Chair, Tustison reported that the subcommittee dedicated a lot of time studing all the various options. Chair Tustison reviewed the four most important issues the Commission should keep in mind.
1. Build the Alternative Water Resources Development Impact Fund (AWRDIf ) over $6 million at the end of five years
2. Keep the Enterprise Fund over $2.5 million at the end of five years
3. Limit borrowing as much as feasible
4. Avoid any rate shock with the water fees
He also thanked Staff for all the time they spent evaluating and processing the different scenarios.
Ms. Seng thanked Chair Tustison and Commissioner Shapiro for their participation.
Ms. Seng reviewed several of the Commissoners’ comments based on the last Finance Subcommittee Meeting.
-Finance Subcommittee Section - Scenario A-3 as the Preferred Scenario with the Alternate being Scenario C-1.
-Financing Differences- FY 09-10 both stay the same -Scenario C-1 includes $5.9 million financing in Yr 11-12, Scenario A-3 includes $3.4 million financing FY 12-13. Both scenarios depict GPF increases of from $0.55 - $0.75 per 1,000 gallons in FY 09-10.
-Preferred Scenario: Small rate increases in the Base Rate & Commodity Rate each year
-Alternate Scenario C-1: No rate increases until last two years. FY 12-13 & 13-14 includes Base Rate and Commodity Rate.
Both scenarios A-3 and C-1 meet the Utility’s financial criteria. Ending Cash Balance: C-1 Year five = $2.2 million, Scenario A-3 = $2.6 million
-Alternative Water & Potable Water Impact Fee Funds: Ending Cash balances are consistent in both scenarios.
Ms. Seng reviewed the Summary pages for both Scenarios.
Review: Scenarios A-3 & C-1 GPF water rate increases.
There were no questions from the Commission.
Ms. Seng reviewed the Service Fees & Charges current and proposed fees:
-New Service Establishment Fee
-New Service Establishment Fee After Hours
-Backflow Permit Fees
-Reconnection Fees Costs
-Reconnection Fees After Hours
-Meter Installation Fees
-Security
A discussion occurred on:
-Subsidizing New Service Estabishment Fee & Cost Recovery (Commissioner Hoffmann). Ms. Seng explained that the cost recovery is not geared towards a full recovery. Mr. Saletta stated that the Utility was very careful about avoiding rate shock for these fees and charges also. It’s been a while since the fees were increased and the we could always go back using the same methodology next year. He suggested keeping the fees at a lesser rate.
-Correction: Delete text (gasoline) under Vehicle Costs (Commissioner Milkey). Ms. Seng noted the correction.
-Reconnection Fees/Deliquent account turn off - after hours (Commissioner Milkey). Ms. Seng explained the Utility’s reconnection process.
-What percentage of customers are tenants (Commissioner Hoffmann). Ms. Seng indicated she did not have the information. Mr. Saletta mentioned that there may be situations where the property owner still has the water meter and account under their name. They are still owners but renting the home. If a customer leaves without paying their final bill the security deposit will be applied against the outstanding balance.
-Water payment tenant versus apartment owner (Commissioner Shapiro). Ms. Seng indicated that the water bills are paid by the apartment owner.
-Commercial Security Deposits- the proposed 2 times estimated monthly usage how will it be estimated, are there standards for restaurants or other businesses? (Commissioner Reynolds). Ms. Seng stated that staff had not yet estimated the monthly usage on different sized meters. Mr. Saletta indicated that there was some monthly usage data available to determine the amount.
-Meter Installation Costs for Submeters in Landscape Ordinance - (Vice Chair Davis). Mr. Saletta explained the fees would be the same if the meter was purchased from Oro Valley Water.
There no further questions on the Service Fees and Charges. Ms. Seng ended her report.
Water Rates Analysis Report Report Draft 9.28.09- Ms. Seng pointed out several sections of the report and changes.
-Table Comparative Summary of Operating Expenses (Pg. 9)
-Graph O&M Budgeted Expenses (Pg. 11)
Review:
-Debt Service
-Personnel Expenditures
-Least Controlled O&M Costs
-Minimal Controlled O&M Costs
-Most Controlled O&M Costs
Question & Discussion Session
-Discrepancies in Table versus Pie Chart. (Commissioner Hoffmann). Ms. Seng noted the change and will make appropriate corrections. Mr. Saletta explained O&M included field costs, CAP, CAGRD but no Debt Service or Personnel expenses. Commissioner Hoffmann will submit his text changes and comments to Staff.
-No Merit increases and no Cost of Living Allowances is it a fair assumption. (Commissioner Hoffmann). Ms. Seng indicated that it was a fair assumption. She explained that Yr. 2010-2011 the Town may be projecting a 2.5% Merit or Cola increase. Mr. Saletta explained that if in the next five years the economy changes these numbers can also change with the new 5-Year Scenario.
-Increase in services and use of Remote Radio Reads (Vice Chair Davis). Ms. Seng explained all new radio reads will not be activated at time of installation. This will be done in a methodical manner.
Ms. Seng stated that approximately 35% of the Utility’s budget is allocated for Operations and Maintenance expenditures and that the Utility has little control over.
Ms. Seng explained that the basis for the assumptions is the best information available today. Staff re-evaluates and analyzes the assumptions every year.
-Is there any information in the report regarding for the acquisition of CAP Water via Tucson Water? (Commissioner Milkey). Mr. Saletta explained that the time frame for CAP water through Tucson distribution system would be off by at least a year and felt it was not appropriate includng any costs at this time.
-CAGRD fee is it determined by the amount of Water pumped. (Commissioner Shapiro). Ms. Seng explained the terms of the contract. Mr. Saletta gave a brief explanation on how excess water is applied to groundwater usage. The CAGRD fee is a contractual obligation.
-Need concise statement in the Draft Water Rates Analysis Report - Why was the Preferred Scenario A-3 selected over Alternate Scenario C-1. (Commissioner Milkey) He suggested the statement be incorporated into the report. Commissioner Hoffmann agreed and thought the statement could be in the report's conclusion.
Mr. Saletta agreed that Commissioner Tustison’s opening statement and guiding principals and that it should be in the report.
Consensus: The Commissioners agreed with the Commissioner Milkey’s suggestions.
Commissioner Milkey suggested the information be incorporated into the Executive Summary and Conclusion of the report.
Vice Chair Davis called for a Motion to approve the Proposed Notice of Intent to Increase Water Rates, Fees and Charges.
MOTION: A motion was made by Commissioner Tustison and seconded by Commissioner Shapiro to recommend to Town Council to approve the Proposed Notice of Intent to Increase Water Rates, Fees and Charges and to further recommend that Scenario A-3 be the Preferred Financial Scenario and Scenario C-1 be the Alternate Financial Scenario.
MOTION carried, 6-0.
Handout: Town Council Communication dated 10.7.09 Ref: Notice of Intent to Increase Water Rates, Rees and Charges for the Oro Valley Water Utility.