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HomeMy WebLinkAboutMinutes 01-30-2007 WorkshopCW CITY COUNCIL WORKSHOP CITY HALL ANNEX 111 Polk Avenue, Cape Canaveral, Florida TUESDAY January 30, 2007 5:30 P.M. MINUTES CALL TO ORDER: The Chair called the meeting to order at 5:30 P.M. ROLE CALL: Council Members Present: Mayor Pro Tem Bob Hoog Council Member Leo Nicholas Council Member Buzz Petsos Mayor Rocky Randels Council Member Shannon Roberts Others Present: City Manager Asst. City Clerk City Clerk Public Works Director Finance Director Building Official DISCUSSION: Bennett Boucher Virginia Haas Susan Stills Ed Gardulski Andrea Bowers Todd Morley 1. Sewer System Rate Study. Ms. Bowers introduced Mike Rocca and Troy from Brown and Caldwell to present an expansive knowledge of the City's sewer rate system and provide some direction for the City. Mr. Rocca thanked City Council for the opportunity to address the rate study. Mr. Rocca began with the Key Goals developed during the scope of the project. He explained that the number one objective is that the rate revenue must provide for fiscal requirements and these rates were reviewed over a five year period. Second, the rates IC need to be just and equitable largely in part because of legal requirements and this also being right thing to do. Thirdly the rates must be compatible and understandable. City Council Workshop Meeting Sewer Rate Study January 30, 2007 Page 2 of 6 Mr. Rocca explained that the study presented is striving to bring this into perspective with a rate proposal that would be suitable for the next five years. He explained that the future is not always predictable so as such some adjustments may be appropriate. Mr. Rocca pointed out that this study is different from the last completed study because the last study looked at numbers level across the board whereas this study took a step forward to look at the rate structure, composite pieces, base, customers and commodity charges plus the amount of each element within each rate structure. In preparation and in order to understand the City's sewer system and future projections, Brown and Caldwell completed a comprehensive analysis of citizen rates and looked at all data from the City of Cocoa and customers were analyzed by class. The study looked at how many equivalencies, usage patterns and provided a final report to staff in a billing frequency report. Mr. Rocca responded to Ms. Roberts that the study included the most current period trends. Mr. Rocca continued that the determinants including number of connections and amount of usage were analyzed and the current numbers are projected into the future. Tony replied to Ms. Roberts that the time period utilized was 2004 to 2005. Ms. Roberts pointed out that multifamily usage in the City could be temporary. Mr. Rocca replied that the study looked at broader categories of single - family multi family, commercial and public use and that the separation of multi - family usage is rarely ever seen. He noted in multi family units there are single and master metered uses however the usage shows similar demands. Mr. Rocco pointed out this rate study pertains to wastewater usage and you would study what a typical drainage pattern looks like. Mr. Rocca continued that they worked with City staff regarding fiscal requirements, debt service, transfers, CIP needs and the need to create a depletion fund. He stated they completed an analysis of revenue sufficiency and developed solutions to resolve the revenue sufficiency. Brown and Caldwell prepared a final report and propose to move forward to develop an ordinance to enact the new rate structure. Mr. Rocca continued with the study activity of revenue sufficiency: He pointed to the 5 years shown on the graph where the first column represents expenditures, the second column represents income (interest, user rates), third column represents restricted and unrestricted reserves and column four represents the depletion fund which is new and not shown on the graph. Mr. Rocca summarized that following this first 2006/2007 year the City will barely make ends meet and will be at a technical default and depleting reserves causing inability to fund programs. In order to fully fund activities the City would have to seek a 10.5°x6 rate adjustment each year. Mayor Randels stated that the purple bar on the left represents operating expenses and noted that the green bar representing revenue is level with no change in the last 4 years. Mr. Rocca responded that if the City had growth you may see an impact in the revenues. Mayor Randels pointed out that January 2003 was the last time the City raised sewer rates. Revenues stayed the same however, expenses continued to increase. Ms. Roberts inquired as to why our reserves hadn't increased. Mayor Randels responded those funds would fall into expansion or impact fees that can only be utilized on new growth. Mr. Rocca stated that in order to sustain a viable operation, the City must look to generate more City Council Workshop Meeting Sewer Rate Study January 30, 2007 Page 3 of 6 revenues by increasing user rates. As depicted by the graph growth did not sustain needs. Mr. Rocca explained that because the City had no rate adjustments for four years the City would have to catch up on adjustments and move forward. He stated that the City must have ample reserves as well as address capital programs. Mr. Rocca asked if the current rate structures truly meet the community needs of today. Mr. Rocca continued discussion with the rate structure for single-family. He explained that there is no need for a cap on the 4,000 gallon per month. Removing the cap will capture additional revenue and encourage conservation. Concerning non - residential rate structure the City is currently utilizing the water rate structure of Cocoa which allows for very little control by the City. This in turn affects the City's customers. He proposed that the public buildings rate structure mimic the single - family without a cap. Mr. Rocca concluded that the existing rate structure should be modified to address single - family and multi - family characteristics and bring the commercial class fully under the City's rate criteria. Mr. Rocca continued that the City's rate structure is compatible and understandable except when reviewing the commercial rate. Mr. Rocca reviewed key projections for the City: He summarized that the survey shows very little growth for the City with only 92 future connections. The analysis shows the c e , City is anticipating the use of $650,000 from reserves and $1.9 million from assessment fees. If the City fails to adjust rates, some funds will be directed toward straight operations. Mr. Rocca summarized the proposal as removing the cap from single - family which will generate significant revenue and executing the 5% rate increase effective April 1, 2007. He reviewed that multi - family will be the largest change because of going to a flat rate. He reminded that over 90% of operating expenses is fixed. Ms. Roberts voiced her concern regarding a multi family flat rate when most of those type residents do not live in Cape Canaveral full time. Mr. Rocco explained how the changes would be uniform across classes if implemented. The major components like the usage rate will not change much: The multi - family now falls into a flat rate category developed for that user classification: This creates uniformity for the different classes and customer charges are the same for each bill. In addition the readiness to serve charge is $11 for all classes and the commodity rate is $3.55. These are uniform rates across the board. Mr. Rocco explained that in the billing system if very little water is used this appears as 0. Mr. Nicholas pointed out that meters aren't read each and every month. Mr. Rocco stated that the main focus is to capture as much fixed cost from the users benefiting from it. The flat rate works well because when the rates are analyzed the City Council Workshop Meeting Sewer Rate Study January 30, 2007 Page 4 of 6 preponderance of zero usage lies in the multi family class and some in single - family class. It would not be equitable to put all single-family classes on the flat rate because there are substantially larger units out there. Mr. Nicholas noted the current system might have fulfilled our needs if we had not forgone the rate increases in the past years. OPERATING PROJECTIONS: Mr. Rocco reported that the firm's projections were made on the conservative side with revenues underestimated and costs overestimated. He explained the chart noting the modifications taking place each year as the amount of revenue which includes the 5% annual rate increases. The rate stabilization includes transfers from existing revenues in order to stabilize the system. Mayor Randels pointed out that the City didn't have enough funds to pay debt services and have been utilizing revenue or savings to pay debts. Mr. Rocco reiterated the importance of building a depletion fund. REVENUE BY CUSTOMER CLASS — COMFORT SLIDE Mr. Rocco stated that the City has been collecting close to the correct amount of rates based on past criteria concluding in no big step up or down. There will be some Commercial rate decreases due to no longer utilizing the City of Cocoa rate structure. He described the 5% increase as 1 cent per day per 1,000 gallons of service or $1.33 per month for 4 thousand gallons of service. AFFECTS: Mr. Rocco stated that because the City will be changing the rate structure some percentages will not be the same across the board. Following the first adjustment, rates will change except for slight modifications on some accounts like single - family. Mr. Rocco responded to Mr. Petsos that single - family usage was around 4,000 gallons, multi - family 3,000 gallons and commercial 10,000. These are the typical uses discovered and will change from year to year. TYPICAL Bill comparison chart: Mr. Rocco stated that one of our goals is to keep adjustments at 5% for typical users. Mr. Rocco responded to Mayor Randels that the increased amount is an additional $1.34 and this amount can increase and decrease. This particular chart represents 4,000 gallons per month usage. Mr. Rocco responded to Ms. Roberts regarding the multi - family flat rate that the characteristics appeared similar across the board and they attempted to stabilize revenues for the sewer system. He gave an example regarding condo budgets for sewer rates. City Council Workshop Meeting Sewer Rate Study January 30, 2007 Page 5 of 6 Mr. Rocco noted that condos use individual meters and master meters, however 80% of the meters are master meters. Mr. Rocco responded to Mr. Nicholas that the Water Management Districts have been encouraging individual meters to give utilities a better enforcement in regards to conservation which is favorable when you look at consumption user fees. NEIGHBORING UTILITY COMPARISON: Mr. Rocco explained the chart on neighboring utility comparisons which focuses on the average of all other communities and then compares it to the City of Cape Canaveral. He noted that it is unknown what other subsidies are within the listed neighboring utilities system. We are clear that the rate for the City is only for sewer usage. FAVORABLE RESULTS: Mr. Rocco stated that the City's revenues are supporting the operations and contributing to the building of reserves. He explained that the green bar in the second column represents revenue generated by the new rate system. The purple bar is expenses and the green and purple bars should stay hand in hand with green showing a little higher. RECOMMENDATIONS: Mr. Rocco proposed that the rate structure modifications and rate adjustments be adopted April 1, 2007. Mr. Rocco explained that if the new rate is adopted in April the budget would have to be adjusted with an additional $150,000 from operating. Mayor Randels explained that the City might want to wait until January to enact the new rates. Mr. Rocco responded to Mayor Randels that if the City waits until January to apply the rate adjustment, an amount in excess of $300,000 would have to be borrowed from reserves. Mr. Boucher stated that inflation is a little over 4% and there is concern about deferring the rate change. Mr. Boucher would like to review revenue trends and growth factors for the remainder of the year and possible deferment to September 2007. Mr. Boucher pointed out that the rate model presented represents a good model for the City to live by because no one wants to go through rate shock. Mr. Petsos asked to see the results of Mr. Boucher's review and where the City might be if $300,000 were borrowed from reserves. City Council directed the City Manager to evaluate if the rate change could be deferred until September. Ms. Roberts stated that she thought the presentation might bring forward a few more options not just a flat rate across the board. Mr. Rocco responded to Ms. Roberts that in dealing with water flow this is an overall average in order to bring equity among the users. The users pay an annual fixed cost that the system is realizing which amounts City Council Workshop Meeting Sewer Rate Study January 30, 2007 Page 6 of 6 over 90% of the system's cost. Mr. Rocco stated that they tried not to impact any group as a classification, however the Multi - Family class is the largest. Ms. Bowers explained that this change would be done through ordinance and strict timelines. She stated that she would gladly meet with Ms. Roberts to review City of Cocoa figures. Mr. Rocco responded to Mr. Petsos that commercial sewer is different from residential depending upon the classification as there are industrial surcharges. Mr. Petsos asked if it would be reasonable to look at different classifications for commercial. Mayor Randels suggested after the requested review that an Ordinance be scheduled for the February 20, 2007 City Council Meeting. Mayor Randels submitted that $1.3 million in reserves has been used in lieu of the standard rate increases over the past four years. Mayor Randels requested more information on types of commercial uses and samplings of condo usage. Mr. Gardulski responded to Mr. Petsos that the biggest problem tends to be grease from restaurants and some heavy metals material coming from an unknown source. ADJOURNMENT: There being no further business the Chair adjourned the meeting at 8 P.M. Virginia Haas, Assistant City Clerk