Download
1 / 21
220 likes | 503 Views
February 2011. City of Farmersville, Texas Water and Wastewater Rate Study. Introduction. Internal and External Issues Impacting Water and Sewer Utility Discussion of Projected Financial Performance Rate Study Results Estimated Rates
E N D
February 2011 City of Farmersville, Texas Water and Wastewater Rate Study
Introduction • Internal and External Issues Impacting Water and Sewer Utility • Discussion of Projected Financial Performance • Rate Study Results • Estimated Rates • Rate Design Options • Monthly Impact of Estimated Rates • Comparison of Monthly Charges • Questions / Comments
Issues Impacting Utility • The finances of a Public Utility are tracked in an “Enterprise” fund – it is a “Business-like” activity • A service is provided, and a fee is charged • The City Council is the “Board of Directors” of the business. Responsibilities include: • Hiring the Chief Executive • Establishing the service goals and objectives • Ensuring financial integrity and solvency of the business
Issues Impacting Utility - External • Legislative and Regulatory Requirements • Texas Water Conservation Implementation Task Force • Emphasis on Water Conservation and Implementation of Best Management Practices • Texas Commission on Environmental Quality • Regulatory Oversight • Significant capital improvements required, particularly to the City’s sewer collection and treatment systems, to maintain compliance • Regional Wastewater System - Phase I capital cost of approximately $3.475 million projected to meet needs through 2017 • Increasing Costs from Wholesale Supplier (NTMWD)
Issues Impacting Utility - Internal • First detailed analysis of the adequacy of water and sewer rates • Historical Financial Policies and Practices • Budgeted for Expenses to Exceed Revenues since FY 2008 • Budgeted under-recovery in current year of approximately $384,000 • Over $1.6 million transferred from Capital Projects Fund to Water and Sewer Fund • Has resulted in available cash of approximately $900,000 • Without transfers, City would have had to increase rates or utilize other available funds to cover expenses
Issues Impacting Utility - Internal • Historical Financial Policies and Practices • Historical budgets have not contained any costs for sewer department personnel, professional services, supplies, or capital expenditures. • Current rates estimated to recover less than 55% of sewer related costs • Some utility-related costs such as Utility Billing have historically been paid by the General Fund • Both issues corrected in adopted FY 2011 Budget
Issues Impacting Utility - Internal • Historical Financial Policies and Practices • Historical practice for adjusting customer bills has been to adjust the dollar amount of the bill, not the level of billed water consumption or sewer flow • Dollars billed and volumes do not correlate • Under normal operating and weather conditions, the City’s current water and sewer rates are not projected to generate sufficient revenue to cover costs
Rate Study ResultsEstimated Rates • Based on estimated revenue performance, immediate action is needed to adjust water and sewer rates to appropriate levels • Recommending adjustments to Inside-City Rates Only • Further adjustments to Outside-City Rates should be made at such time as they reach 115% of the then effective inside-City rate • Given significant under-performance of current sewer rates, recommend using existing available cash in Water and Sewer Fund (approx. $900,000) to support implementation of sewer rate plan which attempts to mitigate rate shock • Plan results in estimated cash balance of just over $122,000 in FY 2014 and accounts for needed funds to maintain operations and maintenance reserve of 45 days
Rate Study ResultsEstimated Rates - Water • Other Rate Design Considerations (recommended by TWCITF) • Remove gallons allowed in minimum bill (Strongly Recommended) • Price differential between rate blocks should be no less than 25% • Differential between 10,001 – 20,000 gal. and 20,0001 gal. blocks is currently just over 22% • Strongly recommend consideration of escalating meter charge • More reflective of potential demand • Impact to larger commercial customers and school district
Rate Study ResultsEstimated Rates - Sewer • Other Rate Design Considerations (Strongly Recommended) • Remove 1,000 gallons allowed in minimum bill • For commercial customers, bill all sewer volumes at same rate • Sewer rates presented above are “phased-in” • Utilizes available cash to support rate performance
Rate Study ResultsFund Performance under Estimated Rates • If rates are phased-in, City must continually evaluate rate performance and adjust rates as required over the planning period to maintain fund performance
Rate Study ResultsMonthly Customer Impact of Estimated Rates
Wholesale Customers • City provides contractual wholesale water service to three customers • Review of contracts conducted – suggested changes to these agreements provided in separate memo • Recommend implementation of a defined rate methodology that recognizes the costs, including the operational impact, and benefits associated with service to these customers • Also Recommend City begin tracking more information regarding how these customers use the system (i.e., daily meter readings)
Questions and Comments? Chris Ekrut, Manager J. Stowe & Co. 1300 E. Lookout Dr., Ste. 100 Richardson, TX 75082 972.680.2000 cekrut@jstoweco.com
