Prescott
AZ

Council Memo
2322

Presentation of Final Water and Wastewater Rate Study.

Information

Department:FinanceSponsors:
Category:Presentation

Attachments

  1. Printout

Document Comments

Recommended Action: This is for presentation only. No action will be taken.

Body

Item Summary

 

This item is an update of the water and wastewater rate alternatives from the Raftelis study, which is available on the City’s website.

 

Background

 

On August 28, 2018, Council received a presentation from Raftelis consultant regarding updating the water, wastewater, and solid waste rate study. The presentation of the preliminary water and wastewater study happened at the November 27th Council workshop with the final report posted on the City’s website January 11, 2019, at http://www.prescott-az.gov/water-sewer/utility-billing/rate-setting-process/ .

 

The public hearings will be held on January 22 and February 12, 2019, followed by a Council vote.  Following is the complete schedule of the rate setting process.

Meeting History

Jan 22, 2019 1:00 PM  City Council Study Session Meeting
draft Draft

Finance Director Mark Woodfill introduced a presentation to Council regarding the Final Water and Wastewater Rate Study and welcomed Andrew Rheems with Raftelis to discuss the study further.

Mr. Rheems gave an update on the water and wastewater financial plan, proposals and rate study since the last update from November.

I. Water Fund

Water Rate Objectives

*Leveling of rate adjustments avoiding sharp annual changes

*Continue the present conservation water-use efficiency oriented pricing structure that has proven to be effective

*Provide a stable source of revenue as the city providing funding for planned water capital projects

*Evaluate Aquifer protection fee, alternative water fee and outside city rate multipliers

*Maintain customer class cost of service rate recovery

Major Water Fund Capital Projects

*FY19-FY23 - total $90.9 million in capital before inflation ($94.9 million after inflation)

- Intermediate and Chino Booster Pump Stations

- Chino Valley Production Well No. 1 through 5 Rehabilitation

- Zone 16 Virginia Pump Station, Haisley Tank and Haisley Road Piping

- Zone 56 Tank and Pipeline, Zone 7 Booster Station

- Mingus Pump Station, Tank and Pipeline Upsize

- Airport Well No. 5

- Airport Well No. 6

- Upsize water mains from Zone 27 Tank to Zone 24 Tank

- Zone 30 Booster Pump Station at Hidden Valley

- Various Water Main Replacements

Water Rate Alternatives:

*All alternatives maintain Aquifer Protection Fee at current levels and recover customer class cost of service and annual revenue needs

>Adjust outside city multiplier from 40% to 30%

>Maintain Chino Valley multiplier at 30%

Alternative 1

*Increase base charge by meter size

*Increases volume rates by customer class

>Water allocations by tier unchanged

>Increased volume rates by tier

*Alternative Water Surcharge remains at current levels of $.89 per kgal

Alternative 2

*No increase to base charge by meter size

*Increases volume rates by customer class

>Water allocations by tier unchanged

>Increased volume rates by tier including higher Tier 2, 3, and 4 rates

*Alternative Water Surcharge remains at current levels of $.89 per kgal

Alternative 3-Developed since the November 2018 Presentation

*Increases base charge by meter size same as Alternative 1

*Increases volume rates by customer class

>Water allocations by tier unchanged

>Increased volume rates by tier

*Alternative Water Surcharge eliminated and incorporated in tiered rates

Alternative Water Fee Background and History

*Established in 1982 as uniform rate per 1,000 gallons to fund city's Central Arizona Project (CAP) costs

Water Rate Alternatives 1 and 3 Differences

Alt 1 Alt 3

Maintains Current Alternative Water Volume Surcharge Yes No

Eliminates Alternative Water Volume Surcharge No Yes

Increases Revenue Recovered through Tier 2, 3 and 4 Use No Yes

Bill Impacts Current Alt 1 Alt 3 in 2019 Alt 1 Alt 3 in 2023

3,000 gallons $26.80 $27.57 $26.82 $30.38 $29.60

5,000 gallons $38.30 $39.45 $38.82 $43.60 $42.92

10,000 gallons $ 67.05 $69.15 $68.82 $76.65 $76.22

20,000 gallons $148.85 $153.75 $158.82 $171.25 $176.12

30,000 gallons $303.55 $314.05 $338.82 $351.65 $375.92

II. Wastewater Fund

Wastewater Rate Objectives:

*Leveling of rate adjustments avoiding sharp annual changes

*Provide a stable source of revenue as the city providing funding for planned wastewater capital projects and debt service

*Maintain customer class cost of service rate recovery

*Review treated effluent rate

Major Wastewater Fund Capital Projects

*FY19-FY23 total $63 million in capital before inflation ($67.4 million after inflation)

- Sundog Trunk Main Phase B and C

- Airport Trunk Main

- Centralization SR89 Lift Station

- Willow Creek Trunk

- Hassayampa Truck Main

- Airport WRF Phase II

- Various Main Replacements

Treated Effluent Rate

*Water produced at city Wastewater Treatment Plant and Water Resource Facility sold for irrigation, industrial, and non-potable uses

*Contracted customer rates are limited to inflation

*Non-contract customer rates are not limited by contract

>Recommend phasing to 60% of the average potable water rate by 2023

-Current is 37% of average volume rate

Residential Customer Monthly Bill Impact

Gallons Current Proposed 4/1/2019 Proposed 1/1/2023

3 $38.03 $39.05 $44..63

5 $49.07 $50.78 $60.07

7 $60.11 $62.50 $75.51

Residential Rate Comparisons-5,000 Gallons Water and 3,000 Gallons Wastewater

Chino Valley $29.33 - Water & $79.02 - Wastewater

Prescott Alt. 1 $39.45 - Water & $39.05 - Wastewater

Prescott Alt. 2 $38.82 - Water & $39.05 - Wastewater

Prescott Current $38.38 - Water & $38.03 - Wastewater

Cottonwood $44.26 - Water & $32.00 - Wastewater

Prescott Valley $25.05 - Water & $18.69 - Wastewater

Councilman Goode asked for confirmation that Alternative 3 presented today is just like the previous Alternative 3 but with the Alternative Water Surcharge rolled into the base rate.

Mr. Rheems provided clarification that there are two volume rates, the tiered volume rate and the alternative surcharge so rather than flat $0.89 on all tiers has been folded into each of the tiers making it vary a bit from the $0.89, it functions as an in-between for Alternative 1 and Alternative 2 that provided a change in the relationship on the volume side.

Mr. Woodfill reiterated that in the November presentation there was only an Alternative 1 and 2, they've added in Alternative 3 to provide an option for revenues more stable with an increase to the base fees that is not as dependent on use.

Chino Valley Mayor Croft addressed Council regarding the Town being in planning mode. Commercial involvement is the backbone of a small town, their issues are with infrastructure on State Route 89. They are looking at the area near Outer Loop and water issues there. He asked for assistance from Prescott to work together on options for Chino Valley as they continue to develop. Additionally, he asked that the two Councils be able to talk regarding prices and insufficient water pressure for fire flow as they are in the Prescott system.

Mr. Woodfill advised Council that staff needs direction from Council regarding Alternative 1 or Alternative 3.

Mayor Pro Tem Orr said that she feels Alternative 3 simplifies but keeps conservation in there and it is the one she would like to see in there.

Councilman Goode agreed with Mayor Pro Tem Orr.