HomeMy WebLinkAboutAgenda Report - April 5, 1995 (92)OF
CITY OF LODI
COUNCIL COMMUNICATION
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AGENDA TITLE: Water Rate Analysis
MEETING DATE: April 5, 1995
PREPARED BY: Public Works Director
RECOMMENDED ACTION: That the City Council review the courses of action on implementing a
water rate increase and provide the appropriate direction to staff. Staff
recommends Option A be selected.
BACKGROUND INFORMATION: At its March 15, 1995 meeting, the City Council set a public
hearing for April 19, 1995 to consider an increase in water rates
to be effective June 1, 1995. More details of the proposed rate
increase were presented at the March 21, 1995
Shirtsleeve Session. In addition, future rate studies and increases were discussed. Toward the end
of the Shirtsleeve Session, the discussion lead to some options suggesting that possibly the public
hearing should be canceled. The options involve two main issues: 1) implementing an "interim" rate
increase before doing a detailed rate analysis, and, 2) whether the analysis should be done by an
outside professional or by City staff.
On the first issue, it is certain we are looking at overall revenue needs that cannot be raised in one rate
adjustment. Comments received from large industrial customers have supported planned, staged rate
increases rather than fewer large increases. Therefore, staff is recommending the series of increases
be started now.
On the second issue, some of the items that should be considered in a rate analysis are listed in
Exhibit A. For comparison purposes, an outside analysis would cost up to $15,000 and would entail
roughly 160 hours of professional services and at least 40 hours of staff time over the course of two
months. An in-house study would take 300 to 350 hours of staff time, although this is difficult to
estimate since Public Works staff has not done this type of study before. Also, since City staff time is
not available in week long blocks due to other on-going tasks, the overall duration of the analysis would
be longer and the work accomplished less efficiently. This will also delay action on other projects
currently underway (see Exhibit B).
The two issues combine to make four options. They are:
A. Proceed with the public hearing on the recommended interim rate increase for June 1, 1995 and
plan to have a rate analysis performed by a qualified professional fine for implementation in 1996.
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APPROVED: L)
THOMAS A. PETERSON recycled paper
City Manager
UU-1
WTRRATEI.DCC 3/28M
Water Rate Analysis
April 5, 1995
Page 2
• Under this option, the only immediate Council action required will be to conduct the public
hearing on April 19. The Council could then adopt the rate increase or take some other action.
if the Council does not provide other direction, staff will include the necessary funds for a rate
analysis in the fiscal year 1995✓96 budget. A recommendation as to the firm to do the work
would be presented in summer 1995.
B. Proceed with the public hearing on the recommended interim rate increase and direct staff to
perform a rate analysis for implementation in 1996.
• This is the same as Option A except the rate analysis would be done in-house.
This option will take significantly more time to implement and would not have the depth and
quality of analysis that could be provided by an outside professional.
• The in-house analysis will involve the Public Works and Finance departments and the
City Manager's office (including a new City Manager.
C. Cancel the public hearing and plan to have a rate analysis performed by a qualified professional
firm for implementation in late 1995.
• Under this option, we should start on the rate analysis as soon as possible in order to maintain
the financial health of the water utility. Using the recommended flat rate increase of 22%, a
6 -month delay means approximately $250,000 in lost revenue.
• The rate analysis will be complicated by the issue of the inappropriate water allowance in the
metered rate if it is not addressed now.
• The rate increases coming out of the analysis will be somewhat higher and/or more prolonged
due to the time delay between June 1, 1995 and final action on the analysis.
D. Cancel the public hearing and direct staff to perform a rate analysis for implementation some time in
late 1995 or early 1996.
• This Option has all the disadvantages of both Options 8 and C.
• Staff sees no advantages in this Option.
FUNDING: None required at this time.
Jack L. onsko
Public orks Director
Prepared by Richard C. Prima, Jr., City Engineer
JLR/RCP/Im
cc: Water/Wastewater Superintendent
City Engineer
WTRRATEI AOC
EXHIBIT A
1) Revenue requirements - cash needs approach vs. Utility approach
2) Revenue requirement projections
3) In -lieu tax policy
4) Miscellaneous operating revenue projections
5) Non-operating revenue projections
6) Cost allocation - base/extra capacity method vs. commodity -demand method
7) Current and short-term financial conditions of water utility
8) Future cost projections - operations and maintenance, capital, other costs
9) Inside City/outside City service cost allocation
10) Establish customer classes
11) Special customer classes - fire service, wholesale, irrigation, other
12) Units of service - meter size, demand rates
13) Establish unit costs
14) Distribute costs to customer classes
15) Block rates - single vs. declining vs. inverted
16) Rate adjustment options - customer acceptance, revenue lag
17) Seasonal, peak period rates
18) Conservation issues
19) Flat rates - equity with metered rates
20) Fire service rates
21) Lifeline rates
22) Connection charges
23) Miscellaneous service charges such as tum on/off, construction water
24) Unauthorized water use charges
25) Cross connection/backflow device charges
26) Develop computer rate model to simplify future updates
27) Rate options/analysis and projections
28) Public education and input process - throughout above steps
29) Public presentation and Council action
WTRRATEI.DOC 3/28!95
EXHIBIT B
City Engineer 1995 Projects and Tasks
Projects (twelve to fifteen weeks minimum)
1) SP Kentucky House Branch abandonment - work with SP
2) ISTEA funding applications, next cycle
3) Central City revitalization - assessment district formation, design firm liaison
4) Water infrastructure/DBCP/rates presentation
5) Development Impact Mitigation Fee update
6) Encroachment Permit fees/policies, downtown sidewalk encroachments
7) Capital budget for FY 95/97
8) Lower Sacramento Road widening - outside engineering firm selection and management
9) Highway 12 Widening at Highway 99 - outside engineering firm selection and management
10) Water storage tank - outside engineering firm selection and management
Ongoing Tasks (average two to three weeks per month)
11) Public Works staff meetings
12) Council of Government Technical Advisory Meetings, brief Board representative
13) Multimodal Station - work with consultant and liaison to Central City Revitalization Task Force
14) Economic Development Meetings
15) Review responses to traffic complaints
16) Direct and review CIP project designs
17) Direct and review development project designs, preliminary requirements and inquiries
WTRRATEI.DOC 03/28/95