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HomeMy WebLinkAbout10-11-2017 Item 11, Mattingly„r Council Memorandum Date: October 18, 2017 TO: Mayor and Council FROM: Carrie Mattingly tilities Director VIA: Derek Johnson, , y anager COUNCIL MEETING: ty I k-7] 20 1-1 ITEM NO.: n 1 OCT 18 2017 .'-,LQ 01'Y €'.[.,ERK SUBJECT: Agenda Correspondence October 17, 2017 — Agenda Item #11 (Water and Wastewater Capacity and Connection Fees) A Council Member has asked several questions regarding Agenda Item #11 (Water and Wastewater Capacity and Connection Fees). The questions are below with staff s response shown in italics: 1. What are the opportunities to increase revenues/offset rate increases by temporarily selling recycled and surplus Nacimiento Project water outside the city? The opportunities are there and being pursued. Sales expectations have not been quantified at this time and there are no revenues from these potential sales plugged into the budget. It will likely take a year or two before revenues from these sources might be expected. Initial discussions with potential outside -the -city recycled water customers have occurred and are in process. The Nacimiento Project Partners have provided the County direction to proceed with using a consultant to set up a local water market for surplus water sales from Nacimiento. As currently structured, these revenues only benefit the water fund. The wastewater fund does not receive benefit from these sales. 2. Please provide a simple example or two in dollars that demonstrates the statement made on page 299 that says that without the connection fees, water rates would go up by five percent and wastewater rates would go up by ten percent. Page 299-300 of the report identifies the difference in water and wastewater fund revenue collection under the current and proposed fee options over 25 years. The City has approximately 15,300 existing water and wastewater ratepayer accounts. The following explanations and charts are highly simplified explanations of a long-term issue and complex calculations. Water and Wastewater Capacity and Connection Fees 2 Water To equitably collect the cost to provide water service to new customers, staff is recommending Water Option 2. Over time this approach results in a zero-sum game associated with providing growth -related capacity (i.e. eventually new development pays its fair share). Alternatively, if Water Option I is selected, and the difference between revenue collected under Water Option 2 and Water Option 1 was applied equally to the City's 15,3 00 customers over 25 years, an increase of approximately $59 per customer per year would be required to support the related expenses. If the City maintains the status quo, the increase would equal approximately $68 per customer per year. Water •.Impact Customer 1 $ 59 2 $ 0 Status Quo $ 68 *Simply applied equally to all customers. Realistically it will vary. Wastewater To equitably collect costs to provide wastewater service to new customers, staff is recommending Wastewater Option 4 and no rate increase would be needed for capital costs associated with providing growth -related capacity. If Wastewater Option 1 or 3 is selected, and the Wastewater Fund revenue shortfall was applied equally to the City's 15,300 customers, the increase would equal approximately $29 per customer per year. If the City maintains the status quo, the increase would equal approximately $133 per customer per year. Wastewater *Annual Impact to Wastewater Rates Per Option 1 $ 29 3 $ 29 4 $ 0 Status Quo $ 133 *Simply applied equally to all customers. Realistically it will vary. 3. What would be the potential impacts of gradually increasing the capacity and connection fees over a period of years rather than all at once? Think of a two pan balance scale with one side being the rate base and the other the capacity and connection fee. More weight is currently on the pan representing the overall rate base. The amount the rate base will pay to make up the difference will gradually shift to the capacity and connection fee over time bringing the scale closer to balance. Water and Wastewater Capacity and Connection Fees Page 3 4. Why is the increase to wastewater so drastic, is it because of WRRF and state regulatory requirements? Yes, and it also includes the existing and future wastewater collection systems costs. Under Wastewater Option 4, the staff recommendation, the elimination of the individual catchment area fees also contributes to the overall fee increase. 5. Could you please clarify the debt -financing of these costs? The current development impacts fees and water capacity and connection fee option 1 and wastewater capacity and connection fee options 1 and 3 include only those assets that were, or are planned to be, debt-financed. 6. Is there any relationship between this item under consideration and our possible sewer lateral -replacement program? While there is some funding for inflow and infiltration reduction in the Wastewater Fund capital program its impacts are small on the overall program.