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HomeMy WebLinkAbout04/23/2012 Work SessionCity of Springfield Work Session Meeting MINUTES OF THE WORK SESSION MEETING OF THE SPRINGFIELD CITY COUNCIL HELD MONDAY, APRIL 23, 2012 The City of Springfield Council'met in a work session in the Jesse Maine Meeting Room, 225 Fifth Street, Springfield, Oregon, on Monday, April 23, 2012 at 5:30 p.m., with Mayor Lundberg presiding. ATTENDANCE Present were Mayor Lundberg and Councilors Pishioneri, VanGordon, Wylie, Moore, Ralston and Woodrow. Also present were City Manager Gino Grimaldi, Assistant City Manager Jeff Towery, City Attorney Mary Bridget Smith, City Recorder Amy Sowa and members of the staff. 1. Regional Wastewater, Local Wastewater, and Local Stormwater User Fees for Fiscal Year 12 -13. Civil Engineer Jeff Paschall and Senior Finance Analyst Katherine Bishop presented the staff report on this item. Mr. Paschall introduced Ms. Bishop who was hired by the City in November 2011. Each year, staff presented proposed user fee rates for local wastewater and stormwater programs to Council. These fees were established to provide adequate revenue to fund operations and maintenance, capital improvement programs, and the debt service payments and bond covenants requirements for the City of Springfield. In addition to the local fees, MWMC developed. regional user fee rates to support the Regional Wastewater Program. Mr. Paschall presented a power point presentation. Staff had used the following two Council Goals to guide them in their rate analysis: Financial Responsibility and Stable Government Services; and Maintain and Improve Infrastructure and Facilities. That included debt coverage obligations, ongoing daily operations, and environmentally regulated standards. The other goals staff had used were the following revenue goals: Provide Adequate Operations and Maintenance; Fund the Adopted Capital Improvements Program; Maintain Debt Coverage Requirements; and Maintain Fiscal Health and Favorable Credit Rating. Mr. Paschall spoke first of the local wastewater rates. He described the timeline of local wastewater rates starting in 2008 when the Wastewater Master Plan was adopted through to the current proposed rate increase. In March 2009 a $22.8M bond was issued to fund about $10 -$12M of rehab work and the Jasper Trunk Sewer. Rates were driven by debt coverage, but the user fees did fund about 50% of the capital program. Ms. Bishop said the rate drivers. included the existing revenue bond and the need to have debt service coverage on an ongoing basis. There were also plans within the current proposed rate and revenue plan for a $IOM revenue bond that was projected in FY13 /14. Within the rate model, there was also debt coverage. The Capital Plan adopted by Council was also a rate driver. The proposed local wastewater rate for FYI 2/13 was a 4% rate increase. This was the rate that was forecasted to Council last year. That increase would mean a $0.77 increase per month for an average residential customer. The increase provided debt service coverage. for the projected $1 OM revenue bond. Over the five year plan the increase provided nearly $9M towards capital investments in the system. With the proposed rate change, the City would continue to deliver essential services such as scheduling maintenance of the wastewater pipe system and 17 pump stations. It would also allow, for manhole inspection and repair City of Springfield Council Work Session Minutes April 23, 2012 Page 2 and high priority rehabilitation projects, which included the infill/infiltration (UI) reduction resulting in a lower flow coming into the plant. Councilor Moore asked if the rates could be reduced once the bonds were paid in full. Ms. Bishop said it would depend on what was happening at that time in terms of capital investment, but it was unlikely. The bonds were normally 20 year bonds. Currently in the wastewater industry it was standard for maintaining, rehabilitating and improving the structure in terms of environmental standards. Councilor Moore said she and Councilor VanGordon had taken a tour of the wastewater facility last Friday. During the tour they had been told that the facility was processing a lot of water needlessly that was getting into the system. She asked if the maintenance of the system would alleviate any of those problems. Ms. Bishop said anytime a pipeline was replaced, it made it a tighter system. It was actually the inflow and infiltration reduction that needed to take place to have a sizable change. Councilor Moore asked if taking care of some of those issues could possibly reduce the rate. She referred to her bill and noted the amount for wastewater and stormwater. The increases continued and she wanted to see when there might not be an increase. Ms. Bishop referred to a chart showing the increases in the future and explained that there could be a smaller increase in the future once the $ l OM bond was positioned to handle that plus the debt coverage. She noted that the I/I had a return on the investment. Mr. Grimaldi said if the improvements were not made, it created a need to increase the size of the plant at a higher cost. Councilor Moore said that was. one of the things noted was that part of the issue was the water getting into the system that shouldn't be there for processing. She was concerned that they address the problem. Mr. Grimaldi said there was another part of the system. Staff was discussing the public side of the system, but there was also the connection between the house and the street which was more difficult to address as it was an expense borne by the property owner. Mr. Paschall said they had completed about 60,000 feet of pipe rehab in the last three or four years. They were identifying the other side of the issue by looking at some of the house laterals that were installed in the 1940's and 1950's. Mr. Paschall spoke regarding local stormwater and the timeline. In 2008, the Stormwater Master Plan was adopted. At that time, several high priority water quality projects and restoration projects were identified with the majority of them centered on the completion and availability of Federal funding for the Mill Race project. At that time, there was a 15% rate increase that set the City up for a $ l OM bond. The rates were then to. drop to a 3 % rate increase, but in order to maintain current debt coverage and credit rating a 4% increase was needed in the coming year. The capital was not the main driver of the rates, but rather the debt obligation. User fees did fund about 58% of the five year capital program. City of Springfield Council Work Session Minutes April 23, 2012 Page 3 Ms. Bishop said the proposed change was 4% for the next fiscal year. That equated to an increase of about $0.47 per month for an average user. That rate delivered approximately $1M in the first fiscal year and about $4.2M over the five year period. The only way to reduce that rate change would-be to have a reduction in the operating budget which would be ongoing in nature. The primary driver for the stormwater rate was the debt coverage. The rate change allowed the City to provide essential services which included implementation of the Stormwater Management Plan,. ongoing inspection and cleaning of pipelines and catch basins, maintenance of 29 water quality facilities, maintenance of public and private bioswales and work on high priority capital improvement projects. Councilor Moore asked if they would be talking about the alternatives outlined in the packet. Ms. Bishop said they could discuss alternatives now or later. Councilor Moore referred to alternative 1 on page 9 of the agenda packet which showed the projected average monthly bill of $14:05 compared to $14.19 in the proposal. She said she would prefer to find a way not to make an increase at this time. She noted that would make the debt ratio coverage less.. Ms. Bishop said the area of concern was on the last row of the table of alternative 1. The minimum debt coverage was 1.25 and in alternative 1, the ratio would be 1.37, 1.34 and 1.31 which was a very narrow margin. She explained how that could be an issue in the future in trying to get that debt ratio back up. They tried to avoid a spike in the rate change and to keep moderate revenue with ongoing incremental rate changes. The public was never pleased to see a rate change, but the City had the responsibility to make sure the fund was healthy and stable and prepared to meet the debt service obligations. Councilor Moore asked if the ratio affected the City's credit rating if it stayed above the minimum. Ms. Bishop said it demonstrated the fiscal health of the fund. If credit agencies were looking at the fund and considering a bond issuance, they would like to see a stronger ratio. The credit rating was about every two years. They looked favorably on governing bodies that made a commitment to maintain the debt service ratio above that minimum level and had moderate rate changes to avoid a spike in rates. O Councilor Moore asked where the City had been with rates in the past. She noted how much rates had increased over the years. Councilor Ralston said the City had .a large number of required improvements. Mr. Paschall said there were several years prior to 2007 where there was no increase. That was what had caused the large increase in FYI 1. Councilor Pishioneri said this increase had been discussed and predicted. He asked about the collection of the stormwater from pervious and impervious surfaces and if there was a balance between how much was collected, treated and discharged into the river and how much went through the soils as natural filters. Mr. Paschall said if the wastewater system was tight we would have a higher groundwater table during winter months. The City was required to treat water from the pervious surfaces prior to discharge into the river or streams. City of Springfield Council Work Session Minutes April 23, 2012 Page 4 Mr. Grimaldi said he understood the question to be whether or not there was a positive impact on infiltration to the sewer system when we were managing stormwater and handling it in a manner that put it into the river. Councilor Pishioneri said that was correct. He wanted to know if we were maximizing the efficiency of the stormwater collection and if it had a positive impact on the sewer collection system. Mr. Paschall said water collected on impervious surfaces was not the water that was causing the problem with wastewater. The water that was causing the problem was the water that fell on yards and fields. Councilor Pishioneri noted South 70th Street where there was no gutter or collection system. Mr. Paschall said there was potential in those types of areas. Councilor Pishioneri said financing for stormwater collection should be eligible to place those types of systems on our transportation systems. Mr. Paschall said that would be a discussion about how to allocate funds towards more street type projects with a storm benefit. Councilor Pishioneri said at a later date if the City looked at bonding and structure of our transportation system, he would like to look at financing our transportation system with stormwater system collections revenue. He wanted to look at how to restructure how the City was rebuilding roadways. Mr. Goodwin said it was a very complex interaction. The more water that was taken off of pervious surfaces like the streets and transported to the river, the more we needed to let it infiltrate through natural swales or engage in active treatment of a stormwater. Right now by allowing it to go into swales to a reasonably large extent, they minimized the cost of treating the stormwater before it got to the river. Councilor Pishioneri spoke regarding streets with the bioswale for stormwater and said there could be innovative ways to finance projects for the betterment of the system. Mr. Goodwin said the green street approaches used bioswales in that way. Some of the concepts within the Glenwood Refinement Plan looked at some of those innovative approaches to stormwater management along streets. Councilor Wylie asked how they calculated the "average" monthly bill. Ms. Bishop said it was based on 5000 gallons of wastewater treated. That could vary based on number of people living in a home or other factors. The winter average flow was used to determine the amount. Councilor Wylie noted how the increases would affect her stormwater bill. Ms. Bishop said stormwater was a set fee for residential and was currently $11.66 /month. Ms. Bishop spoke regarding regional wastewater rates. The MWMC budget process occurred parallel to the City's budget process. The Council had representation on the MWMC with Councilor Woodrow City of Springfield Council Work Session Minutes April 23, 2012 Page 5 and was staffed under the supervision of Ron Bittler; Springfield's Environmental Services Manager, who also served as the General Manager for the MWMC. The budget process for MWMC was kicked off in January of 2012. The Commission talked about key outcomes and performance measures, and draft capital programs. In March, staff.brought the budget presentation to the Commission. On April 13, 2012, the Commission adopted a resolution for a 4% rate change on the regional wastewater fees and for the budget to be forwarded to the governing bodies. Springfield City Council was scheduled for May 7, Eugene's City Council was scheduled for May 14, 2012, and the Lane County Board of Commissioners were scheduled for May 23, 2012. It would come back to the MWMC in June for final ratification of the budget and adoption of the rate effective July 1. Ms. Bishop said the regional rate strategy was to continue to use SDC revenues for debt service, .maximize capital transfers, invest in capital infrastructure, maintain a rate stability reserve at $2M, and project future borrowing in FY14 /15 or later based on current cash flow estimates of capital expenditures. The MWMC was focused on adopting the lowest responsible rate increase to remain on track for future bond issuance, have consistency in rate changes to avoid future rate spikes, maintain strong debt service coverage ratio, and maintain favorable credit rating. She noted that the Standard and Poor's (S &P) reviewed the regional fund recently and upgraded the credit rating to AA from AA -. Ms. Bishop recapped and noted that a 4% increase was being proposed for all three services — local wastewater, local stormwater, and regional wastewater. That would mean an annual increase of about $0.70 per day for the average user. She referred to chart showing a comparison of the effect the changes would have on rates in Eugene. Eugene was looking at a 3% increase in local wastewater, 4% on regional wastewater, and a 4.5% increase for local stormwater. She did note the economy of scale and how that helped to lower their rates. Councilor Pishioneri said he felt the cost between Eugene and Springfield should be split. He didn't understand why there was a difference in rates between the two cities. Ms. Bishop said it depended on flow and the number of people per household. She discussed the different demographics in each city. Mr. Bittler said they looked at both systems independently. For local stormwater, some of the cost depended on the amount of capital investment for each system. Eugene had more people to pay for those improvements, so it would be less money per person. A flow based calculation was used on the wastewater side. Mr. Grimaldi said there were many policies that impacted the rate. Ms. Bishop said it was difficult to do a comparison to another city due to many variables. Councilor VanGordon referred to page 6, Attachment 1, Figure C which showed the typical residential monthly wastewater bill for a number of cities in Oregon. He noted that there wasn't enough information on that chart to understand the differences in rates. Ms. Bishop said Springfield was in the middle of those comparisons. Each community had their own set of circumstances. Some communities didn't have staff to work on rate setting so hired consultants, or didn't know what was forecast. Springfield had a five -year fiscal forecast to plan for the future. City of Springfield Council Work Session Minutes April 23, 2012 Page 6 Councilor VanGordon said when looking at the five -year forecast, there were many things that the City had to do in terms of projects. He asked if there could be a possibility that we would get to a place where there was no increase. Ms. Bishop said for communities to achieve and maintain the increased environmental standards and regulatory requirements a significant investment in the system was needed. Councilor VanGordon asked if it was more realistic to get back to the 3% increase, which was more in line with annual inflation. Mr. Bishop said they would have to be able to predict what would happen regarding regulatory standards and the economy. One thing that could have a positive impact would be new development and the system development charges (SDCs) collected from that development. That would help offset what was being distributed across the general purpose rate. There were signs of interest in development. Councilor Wylie asked Mr. Goodwin if he knew of any community that had tried to institute a low - income fee increase. Mr. Goodwin said he was not aware of any community in Oregon that had gone to discounted rates. There was some concern about providing discounts which raised questions in the financial community about stability of funds. The banking industry liked to see steady, stable revenue sources. He knew of cities in other states that had run into issues by discounting rates and the revenue bonds secured with those rates became less attractive financially. Ms. Bishop said providing a discounted rate would be asking other customers to subsidize. There were programs such as a "Care Program" in other communities where the funds were taken from the General Fund to provide for the program. Councilor Wylie, said she felt it was not fair for users to pay for new development. Ms. Bishop said the purpose of the 20 -year revenue bonds was to take the infrastructure that would be needed for development and amortize it over a 20 -year period. The hope was that as development occurred and SDCs were collected, they would be paying their fair share. As those funds from development came in, user rates were often moderated to an amount closer to the cost .of living. There was a point in time when infrastructure needed to be built so development would come in. Each existing residence or business had paid for the next to come in and so forth. Councilor Wylie said it was difficult to tell citizens about continual rate increases. Ms. Bishop said it was difficult, but they were providing a public service making sure the City's funds were properly funded so the system could be properly maintained. It was a 24/7 high quality service. Councilor Moore said she appreciated that Springfield paid a lower electric rate than other communities in the State. She asked about the administrative fees paid to Springfield Utility Board (SUB) for the collection of the charges. She asked how the fees were collected in Eugene. They were collected by"Eugene Water and Electric Board (EWEB). City of Springfield Council Work Session Minutes April 23, 2012 Page 7 Mr. Grimaldi said there had been ongoing discussions about doing the billing differently. It was very complex. Mr. Goodwin said they had held very preliminary discussions. The challenge was that SUB or EWEB were also citizen utilities and-were apportioning some of their costs to collect the water and sewer bills for municipal government. If the City moved away from them, pressure was put on the electric rates for each city. If the City could find a system that was more efficient, they could perhaps find a way that would reduce that negative impact. Everything had different moving parts, and each affected the other. Councilor Moore discussed rain gardens. She understood that the State recently approved use of gray water for outside irrigation. She asked if that could alleviate some of the stress on the system, and be a way in which customers could save money. Mr. Goodwin `said if it succeeded in reducing the impact: on the system,. it could reduce the level of new investment the City needed to make. If all stormwater didn't have to get treated by a public system, the City wouldn't need a public system. Using gray water took water away from the sanitary system, which reduced flow which could cause pollutant level to be more concentrated. Mr. Bittler said individual customers could do a number of things to reduce their bill, such as making sure their system was tight and conserving water. There was a number on the bill that citizens could call to get information from staff about how to check those things. If someone .did have a leak, they could get credited back for that additional water use. Mayor Lundberg said they had been going down this road for a long time. Continually making small increases didn't force the City to really look at what could be done to change this course. That could include looking at laterals and other things that impacted the system. This was a challenge to look at what could be done. Council may have to look more closely at some of the things that could be impactful in the long run. She noted that the cost of the regional wastewater plant started out-at about $50M and was now over $200M. The Council needed to take on the challenge. Laterals were not a popular topic because they were privately owned, but they were affecting the system. Many were very old and in disrepair. Councilor Pishioneri noted that in less than 10 years, rates had increased about 59% Councilor VanGordon asked if we could get to 2 1/2% within the next five or six years and what would need to be done to get there. Mr. Grimaldi said the discussion would be what the City wouldn't do, such as capital improvements, maintenance, staffing, etc. Councilor Woodrow said as we made improvements and maintained the system, the costs increased. Councilor Moore asked how they could meter what left her house. She was paying about.3 times as much to process the water that left her house as she was for water coming into her house. She asked if other jurisdictions charged for outgoing sewage. Mr. Goodwin said almost no one charged sewage based on measurement of affluent because the cost of installing the meter on each property was cost prohibitive. Some charged based on water coming City of Springfield Council Work Session Minutes April 2' ), 2012 Page 8 into the house, and others used size of pipe or other formulas to determine the charge. Most were based on the assumption that the amount of water that came in, went out. Mr. Grimaldi said two percent had been shown as an alternate. He said staff could show them what would happen if 2% was used instead of 4 %. Mayor Lundberg said she would like to see what it would take to get to 2% with a goal of 5 years. She felt we wouldn't get there if we didn't force ourselves. Behavior changes occurred based on actual need. She would- like to see -what could be done in the future. The current rates were already set in motion. Mr. Grimaldi said he understood Council was not comfortable with 4% this year, but would move forward with the challenge to look to the future to reduce the increase to 2 %. Mayor Lundberg said they would like to see the possibilities so they could determine whether or not they could make some changes. Councilor Woodrow said if the councilors had that information they could then share that with citizens. Councilor VanGordon said if 5 years didn't seem practical to get to the lower rate that was fine as long as they were moving forward realistically. Mr. Bittler said their conversation was similar to the one with MWMC. Staff looked at a 0% and a 2% and discussed both with the Commission. The two bonds the City had borrowed were driving the rate. Mr. Goodwin said as the bonds matured, the City could generate sufficient SDCs so there wouldn't be a need to rely on user revenues to fund 50% of the capital programs. Then future rate increases could be less as the City would not be going out to the bond market. Mayor Lundberg said they needed to set a direction. Councilor Moore said the public had been educated.about the use and conservation of electricity. She asked if there was a way to educate the public on regulation changes and the treatment of stormwater and how to put less stress on the system. Through, education, citizens had decreased the amount of gas and electricity used. Mr. Bittler said they did have an educational program. The State of Oregon adopted one of the strictest water quality standards in the nation regarding toxics. The City needed to address toxics in their public education piece so constituents knew how to keep toxics out of our system, which was not designed to treat some of those toxics. They needed to ramp up their education to the public. The Council was fine with the 4% increase. Mr. Grimaldi reminded the Council about the Budget Committee meeting on Tuesday, April 24, and that there was no Council meeting next week because it was a fifth Monday. There would be another Budget Committee meeting, however, on Tuesday, May 1. ADJOURNMENT City of Springfield Council Work Session Minutes April 2' ), 2012 Page 9 The meeting was adjourned at 6:32 p.m. Minutes Recorder — Amy Sowa Christine L. Lundberg Mayor Attest: Amy Sow 6. City Recorder