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HomeMy WebLinkAboutItem 14 Proposed Resolution Setting Local and Regional Wastewater and Stormwater User Fees AGENDA ITEM SUMMARY Meeting Date: 5/7/2012 Meeting Type:Regular Meeting Staff Contact/Dept.: Ron Bittler/DPW Staff Phone No: 541-744-4170 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: Financially Responsible and Stable Government Services ITEM TITLE: PROPOSED RESOLUTION SETTING LOCAL AND REGIONAL WASTEWATER AND STORMWATER USER FEES ACTION REQUESTED: 1) Conduct a public hearing on local and regional wastewater and local storm water user fees. 2) Adopt or not adopt A RESOLUTION OF THE CITY OF SPRINGFIELD COMMON COUNCIL SETTING LOCAL AND REGIONAL SEWER USER FEES AND LOCAL STORMWATER USER FEES AS SET FORTH IN THE SPRINGFIELD MUNICIPAL CODE. ISSUE STATEMENT: At current rates, the local and regional wastewater and local stormwater user fees will not produce sufficient revenue to fully fund the proposed fiscal year (FY) 12-13 budgets for these funds. Council action is needed to establish new rates for FY 12-13. ATTACHMENTS: 1. Proposed Resolution establishing a schedule of local and regional wastewater and local stormwater user fees. 2. Council Briefing Memorandum reviewed by the Council at the April 23, 2012, 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 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 the proposed local wastewater and stormwater user fee increase at its April 23, 2012 work session. Staff has prepared a schedule of user charges for a public hearing, based on a 4% increase in both the local wastewater and local stormwater user fees. In addition, the Council was informed that the MWMC adopted a 4% increase in the regional wastewater user fees that also needs to be incorporated into the schedule of user charges for FY 12-13. Given the Council’s input during the work session on future rate increases, staff has begun exploring options for a long-term strategy for reducing pressure on user fees. We expect that any successful strategy will take several years to implement and will depend, at least in part, on the City’s ability to significantly reduce reliance on user rates as a source of capital, by improving the ability of SDC revenues to take up the burden of capital investment. This could reduce the need to rely on future debt financing and reduce the importance of providing coverage for debt service as an operating budget constraint. Attachment 1, a resolution establishing the local and regional wastewater and local stormwater user fees for FY 12-13, is provided for Council consideration. It is requested that the Council consider acting on the resolution following the public hearing. Attachment 1 Page 1 of 2 RESOLUTION NO.________ A RESOLUTION OF THE CITY OF SPRINGFIELD COMMON COUNCIL SETTING LOCAL AND REGIONAL SEWER USER FEES AND LOCAL STORMWATER 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 sanitary sewer systems, and the local stormwater drainage 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 12-04, adopting the Regional Wastewater Program Budget and Capital Improvements Program for fiscal year (FY) 2012-2013, and Resolution 12-03, adopting a new schedule of user fees for FY 12-13 operations and capital programs, on April 13, 2012, 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 sanitary sewer system and the local stormwater drainage sewer system in FY 12-13. NOW, THEREFORE, BE IT RESOLVED by the Common Council of the City of Springfield as follows: 1) The City of Springfield Schedule of Local and Regional Sewer User and Local Stormwater Fees, which is attached as Exhibit “A,” is hereby adopted and shall take effect with bills rendered on or after July 1, 2012. 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 7th day of May, 2012. Mayor ________________________________ ATTEST: ______________________________ Amy Sowa, City Recorder EXHIBIT A Wastewater (Sanitary): Beginning with bills rendered on or after July 1, 2012 sanitary sewer charges shall be as follows: LocalRegionalTotal Base Chargen/a$11.34$11.34 Residential$2.995$1.687$4.682 Low Strength$2.995$2.268$5.263 Medium Strength$2.995$3.305$6.300 High Strength$2.995$4.688$7.683 Very High Strength$2.995$6.077$9.072 Super High Strength$2.995$7.462$10.457 Stormwater (Drainage) Beginning with bills rendered on or after July 1, 2012 storm water charges shall be as follows: b. Single family dwellings shall each pay $12.13 a. All real property, with the exception of single family dwellings, shall be charged $1.89 plus the product of the property area (in square feet), runoff coefficient, and $3.525 per 1,000 square feet. Volume Charge Per Unit Attachment 1 Page 2 of 2 ATTACHMENT 2 Page 1 of 10 M E M O R A N D U M City of Springfield Date: 4/12/2012 To: Gino Grimaldi COUNCIL From: Len Goodwin, Development and Public Works Director Jeff Paschall, Managing Civil Engineer Katherine Bishop, Senior Finance Analyst BRIEFING MEMORANDUM Subject: Wastewater and Stormwater User Fees FY12-13 ISSUE: Wastewater and stormwater user fees are reviewed and updated by the City Council annually. This process occurs in coordination with Council consideration and adoption of the Operating and Capital budgets to ensure revenue adequacy. The Council also adopts the regional wastewater user fees, as set annually by the Metropolitan Wastewater Management Commission (MWMC). This Memo and the April 23, 2012 work session will focus on the local wastewater and stormwater user fees, including the factors driving the revenue requirements as projected for Fiscal Year 2012-13 (FY 12-13) and options for Council consideration. In addition, information regarding the MWMC regional wastewater fees as recommended by the Commission to the City Council is included. At the April 23, 2012 work session, staff will be seeking Council comments and direction in preparing a schedule of local wastewater and stormwater user fees for FY 12-13. A public hearing is scheduled for May 7, 2012, when staff will return to Council with a schedule of local wastewater and stormwater fees for FY 12-13 for Council consideration following the public hearing. The proposed FY 12-13 wastewater and stormwater revenue projection assumes that FY12-13 rates would be effective on bills rendered on or after July 1, 2012. COUNCIL GOALS/ MANDATE: Financially Responsible and Stable Government Services In order to implement the Council adopted Capital Improvement Program for local wastewater and stormwater, a revenue plan that includes an increase in user fees for FY 12-13 and rate projections increasing incrementally over multiple years is provided for Council review and consideration. Revenues generated from a user fee increase in FY12-13 will fund ongoing system maintenance and investments in capital improvements for wastewater and stormwater infrastructure and facilities, and continue to deliver high quality uninterrupted services while continuing to meet revenue bond covenants, increasing environmental standards and mandated regulatory requirements. BACKGROUND: Annually, as part of the budget development process, the City develops a Capital Improvement Program (CIP) and operating budget for the local wastewater and stormwater programs. The CIP, operating budget, debt service obligations, and reserve levels established by the City Council determine the annual funding requirements. The primary funding sources include wastewater and stormwater user fees for operating and capital expenses, and system development charges (SDCs) for capital expenses only. In addition to the local fees, the total wastewater user fees include regional charges established by the MWMC to fund the Regional Wastewater Program. Annually, the cities of Springfield and Eugene implement the MWMC user charges consistent with the MWMC intergovernmental agreement (IGA). A description of each utility system is provided below. ATTACHMENT 2 Page 2 of 10 LOCAL WASTEWATER SYSTEM: The local wastewater (or sanitary) 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 200 miles of collection pipelines and 17 pump stations, which is owned and operated by the City of Springfield. Operations and maintenance of the local collection system is funded entirely by revenue from local sewer user fees. User fees are currently the primary source of funding for the local CIP, which provides for system preservation, major rehabilitation, and expansion to support community growth. Through previous rate actions revenues for this program have stabilized and current and projected CIP priorities have been programmed based upon incremental inflationary rate increases. REGIONAL WASTEWATER SYSTEM: The regional (MWMC) wastewater system is comprised of numerous treatment 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 (BMF), Biocycle Farm, the Beneficial Reuse Site, several major pump stations and associated conveyances, and the large interceptor (“East Bank”) that carries wastewater from Springfield to the WPCF. Regional system operations and maintenance, provided by the City of Eugene, is funded entirely by revenue from regional wastewater user fees. The MWMC administration and the Springfield Industrial Pretreatment Program are both integral parts of the Springfield Development and Public Works and Finance departments which are also funded through regional wastewater user fees. In addition user fees fund a significant portion of the MWMC CIP. REGIONAL WASTEWATER FEES: At the March 9, 2012 MWMC meeting, staff presented the Preliminary FY12-13 Regional Wastewater Program Budget and Capital Improvement Program and multiple user fee rate scenarios ranging from a 4% increase to a zero or no rate change and the associated fiscal impacts. Based on discussions and input provided by the Commission, staff returned to the Commission on April 13, 2012 with the proposed 4% user fee increase incorporated into the Regional FY 12-13 Budget. At the April MWMC meeting and public hearing, the Commission adopted resolutions recommending a 4% user fee increase in FY12-13, and the Regional FY12-13 Budget for implementation by the cities of Eugene and Springfield. The primary factors driving regional wastewater user fee increases includes the 2004 MWMC Facilities Plan, which is a 20-year capital improvement projects plan intended to provide environmental compliance and treatment capacity to serve the community including growth through 2025, at an estimated cost of $196 million (in 2006 dollars). Funding sources for capital improvement projects includes revenues from User Fees, System Development Charges, and financing through Revenue Bonds, low interest State Revolving Fund (SRF) loans and grants. While major investments have been made in capital infrastructure improvements in recent years, the 2004 Facilities Plan includes additional capital improvement projects over multiple years. The regional capital improvement program budget including asset management improvements is $23,573,100 in FY 12-13 for design and construction. The regional five-year capital plan, FY 12-13 thru FY 16-17, includes $94 million in planned capital improvements and asset management projects. WASTEWATER PROGRAM FUNDING AND USER FEE RATE HISTORY: The wastewater user fees on the customers’ monthly bills have a local (Springfield) and a regional (MWMC) component. In FY 11-12, based on a typical residential household using 5,000 gallons per month, the current local residential wastewater bill for Springfield residents is $19.24. The current combined typical residential wastewater bill for Springfield residents is $40.98. 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 uses vary significantly because their wastewater volume and strength varies greatly. Figure A below displays the rate history in local and regional user fees over the last several years with incremental rate increases over the recent 10-year period beginning in 2003-04. The local wastewater fees are represented in the bottom portion of the combined bar graph. Prior to this trend, rates for local wastewater user fees were stable. Regional MWMC wastewater user fees remained stable with no rate increases from 1997 through 2003. The annual rate increases for MWMC regional user fees since 2003 and as projected into the future, are driven primarily by: (1) covering the costs associated with financing the 2004 MWMC Facilities Plan and improving the MWMC assets; (2) meeting the covenants associated with the 2006 and 2008 Revenue Bonds and State Revolving Fund (SRF) loans, and; (3) establishing revenue adequacy to fully fund reserves, and operating and maintaining the Regional Wastewater Facilities, while continuing to position the MWMC for future bond sales. Figure A For the City of Springfield’s local wastewater program, the current user fees are projected to generate about $6.32 million during the current FY11-12, which is about 98.6% of original revenue projections (down about 1.4% or $88,600). Revenues from System Development Charges (SDC) are projected to $10.15 $10.15 $10.56 $10.83 $11.61 $12.43 $13.24 $14.88 $14.88 $16.96 $18.50 $19.24  $8.53 $8.53 $9.09 $11.28 $11.96 $13.15 $14.22  $15.77 $16.87  $19.91  $20.91 $21.74  $0.00  $5.00  $10.00  $15.00  $20.00  $25.00  $30.00  $35.00  $40.00  $45.00  01‐0202‐0303‐0404‐0505‐0606‐0707‐0808‐09Dec 0909‐1010‐1111‐12 RegionalLocal $ Monthly Year01-0202-0303-0404-0505-0606-0707-0808-09 Dec 0909-1010-1111-12 Regional$8.53$8.53$9.09$11.28$11.96$13.15$14.22$15.77$16.87$19.91$20.91$21.74 Local$10.15$10.15$10.56$10.83$11.61$12.43$13.24$14.88$14.88$16.96$18.50$19.24 Total$18.68$18.68$19.65$22.11$23.57$25.58$27.46$30.65$31.75$36.87$39.41$40.98 % Rate Increase Category01-0202-0303-0404-0505-0606-0707-0808-09 Dec 0909-1010-1111-12 Regional-0%7%24%6%10%8%11%7%18%5%4% Local-0%4%3%7%7%7%12.5%0%14%9%4% Total-0%5%13%7%9%7%12%4%16%7%4% $ Rate Increase Category01-0202-0303-0404-0505-0606-0707-0808-09 Dec 0909-1010-1111-12 Regional-$0.00$0.56$2.19$0.68$1.19$1.07$1.55$1.10$3.04$1.00$0.83 Local-$0.00$0.41$0.27$0.78$0.82$0.81$1.64$0.00$2.08$1.54$0.74 Total-$0.00$0.97$2.46$1.46$2.01$1.88$3.19$1.10$5.12$2.54$1.57 Wastewater Residential Monthly Bill Trend ATTACHMENT 2 Page 3 of 10 generate about $400,000 for capital projects in the current fiscal year. For years, the Council has dedicated a significant portion of user fee revenues to capital infrastructure needs. The current fiscal year budget includes $2.25 million dedicated to the Capital Improvement Program, plus just over $2 million in annual debt service payments. PREVIOUS COUNCIL ACTIONS: To fund operating and capital requirements for the wastewater program, the Council increased local wastewater user fees by 4% in FY 11-12, which followed a 9% increase in FY 10-11 and 14% increase in FY 09-10. A primary driver of the multi-year rate increases is a projected future bond issuance to fund capital infrastructure priorities identified in the adopted Capital Improvement Program. Last year, when Council adopted a 4% wastewater user fee increase for FY 11-12, the fiscal forecast projected a multi-year rate strategy with moderate increases annually as displayed in Figure B below. Figure B CAPITAL PROJECT FUNDING AND WASTEWATER USER FEES: At the March 5, 2012 Work Session, staff presented the 2013-2017 Capital Improvement Program (CIP). At that time, Council reviewed and approved a CIP prioritized funding for projects that are identified in the 2008 Wastewater Master Plan as necessary to maintain system integrity and meet regulatory obligations, and deferred the majority of the discretionary expansion project work. Two expansion projects are targeted for advancement, completion of phases 1 and 2 of the Jasper Trunk Sewer Extension, and the design of the Franklin Sewer Expansion in Glenwood. In order to fund local wastewater capital projects, a $23.1 million revenue bond was issued in March of 2009. An additional $10 million bond is currently contemplated for FY 13-14. In order to maintain bond covenants, net revenues (revenues minus operations and maintenance expenses) must be 125% of maximum debt service for all existing bonds and planned or to be issued bonds. At the FY 11-12 Council user fee discussion, staff presented four separate, five-year rate forecasts which included annual rate changes ranging from a low of 3% to a high of 9%. Council adopted a 4% rate increase in FY 11-12 as displayed in Figure B above. Additionally, as part of the FY 11-12 Budget, a 3% Right-of-Way (ROW) fee expense was assessed which is calculated at 3% of total local wastewater user fee revenues annually. The ROW fee is charged to the local wastewater fund for the privilege of running the wastewater facilities (pipelines) underground in the city streets or right-of-way. This expense to the wastewater fund provides revenues to the street fund for street and right-of-way maintenance and pavement management. PROPOSED WASTEWATER USER FEES: The proposed user fees for FY 12-13 and the five-year rate forecast delivers incremental and moderate rate changes over multiple years that is in line with the revenue plan implemented by Council in FY11- 12 (as displayed above in Figure B). The proposed user fees for FY 12-13 include a 4% rate increase on the local wastewater user fees in FY 12-13, followed by a moderate rate forecast. It is valuable to note 11-1212-1313-1414-1515-16 AdoptedProjectionProjectionProjectionProjection Avg. Monthly Residential Bill19.24$ 20.01$ 20.81$ 21.75$ 22.73$ Local Rate Increase4.0%4.0%4.0%4.5%4.5% Avg. Mo. Residential Increase0.74$ 0.77$ 0.80$ 0.94$ 0.98$ Fiscal Year ATTACHMENT 2 Page 4 of 10 that a 1% user fee rate increase is projected to generate an additional $63,200 annually beginning in FY 12-13, with the proposed 4% rate increase projected to generate an additional $252,800 annually beginning in FY 12-13. The proposed revenue plan generates nearly $10 million over the next five years to fund capital investments in the communities local wastewater system, to continue to deliver uninterrupted high quality wastewater services and plan for system expansion, while meeting increasing environmental standards and regulatory requirements. The proposed user fees and rate forecast provides a revenue plan to meet the requirements for a currently projected $10 million revenue bond issuance in FY 13-14 to further support the City’s 2013-2017 Capital Improvement Plan and 2008 Wastewater Master Plan as adopted by Council. The prior year, 2011 fiscal forecast projected a $17 million revenue bond in FY 13-14. Within the 2012 analysis the potential revenue bond in FY 13-14 is revised downward to $10 million, with the focus on positioning the fund to be fiscally healthy to secure potential revenue bonds, for system expansion CIP projects as planned for future development. The proposed local wastewater user fees for FY 12-13 and the five-year rate forecast, relying on the assumptions reviewed last year with Council, is displayed below, including the fiscal impact to the typical residential customers assuming 5,000 gallons of usage monthly. As implemented in FY 11-12, the right-of-way (ROW) use fees, which are based on 3% of total wastewater user fee revenues, are included in the table below. WASTEWATER USER FEES - ALTERNATIVE 1: Alternative 1 as displayed below includes no rate change in FY 12-13. This alternative would require a 4.5% rate increase in FY 13-14 to continue to meet debt coverage requirements. Additionally, there is risk in this plan as the debt coverage ratio in FY 12-13 includes a very narrow margin. In the event that user fee revenues collected do not meet revenue projections, this would put the City at risk of not meeting its debt coverage obligations. The City’s credit rating has been established and elevated in recent years, based on the City’s long-term financial planning and the willingness of the Council to maintain stable revenues by adopting moderate rate increases annually. 12-1313-1414-1515-1616-17 ProposedProjectionProjectionProjectionProjection Avg. Monthly Residential Bill20.01$ 20.81$ 21.75$ 22.73$ 23.41$ Local Rate Increase4.0%4.0%4.5%4.5%3.0% Avg. Mo. Residential Increase0.77$ 0.80$ 0.94$ 0.98$ 0.68$ Avg. Annual Residential Increase9.24$ 9.60$ 11.24$ 11.74$ 8.18$ ROW Use Fee (Expense)197,200$ 205,100$ 214,300$ 224,000$ 230,700$ Revenue Bond$10M Debt Coverage Ratio (min 1.25)1.471.461.561.651.40 Fiscal Year Proposed Wastewater User Fees 12-1313-1414-1515-1616-17 ProjectionProjectionProjectionProjectionProjection Avg. Monthly Residential Bill19.24$ 20.11$ 21.01$ 21.96$ 22.94$ Local Rate Increase0.0%4.5%4.0%3.0%3.0% Avg. Mo. Residential Increase-$ 0.87$ 0.90$ 0.95$ 0.99$ Avg. Annual Residential Increase-$ 10.39$ 10.86$ 11.35$ 11.86$ ROW Use Fee (Expense)189,600$ 198,200$ 206,100$ 212,300$ 218,600$ Revenue Bond$10M Debt Coverage Ratio (min 1.25)1.371.361.451.601.34 Fiscal Year Alternative 1 - Wastewater User Fees ATTACHMENT 2 Page 5 of 10 ATTACHMENT 2 Page 6 of 10 WASTEWATER USER FEES - ALTERNATIVE 2: Alternative 2 as displayed below includes a 2% rate change in FY 12-13, and annual rate changes projected at 3% to 3.4% resulting in a lower level of revenue and a very narrow debt coverage ratio margin in FY 13-14. Another constraint is a reduction in revenue dedicated for future investments in the wastewater system capital assets. COMPARISON OF WASTEWATER USER FEES: Annually, as part of the user fee rate development process, staff updates a survey of wastewater user fees to provide a comparison to other communities. Figure C displays residential monthly wastewater charges for each city, based on currently adopted user fees (FY11-12) applied to a typical residential usage of 5,000 gallons per month. The cities of Eugene and Springfield amounts include both the local and regional wastewater fees. The average residential wastewater bill of all cities surveyed is $39.14, which is $1.84 less monthly than the City of Springfield residential wastewater bill including both local and regional charges for FY 11- 12. 12-1313-1414-1515-1616-17 ProjectionProjectionProjectionProjectionProjection Avg. Monthly Residential Bill19.62$ 20.21$ 20.82$ 21.47$ 22.20$ Local Rate Increase2.0%3.0%3.0%3.1%3.4% Avg. Mo. Residential Increase0.38$ 0.59$ 0.61$ 0.65$ 0.73$ Avg. Annual Residential Increase4.62$ 7.06$ 7.28$ 7.75$ 8.76$ ROW Use Fee (Expense)193,400$ 199,200$ 205,200$ 211,600$ 218,800$ Revenue Bond$10M Debt Coverage Ratio (min 1.25)1.421.361.431.591.34 Fiscal Year Alternative 2 - Wastewater User Fees City Typical Residential Monthly Wastewater Bill Albany$41.17 Beaverton$35.94 Bend$39.49 Corvallis$31.03 Cottage Grove$35.37 Creswell$42.58 Eugene $31.26 Gresham$26.30 McMinnville$46.91 Portland$50.37 Salem$48.32 Springfield$40.98 Veneta$45.43 West Linn$28.10 Wilsonville$43.91 Average$39.14 Figure C STORMWATER PROGRAM FUNDING AND USER FEE RATE HISTORY: In FY 11-12, the current local residential stormwater fee is $11.66. 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. Each commercial property is placed into one of five categories: Very Heavy, Heavy, Moderate, Light or None, and based on the category there is a specific monthly charge per 1,000 square feet of property plus a base fee of $1.35 per month. A commercial stormwater customer with 40% to 70% of impervious area is categorized as a heavy user and currently pays $2.542 per 1,000 square feet of property plus a base fee of $1.35 per month. A monthly charge for a customer with 1.5 acres (approximately 65,340 square feet) would be $167.44. Commercial customer rates will vary depending on the size of the property and the amount of impervious area. Figure D below displays the stormwater residential monthly bill trends and rate changes over the recent 10-year period. Figure D For the City of Springfield stormwater program, the current user fees are projected to generate about $5.4 million during the current fiscal year (FY 11-12), which is on target with original revenue projections. Revenues from System Development Charges (SDC) are projected to generate about $120,000 for capital projects in the current fiscal year. PREVIOUS COUNCIL ACTIONS: Prior to FY 09-10, stormwater user fees had not increased since July 2006. In FY 09-10 residential stormwater user rates increased by 14% to prepare for a stormwater revenue bond to fund capital improvements included in the Stormwater Facilities Plan. Subsequently, in FY 10-11 the stormwater user rates were increased 15% and in October 2010 the $10 million in revenue bonds were issued. Similar to the local wastewater rates, stormwater rates were driven by the 125% net revenue to debt service coverage ratio required to issue revenue bonds and to maintain ongoing bond covenants. $6.86 $6.86 $7.46 $8.12 $8.63 $8.63 $8.63  $9.84  $11.32 $11.66  $0.00  $2.00  $4.00  $6.00  $8.00  $10.00  $12.00  $14.00  02‐0303‐0404‐0505‐0606‐0707‐0808‐0909‐1010‐1111‐12 Stormwater Residential Monthly Bill Trend Monthly Bill Category02-0303-0404-0505-0606-0707-0808-0909-1010-1111-12 Monthly Bill$6.86$6.86$7.46$8.12$8.63$8.63$8.63$9.84$11.32$11.66 % Increase0%0%9%9%6%0%0%14%15%3% $ Increase$0.00$0.00$0.60$0.66$0.51$0.00$0.00$1.21$1.48$0.34 ATTACHMENT 2 Page 7 of 10 Last year, when Council adopted a 3% stormwater user fee increase for FY 11-12, the fiscal forecast projected a multi-year rate strategy with moderate increases annually as displayed in Figure E below. Based on the updated 2012 fiscal analysis and with new financial information available, a course correction will be necessary before FY 14-15 to maintain debt service coverage requirements as discussed further in this report. Figure E PRIOR YEAR RATE FORECAST AND PROJECTED COVERAGE RATIOS: When applying the rate forecast presented to Council last year (Figure E above) to the currently proposed FY 12-13 Budget and Capital Plan, it becomes clear that the debt service coverage ratio would leave a very narrow margin of coverage in FY 12-13 and FY 13-14. The fiscal forecast beginning in FY 14-15 and thereafter reveals that the minimum debt coverage ratio beginning in FY 14-15 is currently forecasted to fall below the debt service requirements of 1.25. The 2012 fiscal analysis provides a moderate course correction to meet the currently projected operating budget level, while continuing to ensure debt service coverage requirements for the City’s stormwater progam. PROPOSED STORMWATER USER FEES: The proposed local stormwater user fees for FY 12-13 and the five-year rate forecast is displayed below, including the fiscal impact to a residential customer. A key consideration is the debt service coverage ratio, and the proposed rate plan provides a prudent debt coverage ratio while also providing a multi- year rate strategy with moderate and stable rate changes. As implemented in FY 11-12 the right-of-way (ROW) use fees, which are based on 3% of total stormwater user fee revenues, are included in the table. 11-1212-1313-1414-1515-16 AdoptedProjectionProjectionProjectionProjection Avg. Monthly Residential Bill11.66$ 12.01$ 12.37$ 12.74$ 13.12$ Local Rate Increase3.0%3.0%3.0%3.0%3.0% Avg. Mo. Residential Increase0.34$ 0.35$ 0.36$ 0.37$ 0.38$ Fiscal Year Prior Year Rate Forecast and Current Debt Coverage Projections 12-1313-1414-1515-1616-17 ProjectionProjectionProjectionProjectionProjection Avg. Monthly Residential Bill12.01$ 12.37$ 12.74$ 13.12$ 13.52$ Local Rate Increase3.0%3.0%3.0%3.0%3.0% Avg. Mo. Residential Increase0.35$ 0.36$ 0.37$ 0.38$ 0.39$ Debt Coverage Ratio (min 1.25)1.371.341.171.030.98 Fiscal Year 12-1313-1414-1515-1616-17 ProposedProjectionProjectionProjectionProjection Avg. Monthly Residential Bill12.13$ 12.61$ 13.12$ 13.64$ 14.19$ Local Rate Increase4.0%4.0%4.0%4.0%4.0% Avg. Mo. Residential Increase0.47$ 0.49$ 0.50$ 0.52$ 0.55$ Avg. Annual Residential Increase5.60$ 5.82$ 6.05$ 6.30$ 6.55$ ROW Use Fee (Expense)168,300$ 175,000$ 182,000$ 189,300$ 196,800$ Debt Coverage Ratio (min 1.25)1.531.561.501.451.51 Proposed Stormwater User Fees Fiscal Year ATTACHMENT 2 Page 8 of 10 STORMWATER USER FEES - ALTERNATIVE 1: Alternative 1 as displayed below maintains the previously forecasted 3% increase in FY 12-13 and FY 13-14, followed by increased rate changes of 5% annually over the following two years to maintain a minimum debt coverage ratio. It is important to note that while the debt coverage is met, the margin of coverage is very narrow. COMPARISON OF STORMWATER USER FEES: Annually, as part of the user fee rate development process, staff updates a survey of stormwater user fees to provide a comparison to other communities. Figure F displays residential monthly stormwater charges for each city, based on currently adopted user fees (FY11-12). The average residential stormwater bill of cities surveyed with adopted stormwater fees is $8.04, which is $3.62 less monthly than the City of Springfield residential stormwater charges for FY 11-12. 12-1313-1414-1515-1616-17 ProjectionProjectionProjectionProjectionProjection Avg. Monthly Residential Bill12.01$ 12.37$ 12.99$ 13.64$ 14.05$ Local Rate Increase3.0%3.0%5.0%5.0%3.0% Avg. Mo. Residential Increase0.35$ 0.36$ 0.62$ 0.65$ 0.41$ Avg. Annual Residential Increase4.20$ 4.32$ 7.42$ 7.79$ 4.91$ ROW Use Fee (Expense)166,600$ 171,600$ 180,200$ 189,200$ 194,900$ Debt Coverage Ratio (min 1.25)1.371.341.311.331.31 Alternative 1 Fiscal Year City Typical Residential Monthly Stormwater Bill Albany$0.00 Beaverton$7.25 Bend$4.00 Corvallis$5.48 Cottage Grove$7.69 Creswell$0.00 Eugene $10.59 Gresham$8.60 McMinnville$0.00 Portland$22.37 Salem$0.00 Springfield$11.66 Veneta$2.00 West Linn$5.06 Wilsonville$3.72 Average$8.04 Figure F ATTACHMENT 2 Page 9 of 10 ATTACHMENT 2 Page 10 of 10 RECOMMENDED ACTION: As described above, staff has evaluated the funding requirements associated with the proposed FY 12-13 budget and the Council-adopted FY 13-17 Capital Improvement Plan for the local wastewater and stormwater programs. The proposed local wastewater and stormwater user fee increases in FY12-13 will fund ongoing system maintenance and investments in capital improvements for wastewater and stormwater infrastructure and facilities, to continue to deliver high quality uninterrupted services while continuing to meet revenue bond covenants, increasing environmental standards and mandated regulatory requirements. Staff recommends that Council consider the wastewater rate increase of 4% in FY 12-13, as previously forecasted. This recommendation provides a stable user fee rate change in FY 12-13 and within the rate forecast. This recommendation is projected to generate a stable level of capital funding in pay-as-you- go financing, reducing the potential need for future revenue bonds beyond the $10 million in FY 13-14. Staff recommends that Council consider a stormwater rate increase of 4% in FY 12-13. This recommendation generates the appropriate revenues to continue to meet the debt service coverage ratios in FY 12-13, and within the rate forecast, while funding the requirements of the stormwater program. Staff requests Council direction in order to prepare a draft schedule of local wastewater and stormwater fees, which will include the regional MWMC-adopted rates for FY 12-13 and the Council’s selected local wastewater user fee option. The draft schedule of wastewater and stormwater fees will be reviewed and considered at a public hearing, which is currently scheduled for May 7, 2012.