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HomeMy WebLinkAboutItem 01 Wastewater and Stormwater User Fees AGENDA ITEM SUMMARY Meeting Date: 4/26/2021 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 2021-22 ACTION REQUESTED: Staff seeks Council direction establishing local wastewater and stormwater rates. ISSUE STATEMENT: User fees for local and regional wastewater and local stormwater services are reviewed by the Council annually 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 3, 2021. Additionally, the Metropolitan Wastewater Management Commission (MWMC) approved a schedule of Fiscal Year 2021-22 (FY 21-22) regional wastewater user fees on April 9, 2021 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, the MWMC develops regional user fees to support the Regional Wastewater Program. On April 9, 2021, the MWMC adopted the FY 21-22 regional user fees with a 3.5% rate change that will increase a residential customer bill by $0.95 monthly (when assuming 6.684 units or 5,000 gallons). In FY 20-21, local wastewater and stormwater fees remained level with no rate adjustments due to the COVID-19 pandemic. For FY21-22, staff has prepared 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 of wastewater generated) and stormwater user fees for a residential customer: Option 1 - Includes a 3.0% user fee rate adjustment in FY 21-22, resulting in a $1.18 monthly increase, which includes a local wastewater increase at $0.72 and a stormwater increase at $0.46 monthly, as discussed in Attachment 1. Option 2 –Recommended includes a 2.8% user fee rate adjustment in FY 21-22 resulting in a $1.10 monthly increase, which includes a local wastewater increase at $0.72 and stormwater at $0.38 monthly, as discussed in Attachment 1. A public hearing on the FY 21-22 user fees is scheduled for May 3, 2021. M E M O R A N D U M City of Springfield Date: 4/26/2021 To: Nancy Newton, City Manager COUNCIL From: Matt Stouder, Environmental Services Division Director Katherine Bishop, ESD Program Manager BRIEFING MEMORANDUM Subject: Wastewater and Stormwater User Fees FY 2021-22 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 3, 2021. Additionally, the Metropolitan Wastewater Management Commission (MWMC) approved a schedule of Fiscal Year 2021-22 (FY 21-21) regional wastewater user fees on April 9, 2021 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 adjustment in user fees for FY 21-22 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 permit 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, 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 among Springfield residents. Survey results indicate that promoting economic development and 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: Local Wastewater Program The wastewater system serving the City of Springfield has two components: (1) a local wastewater Attachment 1, Page 1 of 5 collection system owned and operated by the City, and; (2) a regional conveyance, treatment and disposal system owned and operated by the MWMC. The local system is comprised of about 240 miles of collection pipelines and 17 pump stations. 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 are stable, and current and projected CIP priorities have been programmed based upon moderate and incremental rate adjustments. 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 190 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 adjustments. CURRENTLY ADOPTED RATES The table below provides a review of the FY 19-20 thru FY 20-21 rates adopted by Council. PROPOSED LOCAL WASTEWATER AND STORMWATER USER FEE OPTIONS Proposed FY 21-22 user fee options are discussed below for a 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 approximately 4,300 gallons per month, however 5,000 gallons is Adopted Local Wastewater and Stormwater Rates 19-20 20-21 Adopted Adopted Local Wastewater Services Monthly Residential Bill 23.91$ 23.91$ Local Rate Adjustment 2.0% 0.0% Monthly Residential Increase 0.47$ 0.00$ Stormwater Services Monthly Residential Bill 15.24$ 15.24$ Local Rate Adjustment 2.0% 0.0% Monthly Residential Increase 0.30$ 0.00$ Local Wastewater & Stormwater Combined Monthly Residential Bill 39.15$ 39.15$ Local Rate Adjustment Combined 2.0% 0.0% Local Monthly Increases 0.77$ 0.00$ Fiscal Year Attachment 1, Page 2 of 5 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 – 3.0% adjustment The table below displays the proposed combined rate adjustment as a percentage (3.0%) and dollar amount ($1.18) for a 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. This option 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 considers the Engineering News-Record (ENR) Construction Cost Index (CCI) relative to inflation on construction materials and labor cost increases, which increased by 3.6% over 2019 thru 2020. 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. Lastly, this option positions the City to better meet new requirements related to environmental permitting, including the new Phase II General Stormwater permit. It also allows for a greater transfer to capital reserves over the 5-year period coinciding with the City’s 5-year CIP, which may allow for deferral of 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 – 2.8% adjustment The table below displays the recommended combined rate adjustment as a percentage (2.8%) and dollar amount ($1.10) for a residential monthly bill. The recommended rate changes represent the lowest responsible rate change, given the stormwater and wastewater permit renewals and regulatory requirements, in addition to the ongoing operations and maintenance of the systems, and capital projects. Combined Local Wastewater and Stormwater FY 21-22 Rates and Forecast - Option 1 Fiscal Year 21-22 22-23 23-24 24-25 25-26 Proposed Projection Projection Projection Projection Local Wastewater Services Monthly Residential Bill 24.63$ 25.49$ 26.51$ 27.57$ 28.81$ Local Rate Adjustment 3.0%3.5% 4.0% 4.0% 4.5% Residential Increase 0.72$ 0.86$ 1.02$ 1.06$ 1.24$ Stormwater Services Monthly Residential Bill 15.70$ 16.25$ 16.90$ 17.58$ 18.28$ Local Rate Adjustment 3.0%3.5% 4.0% 4.0% 4.0% Residential Increase 0.46$ 0.55$ 0.65$ 0.68$ 0.70$ Local Wastewater & Stormwater Combined Monthly Residential Bill 40.33$ 41.74$ 43.41$ 45.15$ 47.09$ Rate Adjustments Combined 3.0% 3.5% 4.0% 4.0% 4.3% Residential Increases Combined 1.18$ 1.41$ 1.67$ 1.74$ 1.94$ Attachment 1, Page 3 of 5 REGIONAL WASTEWATER USER FEES: At the March 12, 2021 MWMC meeting, staff presented the Preliminary FY 21-22 Regional Wastewater Program Budget and Capital Improvement Program, and the proposed regional wastewater user fee rates. Based on discussions and input provided by the Commission, staff returned to the Commission on April 9, 2021 for a public hearing where the Commission adopted resolutions recommending a 3.5% user fee adjustment in FY 21-22, and the Regional FY 21-22 Budget for implementation by the cities of Eugene and Springfield. The table below shows the adopted FY 21-22 regional wastewater user fees. MWMC Regional Wastewater FY 21-22 Adopted Rates and Forecast Fiscal Year 21-22 22-23 23-24 24-25 25-26 Adopted Projection Projection Projection Projection Monthly Residential Bill (1) $ 27.97 $ 28.95 $ 29.96 $ 31.16 $ 32.56 Regional Rate Adjustment 3.5% 3.5% 3.5% 4.0% 4.5% Residential Adjustment $ 0.95 $ 0.98 $ 1.01 $ 1.20 $ 1.40 (1) When applied to 6.684 billing units or 5,000 gallons With the recommended Option 2 including a local wastewater rate adjustment of 3.0% ($0.72/month), a proposed stormwater rate adjustment of 2.5% ($0.38/month), and the MWMC adopted regional wastewater rate adjustment of 3.5% ($0.95/month), the residential bill (assuming 6.684 units or 5,000 gallons of wastewater generated) would increase by $2.05 monthly resulting in a combined overall adjustment of 3.1%. RECOMMENDED ACTION: Staff has carefully considered the funding requirements associated with the proposed FY 21-22 budget and recommends Council consider a local wastewater rate adjustment of 3.0% and a stormwater rate adjustment of 2.5% (Option 2). If adopted, the proposed adjustments will provide sufficient revenues in FY 21-22 to continue to defer the need for future financing, maintain adequate debt service coverage, meet environmental regulations and permitting requirements, fund necessary capital improvements and system maintenance obligations, and provide quality services to existing customers and new development. Combined Local Wastewater and Stormwater FY 21-22 Rates and Forecast - Option 2 Fiscal Year 21-22 22-23 23-24 24-25 26-27 Proposed Projection Projection Projection Projection Local Wastewater Services Monthly Residential Bill 24.63$ 25.49$ 26.38$ 27.44$ 28.54$ Local Rate Adjustment 3.0%3.5% 3.5% 4.0% 4.0% Residential Increase 0.72$ 0.86$ 0.89$ 1.06$ 1.10$ Stormwater Services Monthly Residential Bill 15.62$ 16.17$ 16.74$ 17.41$ 18.11$ Local Rate Adjustment 2.5%3.5% 3.5% 4.0% 4.0% Residential Increase 0.38$ 0.55$ 0.57$ 0.67$ 0.70$ Local Wastewater & Stormwater Combined Monthly Residential Bill 40.25$ 41.66$ 43.12$ 44.85$ 46.65$ Rate Adjustments Combined 2.8% 3.5% 3.5% 4.0% 4.0% Residential Increases Combined 1.10$ 1.41$ 1.46$ 1.73$ 1.80$ Attachment 1, Page 4 of 5 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 21-22, will be reviewed and considered at the public hearing currently scheduled for May 3, 2021. Attachment 1, Page 5 of 5 WASTEWATER PROGRAM USER FEES AND RATE TREND: Wastewater user fees on customers’ monthly bills include a local (Springfield) and regional (MWMC) component. In FY 21-22, based on a residence using 6.684 units or 5,000 gallons per month, the local wastewater bill would be $24.63. Local wastewater charges are proposed at $3.684 per billing unit (748 gallons) for all customer types. The combined residential wastewater bill, including the regional component is $52.60. 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; as such the bills vary greatly. $ Monthly Year 17-18 18-19 19-20 20-21 21-22 Regional $25.84 $26.49 $27.02 $27.02 $27.97 Local $22.87 $23.44 $23.91 $23.91 $24.63 Total $48.71 $49.93 $50.93 $50.93 $52.60 % Rate Increase Category 17-18 18-19 19-20 20-21 21-22 Regional 3.0%2.5%2.0%0.0%3.5% Local 2.5%2.5%2.0%0.0%3.0% Total 2.8%2.5%2.0%0.0%3.3% $ Rate Increase Category 17-18 18-19 19-20 20-21 21-22 Regional $0.75 $0.65 $0.53 $0.00 $0.95 Local $0.56 $0.57 $0.47 $0.00 $0.72 Total $1.31 $1.22 $1.00 $0.00 $1.67 Attachment 2, Page 1 of 2 STORMWATER PROGRAM USER FEES AND RATE TREND: In FY 21-22, the local residential stormwater service charge is proposed at $15.62. The table below includes the 4-year rate history for stormwater residential monthly charges and rate changes. Commercial stormwater user fees are charged based on impervious area as shown in the chart below. For example, a property that is categorized as a heavy user with an impervious area between 41% to 70% would pay $3.402 per 1,000 square feet of property (plus an administrative fee of $1.802) per month. Commercial customer rates will vary depending on the size of the property and the amount of impervious area. Category 17-18 18-19 19-20 20-21 21-22 Monthly Bill $14.58 $14.94 $15.24 $15.24 $15.62 % Increase 3.5%2.5%2.0%0.0%2.5% $ Increase $0.49 $0.36 $0.30 $0.00 $0.38 * Residential: $15.62 Very Heavy Heavy Moderate Light Undeveloped >70% 41-70%20-40%<20%0% Base Fee per 1,000 sq ft $1.814 $1.814 $1.814 $1.814 $0.000 Impact Fee per 1,000 sq ft $2.724 $1.588 $0.456 $0.000 $0.000 Total Rate per 1,000 sq ft $4.538 $3.402 $2.270 $1.814 $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 $1.802 per account is applied monthly Stormwater Monthly Fee Schedule ** Commercial Attachment 2, Page 2 of 2 RATE COMPARISON CHARTS: The wastewater and stormwater fee comparison charts below reflect a residence using 6.684 units or 5,000 gallons of wastewater generated monthly. The fees are based on adopted rates as of January 15, 2021. $30.05 $18.02 $15.24 $15.00 $13.88 $12.47 $11.90 $11.31 $10.25 $10.18 $9.57 $7.85 $5.79 $4.99 $2.59 $- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 Residential Stormwater Fee Comparison Data based on adopted rates as of January 15, 2021 Average $11.94 Attachment 3, Page 1 of 1 •Matt Stouder •Katherine Bishop •April 26, 2021 •Work Session Annual User Fee Review & Proposal Presentation Outline •Revenues •Systems •Challenges •Permits •Programs •Rate Options Revenue Goals •Provide resources for O&M programs •Fund the Capital Improvements Program •Maintain debt service requirements •Increase Capital Reserves •Maintain fiscal health and credit rating Systems Overview ▪Wastewater System ▪Two components –Local conveyance –Regional treatment (MWMC) ▪Over 240 miles of pipeline ▪17 pump stations ▪Stormwater System ▪190 miles of pipeline ▪Over 6,500 catch basins ▪30 public water quality facilities –Mill Race Stormwater Facility ▪Numerous outfalls to local waterways Public Opinion: ✓Healthy waterways are a priority ✓Recreational opportunities are valued ✓Economic development is dependent on available services Challenges – “paying for clean water” •Fixed operating costs •Aging infrastructure •Capital costs •Regulatory requirements •Inflationary pressure •Significantly reduced federal funding •Debt service obligations Discharge Permits ▪Stormwater Permit ▪Contains discharge and reporting requirements ▪Modified permit issues March 2021 ▪Foundation for City’s stormwater programs ▪Wastewater Permit ▪Issued to MWMC, Springfield & Eugene ▪Renewal expected in 2021 ▪Complex treatment requirements ▪Foundation for regional and local programs User Fee Funded Programs ▪Operations & Maintenance ▪Education and Outreach ▪Illicit Discharge & Detection ▪Capital Program ▪Inspections (facilities, erosion, etc.) ▪Development Review ▪Pre-treatment ▪Wastewater Treatment Local Wastewater Services ▪Ongoing System Maintenance Wastewater Rate Factors •Revenue Bonds •Capital Investments •Customer usage •Water efficient fixtures •Water conservation •Local rates are flow- based Rate Comparison 6.684 units or 5,000 gallons Stormwater Services Upstream Art –PSA Contest Cleaning Storm Ditches Stormwater Funding Sources ▪User Fees -$7.5 Million revenue ▪Rate Structure: ▪Residential homes -fixed rate amount ▪Commercial -based on percentage of impervious surface ▪System Development Charges -$300,000 revenue from new development, expands impervious surfaces ▪Land Alteration Permits -$100,000 revenue Rate Comparison Local Adopted Rates 19-20 20-21 Adopted Adopted Local Wastewater Services Monthly Residential Bill 23.91$ 23.91$ Local Rate Adjustment 2.0%0.0% Monthly Residential Increase 0.47$ 0.00$ Stormwater Services Monthly Residential Bill 15.24$ 15.24$ Local Rate Adjustment 2.0%0.0% Monthly Residential Increase 0.30$ 0.00$ Local Wastewater & Stormwater Combined Monthly Residential Bill 39.15$ 39.15$ Local Rate Adjustment Combined 2.0%0.0% Local Monthly Increases 0.77$ 0.00$ Fiscal Year Rate Scenario –Option 1 21-22 22-23 23-24 24-25 25-26 Proposed Projection Projection Projection Projection Local Wastewater Services Monthly Residential Bill 24.63$ 25.49$ 26.51$ 27.57$ 28.81$ Local Rate Adjustment 3.0%3.5%4.0%4.0%4.5% Residential Increase 0.72$ 0.86$ 1.02$ 1.06$ 1.24$ Stormwater Services Monthly Residential Bill 15.70$ 16.25$ 16.90$ 17.58$ 18.28$ Local Rate Adjustment 3.0%3.5%4.0%4.0%4.0% Residential Increase 0.46$ 0.55$ 0.65$ 0.68$ 0.70$ Local Wastewater & Stormwater Combined Monthly Residential Bill 40.33$ 41.74$ 43.41$ 45.15$ 47.09$ Rate Adjustments Combined 3.0%3.5%4.0%4.0%4.3% Residential Rate Increase 1.18$ 1.41$ 1.67$ 1.74$ 1.94$ Fiscal Year Rate Scenario –Option 2 Recommended 21-22 22-23 23-24 24-25 25-26 Proposed Projection Projection Projection Projection Local Wastewater Services Monthly Residential Bill 24.63$ 25.49$ 26.38$ 27.44$ 28.54$ Local Rate Adjustment 3.0%3.5%3.5%4.0%4.0% Residential Increase 0.72$ 0.86$ 0.89$ 1.06$ 1.10$ Stormwater Services Monthly Residential Bill 15.62$ 16.17$ 16.74$ 17.41$ 18.11$ Local Rate Adjustment 2.5%3.5%3.5%4.0%4.0% Residential Increase 0.38$ 0.55$ 0.57$ 0.67$ 0.70$ Local Wastewater & Stormwater Combined Monthly Residential Bill 40.25$ 41.66$ 43.12$ 44.85$ 46.65$ Rate Adjustments Combined 2.8%3.5%3.5%4.0%4.0% Residential Rate Increase 1.10$ 1.41$ 1.46$ 1.73$ 1.80$ Fiscal Year Rate Options Option 1 Proposed Option 2 Local Wastewater Services Monthly Residential Bill 24.63$ 24.63$ Local Rate Adjustment 3.0%3.0% Residential Increase 0.72$ 0.72$ Stormwater Services Monthly Residential Bill 15.70$ 15.62$ Local Rate Adjustment 3.0%2.5% Residential Increase 0.46$ 0.38$ Local Wastewater & Stormwater Combined Monthly Residential Bill 40.33$ 40.25$ Local Rate Adjustments Combined 3.0%2.8% Residential Rate Increase 1.18$ 1.10$ Fiscal Year 21-22 MWMC Rate and Forecast MWMC Regional Wastewater FY 21-22 Adopted Rates and Forecast Fiscal Year 21-22 22-23 23-24 24-25 25-26 Adopted Projection Projection Projection Projection Monthly Residential Bill 27.97$ 28.95$ 29.96$ 31.16$ 32.56$ Regional Rate Adjustment 3.5%3.5%3.5%4.0%4.5% Monthly Residential Adjustment 0.95$ 0.98$ 1.01$ 1.20$ 1.40$ Discussion & Questions