revenue adequacy. The Council also adopts the regional wastewater
user fees set annually by the Metropolitan Wastewater Management Commission (MWMC). At
its April 7th meeting, the Council reviewed the fiscal year (FY) 08-09 regional wastewater user
fees, and was given a preview of the future revenue requirements that Will require user rate
actions in the local wastewater and stormwater programs.
Tills memo and the upcoming May 12th work session are intended to focus only on the local
wastewater user rates, drivers of revenue requirements projected for FY 08-09, and options for
Council consideration. This memo also addresses issues and questions that were raised by
councilors at the April 7th work session. Information regarding the FY08-09 M\VMC regional
wastewater fees adopted byMWMC was provided in detail at.othe COID+cil's April 7th work
session and is not repeated here.
At the Council's May 12th work session, staffwill seek Council direction for preparation of a
schedule of wastewater user fees for Council consideration following a public hearing on June
2nd. The proposed FY 08-09 budget and revenue projections assume a July 1 st effective date for
new rates. Stormwater user rates will be scheduled for Council consid~ration later this spring.
Formulation of stormwater revenue requirements and rate options cannot be completed until we
have a draft of the updated Stormwater Facilities Master Plan, which is anticipated in June.
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BACKGRO~: . .. I
Each year, the Clty develops a ClP and operating budget for the local wastewater program. The
CIP, operating budget, debt service obligations, and reserve levels established by the City
Council determine the annual funding requirements. The primary fundmg sources include
wastewater user fees (for operating and capital expenses) and ?ystem ~evelopment charges .
(SDCs) (for qualifying capital expenses only). In addition to the local fees, the total wastewater
user fees include regional charges established by the MWMC to fund ti.J.e Regional Wastewater
Program. The Cities of Springfield .and Eugene annually implement tlie MWMC user charges
consistent with the MWM:C intergovernmental agreement (IGA). Descriptions of each of the
utility systems are provided below. :
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LOCAL W ASTEW A ~ER SYSTEM: .. i .
The. wastewater (or samtary) system servmg Spnngfield has two parts: a local collectIon system
and a regional conveyance and treatment/disposal system. The local s~stem is made up of more
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Attachment B
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than 200 miles of collector pipes and 17 pump stations~ It is owned and operated by the City of
Springfield. Operation and maintenance (O&M) of the local collection system is funded entirely
by revenue from local sewer user fees. User fees also are currently the primary source of
funding for the local CIP, which provides for system preservation, major rehabilitation, and
expansion to support community growth. .
REGIONAL WASTEWATER SYSTEM:
The Regional (MWMC) wastewater system is comprised of numerous treafinent facilities and a
conveyance system owned by the MWMC, as described in the MWMC IGA. The primary
Regional Wastewater Facilities include the Water Pollution Control Facility (WPCF), the
Biosolids Management Facility (BlVlF), Biocycle Farm, the residuals Beneficial Reuse Site,
several maj or pump stations and associated conveyances, and the large interceptor ("East Bank")
that carries Springfield's wastewater to the WPCF. Regional system O&M, provided by the City
of Eugene, is funded entirely by revenue from regional wastewater user fees. MWMC
administration and the Springfield Industrial Pretreatment Program, both of which are integral
parts of the Springfield Public Works and Finance Departments, also are funded through regional
wastewater user fees. Regional user fees also fund a significant portion of the MWMC CIP in
addition to regional SDCs.
LOCAL WASTEWATER PROGRAM FUNDING AND USER RATE mSTORY:
Like the wastewater collection and treatment system itself, the wastewater user fees appearing on
customers' monthly bills have a local (Springfield) and a regional (MWMC) component. In FY
07-08, based on a typical residential household using 5,000 gallons per month, the current local
wastewater fee is $13.24, and the regional fee is $14.22. The current combined typical,
residential wastewater bill for Springfield residents ~s $27.46. Residential customer bills are
used as a benchmark for sewer 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 dramatically because their wastewater volume and strength vary
greatly. However, to give the Council some examples, a typical bill for one of the major
industries in Springfield that generates about 900,000 gallons of "super high" strength
wastewater is about $2,350. For a large grocery store generating about 140,000 gallons of
"medium" strength wastewater, the typical monthly bill is about $366.
Figure A below shows the trends (i:e. increases) in the local and regional user fees over the last
several years. Prior to this trend, rates were stable, and the MWMC rates were stable for a long
period of time (with no increases since 1996) prior to the annual increases that began in 2003.
The annual MWMC user rates occurring since 2003, and projected in future years, are driven
primarily by: 1) lost revenue from mdustry shut downs and other reductions in customer usage;
2) inflation; and 3) the 2004 Facilities Plan capital projects, which are intended to extend the
effective life of the treatment plant through 2025.
Attachment B
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Figure A
Springfield Monthly Regional & Local Residential* Wastewater Bill Historical
Trend
$30.00 -----
. .
$25.00 ; [J Regional [J Local
---.-..--.----.
'V
, M N
$20.00 - , M :, 't"" 'V ct)
- - -. ... .. -. ex> ~ N T"" "
1.0 LO CD .' 0 't"" 't"" Ett7
$15.00 'r"'" 't"" 1.0 't"" Ett7
0 't"" 6'7 .. - ..
0 0 ., 6'7 ..
~: 1 .' .. ..
'r"'" 't"" 't"" .. .- .. .- .~ ",..:5
$10.00 ; Ett7 Er7 ~.. 6'7 ~. i,: .)~ ~. 1.0 ". N
_. - .. - - ex> of, CD ~~. ~: 't"" " ~( N .~:
'".:0;. :f, ~..- ;1;. C"! ~ ;:~ .:-~.~. ~
M M .'Ij (J) ~' .~ ct) . ':'.:,- ':~
$5.00 -':? . tq LO ~~ ;.~~ 0 .c: -r.~ 't"" .~- 'r"'" ::1 ,] ~\ 't""
C;~ '~ 0) 51 't"" 't"" Er7
cO :~. ,;',l:: i . ~', 't"" 6'7 ';:ii,
CO ::.~( ",::'1'1 ~,. Er7 {f: 6'7 ...
:'~:5 6'7 ;S; Er7 6'7 . :<:.;;; '?}:' 'l;~ i;~
$0.00 ,~. . . , :' .:;.,. . .:\:
, ,
01/02 02103 03/04 04/05 05/06 06/07 07/08
01/02 02/03 03/04 04/05 05/06 06/07 07/08
$8.53 $8.53 $9.09 $11.28 $11.96 $13.15 $14.22
$10.15 $10.15 $10.56 $10.83 $11.61 $12.43 $13.24
.$18:69 ~. . $18.69 $19.65 $22.11 ., . $23.57 ........$25.58 ... $27.45
. . . I . $0.00 I .$0.971 $2.461. $1.461 $2.011 .,. $1.871
01/02 02/03 03/04 04/05 05/06 06/07 07/08
00/0 7% 24010 6010 1 00/0 8%
00/0 4% 3% 70/0 7% 60/0
'.0% 50/0 12% .7% 9010 70/0
* Residential based on average customer using 5,000 gallons per month
For Springfield's local wastewater program, the current user rates are projected to generate about
$4.3 million during the current fiscal year. Current SDCs are projected to generate about
$230,000 for capital projects in the current fiscal year. For years, the Council has dedicated a
significant portion of user fee revenues to the CIP. In recent years, the annual user rate
contribution to the capital program has been about $1.4 million, along with about $660,000 in
annual debt service payments. In FY 07-08, the wastewater CIP is funded about 30% through
SDCs and about 70% through user rates.
Exhibit 1 shows the projected future allocation of the ,average residential bill t6 operations and
capital programs (under the Option 1 rate scenario described below). As the revenue
requirements of the capital program continue to place upward pressure on user rates,
Springfield's wastewater rates are approaching the average of residential user rates among the
Oregon cities we survey annually. A review and update to the local wastewater SDC
methodology is currently underway. This process will provide the Council with the opportunity
to provide policy direction regarding the balance of user rate funding vs. SDC funding for capital
projects. A shift toward increased capital cost recovery to SDCs would reduce that portion of the
user's bill dedicated to capital proJects in future years.
PREVIOUS COUNCIL ACTIONS:
In reviewing the FY 07-08 local wastewater program funding requirements and options last year
at this,tirne, the Council committed to fund the projects in the adopted five-year ClP. With this
Attachment B
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action, the Council recognized that $8 million to $10 million would need to be borrowed just to
fund the Jasper Road Trunk Sewer project. To fund operating and capital requirements in FY
07 -08, the Council increased user fees by 6% and anticipated subsequent increases of 6% to
6.5% for multiple years.
The Council also directed staff to update the SDC methodology with an eye toward increasing
SDC cost recovery for capital projects. This process is underway, and staff ~ticipates
forwarding the results of this study and new SDC ra~es to Council by October, 2008. Finally, the
Council directed staff to develop a Capital Financing Plan once the Wastewater Facilities Master
Plan (Master Plan) update is completed. The draft Master Plan is now complete and is scheduled
for City Council review in June.
The current CIP includes the following projects and amounts that have been identified for the
five-year period ofFY 08-09 through FY 12-13. Funding is available for all of these projects
except for the Jasper Trunk Sewer under the current user rate and SDC structure.
Local Wastewater Five-Year Adopted CIP (FY 08-09 throu2h FY 12-13)
CIP Project/Category . Project Cost
Sewer System Rehabilitation (WWFMP) $ 6,686,000
Gray Jacqua Infrastructure $ 430,000
Jasper Trunk Sewer $11,500,000*
Existing Debt Service (five years) $ 3,081,000
Five- Year Total $21,697,000
Note *: Not funded under current user rates or SDCs.
CURRENT/FUTURE FUNDING NEEDS AND RATE OPTIONS:
Without a current Master Plan for many years, the wastewater CIP has been limited mostly to:
1) addressing City Council objectives for community growth; and 2) sewer rehabilitation to
eliminate sewage overflows through implementation of the Wet Weather Flow Management Plan
(WWFMP). In the foreseeable future, funding requirements in the local wastewater program
will be driven by the updated Master Plan funding needs.
The draft Master Plan identifies $39 million (in 2008 dollars) in capital projects over the period
ofFY 08-09 through FY 19-20 in addition to the $21,697,000 (in 2008 dollars) of projects
included in the current adopted CIP (shown above). Of the $39 million identified through 2020,
almost $37 million is needed in the fITst five years. This is due to the aging nature of the existing
collection system, which must be rehabilitated in order to avoid sewage overflows onto streets
and private properties and into waterways. The new projects also include work to expand
capacity in the existing collection system to address growth that has occurred, and to extend
sewers to newly developing areas. The table below shows the types and .costs of projects
identified in the Master Plan over the next five years.
Attachment B
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Local Wastewater Facilities Master Plan New CIP Proiects (FY 08:-09 throueh FY 12-13)
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CIP Project/Category Project Cost i
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Mandatory Sewer System Rehabilitation $26,501,000 I
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System Expansion for Growth $ 5,81"6,000 :
,
Glenwood System Expansion* $ 4,441,000* I
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Five-Year Total $36,758,000 I
Note * : To be funded by other sources. ,
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The total five-year unfunded capital project needs under current user rat~sand SDCs equate to
almost $30.1 million in newly identified rehab and development-driven :expansion, plus the
$11.5 million Jasper Trunk Sewer that is in the adopted CIP. The local rastewater capital
reserves have been depleted, and the City will need to fmance capital prpjects through borrowing
for the foreseeable future. !
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CAPITAL PROJECT FUNDING AND WASTEWATER USER FEE OPTIONS:
To give the Council options and flexibility regarding user rates, staffha~ divided the current .and
future wastewater capital projects into two categories. The fIrst category includes projects that
are already included in the CIP and. additional mandatory sewer rehabiH;tation work identified in
the draft Master Plan as needed to avoid sewage overflows. The other Qategory includes .
discretionary projects the Council may chose to pursue to facilitate timely extension of services
for community growth. Exhibit 2 shows a description and estimated tinillng of the projects and
the annual cash flow requirements that would be associated with the two proj ect categories. The
.options for funding the identified wastewater CIP proj ects, and the corr~sponding user fee rate
actions for FY 08-09 are discussed below. '
OPTION 1: i
Option one would provide funding ONLY for the mandatory sewer rehabilitation work (i.e. $33
, I
million) and the projects included in the adopted CIP (i.e. $11.5 million' Jasper Trunk Sewer and
the infrastructure for the Gray Jacqua development area). This option would enable the
Glenwood System Expansion projects to be completed if they can be fullded through urban
renewal or,other funding sources. Other discretionary projects would qe deferred until and
unless viable alternative funding sources could be identified. Under thi~ bare-bones scenario,
significant borrowing will need to occur over the next five years, with approximately $20 million
occurring in FY 08-09. (Refer to Exhibit 2 for the cash flow requiremep.ts that would be met
through borrowing.) Exhibit 3 shows the historical and projected comb,ined local and regional
wastewater fees under this option. I
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This scenario is based on the following rate, revenue and operational as:sumptions. The local
user fees would need to increase $1.31 per month on the average residehtial monthly bill (a 10%
increase in FY 08-09), and a similar amount for each of the next five y~ars. The local
wastewater SDC charges, under the currently adopted methodology, will increase from $1,086 to
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$2,025 for an average single family residence based on a new Master Plan project list that
includes all of the SDC el~gible pr~jects. Also, SDC revenues will onl~ me.et projected need if .
the level of new constructIon remams stable. Through the process of updatmg the SDC
methodology over the next six months, the Council may have some pollcy flexibility to shift a
greater portion of capital costs to the SDCs. This would enable the CoJncil to reduce the
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Attachment B
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projected user rate increases in years two through five. Finally, this rate option does NOT
anticipate the addition of any incr~ased staff or other operational costs beyond approximately 3 %
per year for inflation. The accelerated work schedule for mandatory work will require increased
use of contractual engineering services, and the increased system operations and maintenance
requirements will necessitate increasing Maintenance Division staff at some point.
OPTION 2:
Option 2 would enable construction of all of the projects on the adopted five-year CIP, the
mandatory sewer rehabilitation projects and the discretionary projects the Council may chose to
pursue to facilitate timely extension of services for community growth as anticipated in the new
~ Master Plan (shown in the table below and in Exhibit 2). This option would require a greater
commitment to borrowing over five years, and the resulting user fee increase for FY 08-09
would b~ $2.86 per month on an average residential bill. .All of the other user rate, SDC and
operational assumptions described in Option 1 also apply to this optio~.
Development Driven System Expansion Project Cost
Peacehealth Riverbend Pump Station $3,200,000
McKenzie Highway Sewer Extension . $1,616,000
Local Sewer Extensions to New Areas $1,00.0,000
Five- Year Total $5,816,000
OPTION 3:
The Council could elect to establish a user rate (between the Option 1 and Option 2 levels) and
include CIP fundi!Lg for a set amount of capital proj ect expenditures, and leave the determination
of project priorities and timing for a later date. This option would provide the Council with
flexibility to respond to development opportunities without committing prematurely to any
specific proj ects. Based on the SDC rate and revenue assumptions described under Option 1, the
user rates under Option 3 would need to be increased an additional $.33 per month (i.e., 2.5(10)
for each $1 million in capital projects the Council may wish to fund. In addition to the projects
included in Option 1, the projects that would be anticipated for Council consideration, totaling
$5,816,000 (in 2008 dollars) over five years, are shown above. If the Council establishes some
level of funding available for a future Council priority, there may be opportunities, such as a
reimbursement district, that could provide for additional developer participation in the project
costs.
FIVE- YEAR RATE IMP ACTS:
The five-year summary of Options 1 and 2 is shown on the table below. Exhibit 3 provides
graphs that show the five-year projections for the combined regional and local wastewater user
fees.
o f 1
FY 08 09
FY 09 10
FY 10 11
FY 11 12
FY 12 13
'p1lon - - - - -
Proposed Rate $1.31 $1.46 $1.60 $1.76 $1.94
Increase * (10%) (10%) (10%) (10%) (10%)
Projected Revenues
User Fees** $5,000,000 $5,556,000 $6,143,000 $6,791,000 $7,509,000
SDCs $482,000 $487,000 $492,000 $497,000 $502,000
Attachment B
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o f 2
FY 08 09
FY 0910
FY 10 11
FY 11 12
FY 12 13
'p110n - - - - -
Proposed Rate '$2.86 $3.59 $0.59 $0.61 $0.63
Increase* (21.7%) (22.3%) (3.0%) (3.0% ) (3%)
Proiected Revenues
User Fees** $5,519,000 $6,783,000 $7,112,000 $7,362,000 $7,621,000
SDCs $482,000 $487,000 $492,000 $497,000 $502,000
Notes *: Based on average residential customer using 5,000 gallons per month
**: In~ludes 1 % projected growth in volume from new customers.
COMPARISON OF WASTEWATER USER FEES TO OTHER OREGON CITIES:
Each year, staffupdates a survey of user fees and SDCs anticipated for the upcoming fiscal year
in order to "benchmark" Springfield's program costs to those of other similar communities.
Figure B below shows a sample of communities for which anticipated FY 08-09 data was
available. It should be noted that at the time of this survey, not all of the cities had finalized user
rates for the upcoming year, so some of the user rates may be higher effective July 1 st than
indicated below.
For the purposes of estimating Springfield wastewater user "fees, staff assumed the adoption of a
$1.31 (10%) increase in the local wastewater fee (Option 1) in addition to the $1.55 (11 %)
regional wastewater fee increase adopted by MWMC. The combined monthly increase on the
average residential bill, assuming 5,000 gallons of usage a month would be about $2.86. This
- information is also shown graphically in Exhibit 4, which includes a graph showing a
comparison of all SDCs (including wastewater, stormwater, transportation, parks, and water) for
each city.
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Figure B .
Average Residential
Wastewater Bill/mo. *
$35.29
$29~89
$25.18
$27.42
$43.00
$22.61
$24.63
$45.65
$38.81
$37.72
". '\i""(ff''''.'' ,
:. },j j.J!.ar,'.
$42.00
$23.54
$32.4 7
Residential (2,400 sq ft)
Wastewater SDC
$2,376
$2,800
$2,038
$4,171
. $4,896
$1,627
$4,923
$2,870
$3,258
$2,804
~~:
$3,250
$2,632
$4.1 53
City
Albany
Beaverton
Bend
Corvallis
Creswell
Eugene
Gresham
McMinnville
Portland
Salem
Veneta
. West Linn
Wilsonville
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*Note: Based on typicalresidential usage of 5,000 gallons per rhonth.
The average residential bill of all cities surveyed is $32.69, which is about $2.37 higher than
Springfield's estimated average bill (including a 10% local rate increas~). The average
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Attachment B
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wastewater.SDCs for the surveyed cities is projected to be $3,083, which is about $38 lower than
Springfield's projected rate for FY 08-09.
OTHER LOCAL WASTEWATER FUNDING CONSIDERATIONS:
At the April 7tt1 City Council work session, councilors requested that staff return with an
assessment of the potential for other types of fees or .charges that could bear some portion of the
local wastewater costs in order to shift some of the burden away from user fees and SDCs. A
request also was made to return with information about how the Council might provide .
consideration to 19W income and fixed income sewer customers. Initial responses to these
considerations are provided below.
ALTERNATIVE FUNDING SOURCES:
Throughout the State of Oregon, the vast majority of sewer utility expenses are now covered
through user rates and SDCs. In preparing the 2005 Financial Plan for the Regional Wastewater
Program, staff and the MWMC fmancial advisor conducted a comprehensive evaluation of
funding and fmancing mechanisms to support wastewater capital programs: From this research,
the Financial Plan concludes that, without the benefit ofgrants and or internal transfers from
other funds, user fees and SDCs will be the primary source of revenue for wastewater utilities
state wide. The most economically strategic fmancing tools appear to be State Revolving Fund
loans and revenue bonds.
When the original treatment plants were constructed in the 1970s and 1980s, with about 80%
federal grant funding, some communities, like Eugene-Springfield, funded the local match to the
grants with General Obligation (GO) Bonds, which were repaid through property taxes. Among
the reasons communities no longer tend to fund wastewater improvements with GO bonds is to
reserve property taxes and bonding for other community priorities that do not have user rates and
SDCs as a funding option. The Council could choose to put the discretionary development-
driven capital projects on a future ballot. However, the mandatory sewer rehabilitation projects
are not suitable for GO bond funding for three reasons: 1) we are on a short time line for
securing the funding and completing the projects to avoid sewage overflows; 2) the projects are
not discretionary; and 3) the required amount of funds is large and may compromise the
Council's ability to pass other priority ballot measures.
Reimbursement Districts, which have been a recent topic of discussion by the City Council,
provide another funding tool that could be used in the future by the Council, particularly for
development driven discretionary projects. However, they do not provide 'a ready alternative that
can be applied to the mandatory sewer rehabilitation projects (included in Option 1).
The City of Ashland dedicates a significant portion of a special restaurant tax to fund a portion of
the wastewater utility. We are not aware of any other community in Oregon that funds
wastewater programs in this manner. If the Council wishes to pursue this type of a fee to support
wastewater capital programs, staff would need to return. to Council with a work plan, scope and
cost of a project to develop this type of fee for Council consideration.
Staff is not aware of other'viable wastewater funding strategies. However, additional research
could be conducted in the context of the Capital Financing Plan development.
Attachment B
8 of 15
RELIEF FOR LOW-INCOME AND FIXED-INCOME CUSTOl\fflRS
In our annual survey of wastewater utilities throughout the state, we havp not identified any
communities that have a low-income wastewater subsidy or reduced rat~ program. Therefore,
we do not l?ave a model that we could rea'dily apply to Springfield. Dev~lopment and
administration of a reduced rate for low-income customers as ~ part of S!pringfield's rate
structure would, at a minimum, entail the following: I.
1) An updated rate study completed by a consultant, which would include an analysis of
how much of the wastew.ater utility revenue requirement wouid ~e shifted from low-
income customers to other customers, and how it would be distri;buted;
2) Development of a program, which may require additional staff or consultants, to
determine criteria for apprqval of low-income status customers, ~o review customer
information for proof of low-income status, and to administer the rate program;
3) Additional contractual services with the Springfield Utility Boar~ to assign special rate
categories to customer accounts upon request; and i
4) A program to track the status and accounts of qualifying custom~rs on an ongoing basis~
I
Staff has not evaluated the costs of developing a low-income program. Jf the Council wishes to
pursue a low income rate, additional contractual services would need to !be included in the FY
08~09 budget. These operational costs would need to be added to the rate model to determine the
rate impact of additional program expenditUres. Implementation of such a program would not
occur at least until FY 09-10. :
As a side note, unlike energy costs that can often be higher for !ow-incobe customers due to
uninsulated housing, wastewater bills are likely to be lower than the av~rage residential usage
which is typically used as a benchmark. Although not insignificant, the!relative impact of the fee
. I
increases would be less for those with less water consumption. !
i
RECOMMENDATIONS AND REQUESTED ACTION: ! .
As described above, staff has evaluated the funding requirements assoc~ated with the proposed
FY 08-09 budget and the adopted FY 08-09 CIP for the local wastewat~r program, as well as the
new project list in the draft Wastewater-Facilities Master Plan. Given the level of investment the
City needs to make in wastewater infrastructure, funding requirements datmot be met without
increaSing user fees in each of the next five years.
Staff recommends Option 3, with a baseline increase of 10% plus a 2.510 increase to establish the
ability to fund an additional $1 million in discretionary capital projects to be determined by the
Council at a later date. This will provide the Council with the flexibilitY to fund one or more
capital projects needed to support the development of areas not currentlf served by wastewater
infrastructure. This recommendation equates to a 12.5% rate increase, Which would amount to
$1.65 on an average residential bill over FY 07-08 rates. I
Regardless of which option is selected by the Council, additional rate increases will be needed
over the next five years in order to fund the increasing level of debt serlice and reserves
necessary to finance the projects. With the completion of the Master Plb, staff will have the
tools needed to complete a longer term capital fmancing plan and revisibns to the SDC
methodology in FY 08-09.
Attachment B
9 of 15
Staff requests that the Council select one of the options described in this memo and direct staff to
prepare a draft schedule of local and regional wastewater fees, which will include the MWMC-
adopted rates for FY 08-09 and the Council's selected local wastewater user fee option. The
draft schedule of wastewater fees will be reviewed and considered at a public hearing, which is
scheduled for June 2nd. .
Attachment B
10 of 15
Exhibit 1
Average User Local Residential Bill Allocation to Operatipns Projected
Trend using Option #1
I [J Operations [J Capital I
$25.00
$20.00
$15.00
$10.00
$5.00
6.27 6.33 6.41
$0.00
2009 .2010 2011
6.51
6.66
~012
2013
Service 2009 I 2010 I 2011 I :2012 I 2013
Operations 6.27 6.33 6.41 6.51 6.66
:;'ea:pital~;:t:t;;.;"S<{;,:)(:i:.::~\.. 8.28 9.68 1 1.20 12.86 14.65
Total 14.551 16.01 17.61 I 19.371 21.31
* Assumes Local increase by 10010 per year
** Rounding of % increase causes slight adjustments to Total numbers
Updated 5/8/2008
Attachment B
11 of 15
Local Wastewater Capital Improvement Project Phasing and Cash Flow - Option #1
Proiect/Y ear Total 08/09 I 09/1 0 I 10/11 I 11/12 I 12/13
Mandated* 33,501,000 8,500,000 2,000,000 8,135,000' 4,773,000 3,093,000
Already Approved** 11,930,000 4,130,000 7,800,000 0 0 0
Discretionary*** 12,815,900 01 0 0 0 5,815,900
Total 58,246,900 12,630,0001 9,800,000 I 8,135,0001 4,773,0001 . 8,908,900
"Mandated Wet Weather Flow Management Plan (WWFMP) and Sanitary Sewer Overflow (SSO) projects
.... Already Approved in FY '07-08 and FY '08-09 C IP
...... Master Plan Projects as identified by CH2M Hill draft local Wastewater Master Plan
P rojectIY ear Total 08/09 I 09/10 I 10/11 I 11/12 I 12/13
Remaining WWFMP Work 8,500,000 8,500,000
Basin 22 Rehab 6,200,000 2,000,000 4,200,000
10th & N Street Upgrade (proj #1) 3,935,000 3,935,000
58th Street Bypass (proj #9) 2,195,000 2,195,000
9th Street Sewer Upgrade (proj #2) 476,000 476,000
Main 5t Improvements # 1 (proj #10) . 2,102,000 2,102,000
Main 5t Improvements # 2 (proj #13) 1,145,000 1,145-,000
A Street Improvements # 1 (proj #11) 539,000 539,000
A Street Improvements # 2 (Proj #12) .246,000 .. . 246,000
A Street Improvements # 3 (Proj #14) 163,000 . . .163,000
Misc Rehab 8,000,000 ' .1,000,000
Jasper Road 11,500,000 4,000,000 7,500,000
. Gray Jaqua 430,000 130,000 300,OOQ
PeaceHealth Riverbend PS 3,189,900 3,189,900
McKenzie Hwy 1.626,000 1,626,000
Local Sewer Extensions 8,000,000 1,000,000
Franklin Exp****. 2,998,000 2,998,000
Nugget Way PS**** 1,443,000 1,443,000
Totals 58,246,900 12,630,0001 9,800,0001 8,135,0001 4,773,0001 8,908,900
Note- Project estimates in 2008 dollars
*...... Not counted in Total-Funded through other sources \
Local Wastewater Capital Improvement Project Phasing and Cash Flow - Option #2
Proiect/Y ear Total 08/09 I 09/10 I 10/11 I 11/12 I 12/13
Mandated* 36,301,000 8,500,000 9,935,000 5;773,000 2,145,000 1,948,000
Already Approved** 11,930,000 4,130,000 7,800,000 0 0 0
Discretionary*** 12,815,900 0 0 0 4,815,900 1,000,000
Total 61,046,900 12,630,000 I 17,735,000 I 5,77:3,0001 6,960,900 I 2,948,000
*MandatedWet Weather Flow Management Plan (WWFMP) and Sanitary Sewer Overflow (SSO) projects
.... Already Approved in FY '07-08 and FY'08-09 CIP
*** Master Plan projects as identified by CH2M Hill draft local Wastewater Master Plan
ProjectIY ear Total 08/09 I 09/10 I 10/11 I 11/12 I 12/13
Remaining WWFMP Work 8,500,000 8,500,000
Basin 22 Rehab 6,000,000 6,000,000
10th & N Street Upgrade (Proj #1) 3,935,000 3,935,000
58th Street Bypass (proj #9) 2,195,000 2,195,000
9th Street Sewer Upgrade (Proj #2) 476,000 476,000
Main St Improvements # 1 (Proj #10) 2,102,000 2,102,000
Main St Improvements # 2 (proj #13) 1,145,000 1,145,000
A Street Improvements # 1 (proj #11) 539,000 539,000 .
A Street Improvements # 2 (proj #12) 246,000 246,000
A Street Improvements # 3 (proj #14) 163,000 163,000
Misc Rehab 11,000,000 1,000,000 1,000,000 1,000,000
Jasper Road 11,500,000 4,000,000 7,500,000
Gray Jaqua 430,000 130,000 300,000
PeaceHealth Riverbend P5 3,189,900 . 3,189,900
McKenzie Hwy 1,626,000 1,626,000
Local Sewer Extensions 8,000,000 1,000,000
Franklin Exp**** 2,998,000 2,998,000
Nugget Way PS**** 1,443,000 1 ,443,000
Totals 61,046,900 12,630,0001 17,735,0001 . 5,773,0001 6,960,9001 2,948,000
Note- Project estimates in 2008 dollars Attachment B
*"** Not counted in Total-Funded through other sources
12 of 15
Updated 5/8/2008
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Springfield Monthly Regional & Local Residential Wastewater Bill w/Historical & Future..
Trend Using Option #1
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. $18.69 $18.69. .$19~65
1$ Change I $0.001. $0..971
'" No Regional or Local Rate increase from 01/02 to 02/03
"'''' Residential based on average customer using 5,000 gallons per month
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T ota I 0% :5O.IcJ .......12% . :.7%> .... 7.oJb 10.% .. 11 oJb . .'.7%... 70Jb . .....8OJb
Updated 5/8/2008
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Wastewater 4,923 4,896 4,171 4,153 3,258 3,250 3,121 2,870 2,804 2,800 2,632 2,376 2,038 1,627 1,322 Wastewater
Monthly 24~63 43.00 27.42 32.47 38.81 42.00 30.32 45.65 37.72 "29.89 23.54 35.29 25.18 22.61 31.83 Monthly
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* Combined Local/Regional Wastewater SDCs
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Updated 5/8/2008 .
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Combined Residential seCts and Total Monthly Wastewater Fees by City
mc::::nTotal SDC's -Average SDC's ----Monthly Wastewater - - - 'Average Sewer
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Stormwater 455 900 802 492 237 0 1,100 614 145 449 493 0 0 0 1,255 Stormwater
Transportation 4,897 3,200 2,721 3,859 2,228 4,356 1,057 2,000 1,738 1,814 1,615 1,425 1,719 0 775 Transportation
Parks 8,029 6,783 3,643 2,502 5,084 3,550 2,513 3,117 .3,283 0 2,924 2,118 0 0 238 Parks
Water 4,628 3,144 4,043 4,436 1,841 3,496 3,199 1,787 1,937 4,184 2,167 0 2,023 0 1,063 Water
Total SDC's 20,641 16,827 16,132 1 5,442 13,561 13,440 10,990 10,776 10,353 9,251 8,826 6,413 6,118 .4,896 4,653 Total SDC's
* Combined Local/Regional Wastewater SDCs
.. Information based on 2,400 sq. ft residential house
... Springfield Water SDC based on 3/4" pipe and second level elevation (570' to 670') pump s.tation fees
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Mon. Wastewater
.... Average Monthly Sewer bill for all listed cities Is $32:69
....~ Springfield Monthly Total Wastewater Fees Include a 11 % Regional and 10% Local increase
...... Residential based on average customer using 6.68 units (5.000 gal) per month
Updated 5/8/2008
.