Loading...
HomeMy WebLinkAboutItem 08 Setting Wastewater & Stormwater User Fee Adoption FY 19-20 AGENDA ITEM SUMMARY Meeting Date: 5/6/2019 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, 2019 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 19-20. ATTACHMENTS: 1. Resolution 2. Council Briefing Memorandum from April 22, 2019 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 and stormwater systems, a portion of the Capital Improvement Program (CIP) for each program, and various other program related activities. 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 the April 22, 2019 work session. Detail on the options discussed 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 a 2% increase in the local wastewater user fees and a 2% increase in the local stormwater user fees. In addition, the Council was informed that the MWMC adopted a 2% increase in the regional wastewater user fees that also needs to be incorporated into the schedule of user charges for FY 19-20. Staff continues to explore options to reduce pressure on user fees while continuing to meet environmental and regulatory standards. In mid-2017, the City refunded the 2009 sewer revenue bonds, resulting in the 2017 bonds that include a reduction in financing costs over a 10-year term. In addition, a successful strategy, in part, depends on the City’s ability to continue to increase capital reserves for capital investments, and improve the ability of System Development Charge (SDC) revenues to fund a greater portion of the capital investment. This strategy will help reduce and/or defer the need to rely on future debt financing. Attachment 1, a resolution establishing the local and regional wastewater and local stormwater user fees for FY 19-20, 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 19-06, adopting the Regional Wastewater Program Budget and Capital Improvements Program for fiscal year (FY) 2019-2020, and Resolution 19-05, adopting a new schedule of user fees for FY 19-20 operations and capital programs, on April 12, 2019, 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 19-20. 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, 2019. 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, 2019, with a vote of _____ for and _____ against. ________________________________ Christine L. Lundberg, Mayor ATTEST: ______________________________ AJ Ripka, City Recorder ATTACHMENT 1 Page 2 of 2 EXHIBIT A Wastewater (Sanitary Sewer) Beginning with bills rendered on or after July 1, 2019 Wastewater charges shall be as follows: Low Medium High Very High Super High Strength Strength Strength Strength Strength 400*800*1200*1600*Over 1600* MWMC $2.016 $2.708 $3.946 $5.600 $7.258 $8.912 City of Springfield $3.577 $3.577 $3.577 $3.577 $3.577 $3.577 Total $5.593 $6.285 $7.523 $9.177 $10.835 $12.489 * Average total biochemical oxygen demand and suspended solids in milligrams per liter (mg/L) Base Charge: A regional (MWMC) monthly base charge of $13.55 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, 2019 Wastewater charges shall be as follows: * Residential: $15.24 Very Heavy Heavy Moderate Light Undeveloped >70% 41-70%20-40%<20%0% Base Fee per 1,000 sq ft $1.770 $1.770 $1.770 $1.770 $0.000 Impact Fee per 1,000 sq ft $2.658 $1.549 $0.445 $0.000 $0.000 Total Rate per 1,000 sq ft $4.428 $3.319 $2.215 $1.770 $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 $1.758 per account is applied monthly Stormwater Monthly Fee Schedule ** Commercial ATTACHMENT 2 Page 1 of 5 M E M O R A N D U M City of Springfield Date: 4/22/2019 To: Gino Grimaldi COUNCIL From: Tom Boyatt, Interim Development and Public Works Director Matt Stouder, Environmental Services Manager Katherine Bishop, ESD Program Manager BRIEFING MEMORANDUM Subject: Wastewater and Stormwater User Fees FY 2019-20 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 user fees for Council consideration and adoption. A public hearing is scheduled for May 6, 2019. Additionally, the Metropolitan Wastewater Management Commission (MWMC) approved a schedule of Fiscal Year 2019-20 (FY 19-20) regional wastewater user fees on April 12, 2019 and will forward them to the Cities of 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 19-20 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 reserves. 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 based on the size of the system (regardless of usage), capital project costs that often inflate at 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 and operating budget, makes debt service payments and sets reserve levels as established by the Council. This information is then used to determine 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 local fees, the MWMC establishes regional wastewater charges to fund the Regional Wastewater Program. The services the City provides are vital to economic development activity and the health and safety of the City’s local waterways, and rank highly when discussed with Springfield residents. Recent survey results indicate that “promoting economic development” and “maintaining a healthy environment and overall ATTACHMENT 2 Page 2 of 5 water quality” are a very high priority. A brief description of the City’s local wastewater and stormwater programs is discussed below: 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 237 miles of collection pipelines and 17 pump stations, which are owned and operated by the City. 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 Stormwater management services are an important part of the City’s effort to improve water quality, protect aquatic 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 about 188 miles of stormwater pipe, 6,520 catch basins, and over 30 public water quality facilities (including the Mill Race Stormwater Facility), which require 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. CURRENTLY ADOPTED RATES AND PRIOR YEAR PROJECTIONS The table below provides a review of the FY18-19 rates adopted by Council, as well as the projection for FY19-20 from last year: 18-19 19-20 20-21 21-22 22-23 Adopted Projection Projection Projection Projection Local Wastewater Services Avg. Monthly Residential Bill 23.44$ 24.14$ 24.86$ 25.73$ 26.63$ Local Rate Increase 2.5%3.0%3.0%3.5%3.5% Avg. Mo. Residential Increase 0.57$ 0.70$ 0.72$ 0.87$ 0.90$ Stormwater Services Avg. Monthly Residential Bill 14.94$ 15.31$ 15.77$ 16.32$ 16.89$ Local Rate Increase 2.5%2.5%3.0%3.5%3.5% Avg. Mo. Residential Increase 0.36$ 0.37$ 0.46$ 0.55$ 0.57$ Local Wastewater & Stormwater Combined Avg. Monthly Residential Bill 38.38$ 39.45$ 40.63$ 42.05$ 43.52$ Local Rate Increases Combined 2.5%2.8%3.0%3.5%3.5% Local Rate Increases 0.93$ 1.07$ 1.18$ 1.42$ 1.47$ Combined Local Wastewater and Stormwater FY 18-19 Adopted Rates and Projections Fiscal Year ATTACHMENT 2 Page 3 of 5 PROPOSED LOCAL WASTEWATER AND STORMWATER USER FEE OPTIONS Proposed FY 19-20 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 for comparison purposes). Note the average Springfield residential customer uses less than 5,000 gallons of wastewater per month (~4,300 gallons) based on household size (however 5,000 gallons is used to normalize and compare with other communities). The following options are presented for discussion and Council consideration. Option 1: Combined Local Wastewater and Stormwater User Fee – 2.5% increase The table below displays the proposed combined rate increase as a percentage (2.5%) and dollar amount ($0.96) for a typical residential monthly bill. The level of projected rate change for future years is also displayed. Option 1 fully funds existing system operations, maintenance and regulatory obligations, as well as the Council approved CIP. Option 1 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 significant system users make major modifications to their business practices. Option 1 takes into consideration the Engineering News-Record (ENR) Construction Cost Index (CCI) relative to inflation on construction materials and labor cost increases, which increased by 3.0% in 2018 compared to the prior year. The ENR CCI rate of inflation is generally higher than the CPI inflation index, most closely aligning with the City’s capital construction project costs. Option 1 above allows for a slightly greater transfer to capital reserves to continue to position the City to 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. Option 2 (Recommended): Combined Local Wastewater and Stormwater User Fee – 2.0% increase The table below displays the recommended combined rate increase as a percentage (2.0%) and dollar amount ($0.77) for a typical residential monthly bill. The recommended rate changes are the lowest responsible rate change. Option 2 is $0.19 less monthly when compared to Option 1 for the typical residential monthly bill in FY 19-20. 19-20 20-21 21-22 22-23 23-24 Proposed Projection Projection Projection Projection Local Wastewater Services Avg. Monthly Residential Bill 24.03$ 24.75$ 25.49$ 26.38$ 27.30$ Local Rate Increase 2.5%3.0%3.0%3.5%3.5% Avg. Mo. Residential Increase 0.59$ 0.72$ 0.74$ 0.89$ 0.92$ Stormwater Services Avg. Monthly Residential Bill 15.31$ 15.77$ 16.24$ 16.81$ 17.40$ Local Rate Increase 2.5%3.0%3.0%3.5%3.5% Avg. Mo. Residential Increase 0.37$ 0.46$ 0.47$ 0.57$ 0.59$ Local Wastewater & Stormwater Combined Avg. Monthly Residential Bill 39.34$ 40.52$ 41.73$ 43.19$ 44.70$ Local Rate Increases Combined 2.5%3.0%3.0%3.5%3.5% Local Rate Increases 0.96$ 1.18$ 1.21$ 1.46$ 1.51$ Combined Local Wastewater and Stormwater FY 19-20 Rates and Forecast - Option 1 Fiscal Year ATTACHMENT 2 Page 4 of 5 Option 2 funds system operations, maintenance and regulatory obligations, as well as the Council approved FY 19-20 CIP. The proposed FY 19-20 rate increase is $0.77 or 2.0% monthly for local wastewater and stormwater services combined. Stormwater rates consider the projected impact of the pending NPDES permit renewal currently in progress, resulting in an increased service level to meet more stringent regulatory and environmental requirements. Option 2 displays rate increases that will fund program activities, meet current debt service obligations, provide contributions necessary to fund the capital program, and continue programs required to meet current and anticipated permit requirements. Option 2 takes into consideration the current capital reserves available for planned investments in infrastructure improvements for local wastewater and stormwater services, including the right-of-way use fee increase from 3% to 5% effective July 1, 2019. WASTEWATER PROGRAM FUNDING AND RATE HISTORY: Wastewater user fees on customers’ monthly bills include a local (Springfield) and regional (MWMC) component. In FY 18-19, for a residence using 6.684 units or 5,000 gallons per month, the local wastewater bill is $23.44. The combined typical wastewater bill, including the regional component is currently $49.93. Residential customer bills are used as a benchmark for wastewater rates because the volume and strength of the wastewater generated is similar within the customer class. The usage (and therefore the bills) of commercial and industrial users vary significantly because their wastewater volume and strength varies greatly. In FY 19-20, the right-of-way use fee established and implemented in FY 11-12 at 3% (of total user fee revenue collected), will increase from 3% to 5% effective July 1, 2019 and is assessed annually to the local wastewater fund. In FY 18-19 the Council increased local wastewater user fees by 2.5%, which followed a 2.5% increase in FYs 17-18, 16-17 and 15-16, and a 3.0% increase in FY 14-15. A history of the local and regional user fees is provided in Attachment 2. 19-20 20-21 21-22 22-23 23-24 Proposed Projection Projection Projection Projection Local Wastewater Services Avg. Monthly Residential Bill 23.91$ 24.51$ 25.24$ 26.00$ 26.78$ Local Rate Increase 2.0%2.5%3.0%3.0%3.0% Avg. Mo. Residential Increase 0.47$ 0.60$ 0.74$ 0.76$ 0.78$ Stormwater Services Avg. Monthly Residential Bill 15.24$ 15.62$ 16.01$ 16.49$ 17.07$ Local Rate Increase 2.0%2.5%2.5%3.0%3.5% Avg. Mo. Residential Increase 0.30$ 0.38$ 0.39$ 0.48$ 0.58$ Local Wastewater & Stormwater Combined Avg. Monthly Residential Bill 39.15$ 40.13$ 41.25$ 42.49$ 43.85$ Local Rate Increases Combined 2.0%2.5%2.8%3.0%3.2% Local Rate Increases 0.77$ 0.98$ 1.13$ 1.24$ 1.36$ Fiscal Year Combined Local Wastewater and Stormwater FY 19-20 Rates and Forecast - Option 2 ATTACHMENT 2 Page 5 of 5 STORMWATER PROGRAM FUNDING AND RATE HISTORY: In FY 18-19, the current residential stormwater fee is $14.94. 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. In FY 19-20, the right-of-way use fee established and implemented in FY 11-12 at 3% (of total user fee revenue collected), will increase from 3% to 5% effective July 1, 2019 and is assessed annually to the stormwater fund. In FY 18-19, the Council increased stormwater user fees by 2.5% which followed a 3.5% increase in FYs 17-18 and 16-17, and a 3.7% increase in FY 15-16, and a 4% increase FY 14-15. A history of the stormwater user fees over the last several years is provided in Attachment 2. REGIONAL WASTEWATER USER FEES: At the March 8, 2019 MWMC meeting, staff presented the Preliminary FY 19-20 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 12, 2019 at a public hearing where the Commission adopted resolutions recommending a 2.0% user fee increase in FY 19-20, and the Regional FY 19-20 Budget for implementation by the cities of Eugene and Springfield. The table below shows the adopted FY 19-20 regional wastewater user fees. With the recommended Option 2 including a local wastewater rate change of 2.0% ($0.47/month), a proposed stormwater rate change of 2.0% ($0.30/month), and the MWMC adopted regional wastewater rate change of 2.0% ($0.53/month), the typical residential bill (assuming 6.684 units or 5,000 gallons of wastewater generated) would increase by $1.30 monthly resulting in a combined overall increase of 2.0%. RECOMMENDED ACTION: Staff has carefully considered the funding requirements associated with the proposed FY 19-20 budget and recommends Council consider a local wastewater rate increase of 2.0% and a stormwater rate increase of 2.0% (Option 2). If adopted, the proposed increases will provide sufficient revenues in FY 19-20 to continue to defer the need for future financing, maintain adequate debt service coverage, meet environmental regulations and NPDES Permit requirements, fund necessary capital improvements and system maintenance obligations, and provide quality services to existing customers and new development. Staff requests Council’s consideration, comments and direction on the proposed rate changes. The schedule of wastewater and stormwater fees, including the regional MWMC adopted rates for FY 19-20, will be reviewed and considered at the public hearing currently scheduled for May 6, 2019. 19-20 20-21 21-22 22-23 23-24 Adopted Projection Projection Projection Projection Avg. Monthly Residential Bill 27.02$ 27.83$ 28.80$ 29.81$ 31.00$ Regional Rate Increase 2.0%3.0%3.5%3.5%4.0% Avg. Mo. Residential Increase 0.53$ 0.81$ 0.97$ 1.01$ 1.19$ MWMC Regional Wastewater FY 19-20 Adopted Rates and Forecast Fiscal Year