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Minutes 06-06-90MINUTES OF THE SPECIAL CITY COMMISSION MEETING HELD IN COMMISSION CHAMBERS, CITY HALL, BOYNTON BEACH, FLORIDA, WEDNESDAY, JUNE 6, 1990 AT 6:00 P. M. RE WATER/WASTEWATER RATE STUDY PRESENT Lee Wische, Vice Mayor Lillian Artis, Commissioner Robert Olenik, Commissioner J. Scott Miller, City Manager Sue Kruse, City Clerk Scott A. Elk, City Attorney Vice Mayor Wische called th meeting to order at 6:10 P. M. John Guidry, Director of Utilities, informed everyone that ~he last utility rate increase in this City took place in two phases over 1982 and 1983. After elaborating, he stated he would not address the reasons why additional increases did not take place over the years. Due to the capital program before them, Mr. Guidry said the accounting data from 1982 forward had been looked at. He referred to his memorandum dated May 9, 1990, which was a recommendation. Robert Sheets, David M. Griffith and Associates, Ltd., t521-A Killearn Ctr. Blvd., Box 11, Tallahassee, FL 32308, recalled when they first came before the Commission in early Fall with Prudential-Bache and CH2M Hill. Prudential- Bache and CH2M Hill were to outline how much the City is to ~pend over the next five years to take care of some defici- 9ncies in view of growth additions. Prudential-Bache was here to tell the City how much it would have to borrow to do ~hose things. The task of David M. Griffith and Associates, Ltd. (DMG) is to help the City understand what those impacts Will be on the City's utility customers. Mr. Sheets presented slides and explained DMG's ~Commissloners"' Report, Water/Wastewater. ,, and Capital Facilities Charge Analysis , dated April, 1990, which had been furnished to the Commission. With regard to "Capital Facilities Charge Cost Recovery" on page 2 of the report, he Said that term will be referred to as "cap fees and impact fees". In the "Rate Design", he stated they would be talk- ing about the difference between a flat rate, a declining Fate, or an inverted rate. Mr. Sheets said DMG's basic recommendations were that the City implement a rate structure fee and an across the board increase of 86.43% over the next years, which translated into a 17.26% increase; that the City implement a water cap fee of $833 per equivalent residency unit (ERU); and imple- ment a wastewater cap fee of $266. MINUTES - SPECIAL CITY COM~4ISSION MEETING BOYNTON BEACH, FLORIDA JUNE 6, 1990 Mr. Sheets advised the City should be considering the implementation of a storm water management utility. It should implement proposed utility user fees that have been proposed by the City Staff. Mr. Sheets noted the recommen- dation the City Staff was making reflected the increase in salaries and operating costs. Mr. Sheets further stated the City should eliminate special gustomer classes and review findings on a regular basis. The City must review this as an ongoing critical business in terms of its revenue generation, its management, its cost, and its level of service in delivery of service to the community. Commissioner Olenik asked what the current cap fees are for Water and wastewater. Mr. Guidry replied it is $475 for water and $525 for sewer. He referred him to the inside City cap fee for water and sewer on the average 3 bedroom ~ome in Rate Schedule B, and said the net increase due to the declining sewer cap fee is approximately $179, or approximately a 10% increase. If they keep the sewer cap ~ee at $525, Commissioner Olenik questioned whether the City would be at any type of liability situation for over- ~harging for capital service. Mr. Sheets stated they were going to go into detail about what a cap fee can and cannot do legally. You cannot use a cap fee to fund efficiency makeup or operating costs. They have to cover costs associ- ated with the impact growth has on a utility. As the City may change the schedule of which they will embark on some of these programs, it can affect the cap fees. The cap fees were designed on the program that is in place now. Commissioner Olenik questioned whether the enhancements of the sewer treatment plant (odor and the pumping system) were cap fee related. Mr. Guidry answered, "No." He advised the 0nly thing of the $7,500,000 allocable to cap fee is about $525,000. John DeMico, Project Manager, DMG, explained DMG's "Techni- Cal Report, Water/Wastewater and Capital Facilities Charge Analysis," dated April, 1990. Mr. Guidry said the Utilities Department is electing this year not to make significant staffing increases. He agreed with Commissioner Olenik ~hat the facilities will not be built this year. Mr. Guidry added the City has had an operating policy for years that if an A or B water plant operator can be found, he will be put on. MINUTES - SPECIAL CITY COMMISSION MEETING BOYNTON BEACH, FLORIDA JUNE 6, 1990 Mr. DeMico stated they also assumed a repair and replacement (R&R) fund. Money is set aside for replacement because of deterioration of the City's assets. The water is $500,000, and the wastewater is $350,000. The South Central Regional Wastewater Treatment Board (SCRWTB) is driving up the costs for the community to treat wastewater. A~ter elaborating, Mr. Guidry stated the costs at the SCRWTB have Been personnel. Commissioner Olenik did not think they Would see 25% increases per year down there in the future. With the new pump station and the expansion of the pump station, if the City gets into wastewater fees, Mr. Guidry informed him they will be looking at significant power increases. He thought it was something they needed to look at. Hr. DeMico stated he was not taking all of the costs at 25%. That was just one item. For example, Bob Kenyon, Superin- tendent, Public Water and Pumping Stations, b~lieved some of She chlorine costs on the water side may go up as high as 50%. Mr. DeMico thought probably the most important cost factor was the involuntary and voluntary water conservation in the community as far as adhering to water conservation. ge pointed out the Department of Utilities is in the ~usiness of selling water. With water conservation in the Community, he projected the City may see as high as $1,000,000 in lost revenues. That is part of the reason for the high rate increase. Since 1987, Mr. Guidry said the City has had to reduce pressure voluntarily in order to stay on line, stay out of enforcement, and keep operating. He informed Commissioner Qlenik the system design pressure is at 60 pounds per square inch (PSI), and they will try to maintain that. There was discussion about water consumption. Mr. DeMico referred the Commission to "Figure 2, Sufficiency Tests" on page 8 of the ~echnical report, which showed a 17.268% revenue increase is needed, and he explained. ¢ommissione~ Olenik asked if the cash flow included the ~unding. Mr. DeMico answered affirmatively. With this year's budget, Mr. Guidry said they are not going over recommended Schedule B unless it is an emergency item. R&R With reference to the recommended 86.43% rate increase over five years, Mr. DeMico said that would be five increments at 17.26%. He stated they may want to split the 86.43% over two or three rate increases, but that is the five year %ncrease needed. The Commission knows the community and how 3 MINUTES - SPECIAL CITY COMMISSION MEETING BOYNTON BEACH, FLORIDA JUNE 6, 1990 it will be accepted, and they may want to consider present- ing it in different ways than five. Mr. DeMico referred to "Figure 3" on page 9 of the technical report and told the Commission they determined there were some inequities in the City's rate structure, such as the residential is basically subsidizing non-residential every year. They tried to fix that by allocating 10% of that allocated cost to the City's minimum or fixed bills to cover all of the customer rate classes. Approximately 40% of that increase is rolled over into the City's commodity portion. !t impacts more of the high users than it does residential. Mr. DeMico further explained Figure 3. Mr. DeMico stated they chose across the board for water and wastewater because of cost accounting. It would be very difficult to split everything out and treat them as two enterprise funds. It would be easier for the Finance Department and the Data Processing Department to go across the board. Commissioner Olenik asked how the City charges for waste water today. He was informed it is by water con- Sumption. There was discussion. Mr. DeMico drew attention to pages 6 and 7 in the Commissioners' Report. Commissioner Olenik asked whether the City was only allowed by Statute to charge so much per- centage. Mr~ DeMico replied by law, the City can charge what it is charging. Between 120% and 125% is normal. Mr. DeMico advised the residential and commercial pay the same rate. Currently, the commercial pays $8.00 for their first 3,000 gallons, and the residential pays $4.50. In the wastewater, they are all treated the same. Mr. DeMico said the new customers must create a need for the capital facilities. The fees should represent their fair Share of those new customers, and the fees collected should benefit the new customers. Current users should not pay for new expansion if it is for specific growth items. Commissioner Otenik said the west water treatment plant is Costing "X" Million Dollars the City will sell bonds for. He asked whether the City can take capital fees it is collecting from new developments and use those fees to pay for the debt service of the bonds. Mr. DeMico answered, "For future use." City Manager Miller thought that was a legal question City Attorney Elk would have to research. There was further discussion. 4 MINUTES - SPECIAL CITY COMMISSION MEETING BOYNTON BEACH, FLORIDA JUNE 6, 1990 Wilda Searcy, 402 N. E. 13th Avenue, inquired whether the City is getting all of its water out of a well. Mr. Guidry answered, "Every bit." Mrs. Searcy asked if water could be piped ino Mr. Guidry replied it would be a technical impossibility. He added the wells are far superior water quality, unless they are contaminated, than surface water systems. Mr. DeMico explained the calculations on page 130 of the Technical Report and said they were recommending an impact fee of $1,500 per three bedroom family. He referred to page 13 and said that was how they came up with the $1,500. Mr. DeMico pointed out to Commissioner Olenik they are not going to bring in the revenues 100%. W/~atever is not paid for through impact fees will come through rates. Mr. DeMico confirmed Commissioner Olenik's statement that they did not recommend the $2,900 because it is very high and does not compare with any other cities. If the City is higher than the County, Commissioner Olenik commented it might be cheaper for developments not to want to annex but to go to the County° Mr. DeMico again referred to paragraph 13 of DMG's recommen- dations. (See page 11 of the Commissioners' Report.) He stated a mechanism being used throughout the country is taking the drainage related expenditures, creating an enterprise fund, and treating it as a utility. City Manager Miller stated the Comprehensive Plan gets involved in estab- lishing a storm water management utility fee for the construction and maintenance of storm water management systems, including the master plan. Commissioner Olenik asked whether the State told the City what it is required to do with regard to recent legislation regarding storm water management. Mr. DeMico replied the Federal regulations are still in review and are to come out in Late August. City Manager Miller understood that in 1991, cities with over 100,000 in population were the first ones who would have to deal with it. Due to the City's service area configuration with Palm Beach County, Mr. Guidry thought the City should start planning for this. Mr. DeMico suggested the City could take out some expendi- tures to reduce its rates. If they were to eliminate a storm water utility with an ERU of approximately $1.00, City Attorney Miller said it should generate about $1,000,000 a year. He explained to Commissioner Olenik how he arrived at that figure. 5 MINUTES - SPECIAL CITY COMMISSION MEETING BOYNTON BEACH, FLORIDA JUNE 6, 1990 DMG also recommended that the City implement proposed utility user fees. Commissioner Olenik asked for an example of utility user fees. He was informed meter charges for turning on and turning off, rereading meters, and bad checks. Commissioner Olenik thought the Commission should be given a list of the user fees. Mr. DeMico reiterated that there were inequities in the City's rate structure. An example of a customer class the City has now is Sterling Village. A few more are Colonial Ridge, Crown Colony and Jamaica Bay. There is no cost accounting reason to exempt them. They do not pay the $4.50 charge. Their bills are calculated like wastewater. There was discussion about Briny Breezes and condominium associa- tions. Mr. DeMico told Commissioner Olenik they developed costs to treat water and costs to treat wastewater for the utilities to use as a basis, but they did not include associated capital. Commissioner Olenik questioned whether the City has any large user rates for water, other than the agreement With Delray Beach. Mr. Guidry replied, "Jamaica Bay:. Mr. DeMico stated at least some portion of the rates should be increased. Mr. DeMico felt the Commission should look at this analysis on a frequent basis. The City has not done anything for the past six years, so they were looking at 11 years of needed rate increase. If they would do it every third year, it Would be easier for the community to swallow. Mr. DeMico further explained the rate study. Mr. DeMico stated Rate Structure A is the City's current rate structure. That was not the most favored way. ~r. DeMico explained Rate Structure B and stated they did not recommend an inverted rate structure because it is difficult to project revenues. Mr. Guidry advised that Boca Raton and West Palm Beach increased their ground water Withdrawal permit. A specific condition of the permit says the City has to, within two years within the issuance of that permit, has to implement a water conservation policy agreeable to the South Florida Water Management District. Mr. Guidry was concerned that the City has to satisfy the South Florida Water Management District this year with a palatable elected body policy that says the City has a conservation program. He recommended a portion of Rate Schedule C. 6 MINUTES - SPECIAL CITY COMMISSION MEETING BOYNTON BEACH, FLORIDA JUNE 6, 1990 Commissioner Olenik inquired whether DMG looked at fixed versus variable costs and broke them down. Mr. DeMico replied they looked at every specific departmental cost and every individual line item in each of the departments in the City's budget document. If the Commission wanted to implement Rate Structure C tonight, Mr. DeMico advised it would certainly give the City its equity portion. He explained Rate Structure C. Commissioner Olenik asked if there will be a separate commercial rate classification. Mr. Guidry answered that there is. Mr. Sheets stated the City has a difficult job in trying to provide utility services. Conservation will have to be addressed. If they go to Rate Structure C now, they know they will have to make adjustments. Mr. Sheets thought they would see less than $200,000 in reduced costs. All of the decisions will be difficult ones. The impact fees need to be looked at. They are a great revenue. If they have a 21% interest rate in two years and construction stops, there will be no impact fee. The rates will have to be increased to cover that. There was discussion about the rate struc- tures of Boca Raton and West Palm Beach and what kind of structure Boynton Beach should have. Mr. Sheets said he would ask Mr. Guidry and Mr. DeMico to spend time together to see what they can put together to give the Commission some options and show what that would be in terms of projections and impact of revenues. Mr. Guidry stated the Commission would have to direct them to do that. Motion Commissioner Olenik moved that the Utilities Department and DMG give the Commission a general overview of different options and an inverted conservation rate. Mr. Guidry did not think they could lose sight of Rate ~chedule B as it ties to the utility in its ongoing budget. Commissioner Olenik responded they should not look at it in khe period that is in the budget, and he explained. Mr. Guidry felt the only thing that could give the City one civil structural activity the City has available to it is khe aquifer storage/recovery program the City had talked about. It is the only one thing that can give the City a time extension as far as needed commitments in what the City has to do. 7 MINUTES - SPECIAL CITY COMMISSION MEETING BOYNTON BEACH, FLORIDA JUNE 6, 1990 Mr. Sheets thought there were administrative issues that should be addressed by Mr. Swann and Mike Munro, Director of Data Processing, such as what impacts many of these alter- natives would have on the Finance Department and the Data Processing Department in terms of program modifications If they decide they want an inverted formula and decide to group the users into four groups (two residential, being ~ingle family and multi family) and two commercial (small retail and large business) and categorize each bill in the City, Mr. Munro agreed with Mr. Guidry that the City's rate structure could not handle it. He stated Leisureville is 3,000 gallons per family month in and month. The rest of the residential run between 7,000 and 10,000 per month. There is no established average on the commercial. He explained what the program could handle. Discussion ensued about rates, conservation, and water. Mr. Sheets emphasized that a policy statement needed to be ~ormulated. He thought the Commission might want to look at at a true conservatoin program. They should be recovering the costs for homeowners, education programs, and policy indoctrination. Mr. Guidry had a problem obligating funds Without the funding mechanism to pay for it. The City Manager repeated the motion, and the motion was Seconded by Commissioner Artis. The motion carried 3-0. Vice Mayor Wische wondered what the latest date would be when the Commission could have this information. City ~anager Miller answered the City's intent was October 1. If everyone felt comfortable, it would not preclude the City from implementing it sooner. The earliest date they would be looking at would be August. Mr. Guidry brought out the fact that the City has been pay- Sng for sewage through the Regional at the rate of 50.55 per 1,000, and it is actually costing the City a rate of 76 per 1,000. This year, the City is subsidizing that. Mr. Guidry felt there was an urgency, There were further comments about dates for the information. 8 MINUTES - SPECIA~L CITY COMMISSION MEETING BOYI~TON BEACH, FLORIDA ADJOURi~-MENT The meeting properly adjourned at 7:38 P. JUNE 6, Mw 1990 ON BEACH Mayor ~TTES T: Vice Mayor ~ommlssioner Commissioner ~i~y Clerk ~ecording Secretary // (Two Tapes) 9