Title
Approval of Ordinance Adopting the 2015 Utility Rates and General Facilities Charges
Recommended Action
Committee Recommendation:
The City Council Finance Committee reviewed and discussed the proposed 2015 Utility rates and general facility charges (GFCs) on November 3, 2014. The review considered recommendations forwarded to Council by the Utility Advisory Committee (see attached letter). The proposed rates and charges reflect recommendations from the both Finance Committee and the Utility Advisory Committee.
City Manager Recommendation:
Move to approve on second reading the ordinance adopting the 2015 utility rates and charges.
Report
Issue:
Whether to approve an ordinance adopting the 2015 utility rates and general facility charges (GFC). Increases in LOTT Clean Water Alliance rates and capacity development charges have been part of budget discussions and are included in the ordinance.
Staff Contact:
Dan Daniels, Director, Public Works Waste ReSources, 360.753.8780
Andy Haub, P.E., Director, Public Works Water Resources, 360.753.8475
Presenter(s):
None - Consent Item.
Background and Analysis:
The background and analysis have not changed from first reading to second reading.
The proposed 2014 utility rates and general facility charges (GFCs) are consistent with the Council-adopted utility master plans and the City of Olympia's Comprehensive Plan. The Utilities provide key public and environmental health services for our community. Services are delivered without interruption and at a minimal cost.
For 2015, rate increases are proposed for the four utilities of Drinking Water, Wastewater, Storm and Surface Water, and Waste ReSources. GFCs are proposed for the Drinking Water and Storm and Surface Water utilities. GFCs are charged to new development and recover the costs of customers that connect to the system.
The LOTT Clean Water Alliance Board of Directors approved increases for both monthly wastewater treatment rates and their capital development charge (CDC). The CDC is similar to the City's GFC. The City collects the CDC for LOTT through the utility billing and development permitting processes.
If approved, the overall impact of the proposed rates to a typical residential customer for 2015 will be four percent or an $8.58 increase in their bi-monthly bills ($4.29/month). City general facility charges and LOTT capacity development charges will increase $529 for a new single family home. Non-residential utility customers would be charged proportional to residential customers.
Drinking Water
Six Percent Increase Proposed for 2015
The Drinking Water Utility continues to experience increases associated with State-mandated water quality testing regulations and infrastructure improvement costs.
Without the rate increase, the Drinking Water budget would be out of balance by approximately $350,000. Key budget drivers for 2015 include increasing debt service on the McAllister Wellfield and Service Meter Replacement Project, increasing State taxes, shifting some salaries from the Wastewater Utility to the Drinking Water Utility, and increasing City administration costs.
The proposed six percent rate increase will result in an average single family residential account increasing by $1.39/month. Drinking Water GFCs are proposed to increase 6.7 percent to $3,687 for a new single family residence.
Reclaimed water rates were modified in 2014 and remain appropriate for 2015. Reclaimed water revenues closely mimic costs.
Wastewater
Two Percent Increase Proposed for 2015
Without the rate increase, the Wastewater budget would be out of balance by approximately $95,000. In general, the Wastewater Utility experiences stable revenues and expenditures.
The operating and capital budgets for the Wastewater Utility are consistent with the recently completed 2013-2018 Wastewater Management Plan.
The two percent wastewater rate increase will result in an average single family residential account increase of $0.38/month. No increase in Wastewater GFCs is proposed. The GFCs were evaluated and increased in 2014.
Wastewater Treatment Services - LOTT Clean Water Alliance
The Lacey, Olympia, Tumwater, Thurston (LOTT) Clean Water Alliance collects revenue for its operations through the Utility bills of the local jurisdictions. Increases to both LOTT monthly charges and new connection charges are proposed for 2015.
An inflationary increase in LOTT monthly rates of three percent is proposed for 2015. With the proposed rate increase, LOTT charges will increase $1.05/month for a single family residence. The current LOTT charge is $70.02 bi-monthly for single family residences. Bi-monthly bills in 2015 will be $72.12. Non-single family accounts will increase proportionately.
The LOTT Capacity Development Charge (CDC) will increase 4.3 percent to $5,136 for a new single family home.
Storm and Surface Water
Three Percent Increase Proposed for 2015
Without the rate increase, the Storm and Surface Water Utility budget will be out of balance by approximately $168,000. Key drivers for the increase include salaries and benefits, State permitting, State taxes, City administration, and water quality treatment facility maintenance. The proposed rate will result in single family residential accounts increasing by $0.35/month.
The stormwater GFC is proposed to increase ten percent to $1,190 for a new single family home. The increase is justified by a 2013-2014 analysis of infrastructure costs.
Waste ReSources
Variable Rate Increases Proposed for 2015
Without rate increases, the 2015 Waste ReSources budget would be out of balance by approximately $370,000. Key drivers for the 2015 rates include inflationary increases in disposal/tonnage fees, salaries, equipment, and fuel. Proposed rate increase will finalize a four year rate smoothing for municipal solid waste in both residential and commercial service classes.
While the processing and handling fees for recycled materials remain stable, commodity values are still volatile and, in some cases, continue to decline. The revenue from recycled materials, which helps offset expenses, is expected to fall short of fees.
The proposed 2015 rate increases are summarized as follows:
· Residential 6 percent
· Commercial 4 percent
· Organics 8 percent
· Drop Box No rate increase proposed
Waste ReSources staff are revising the current management plan for City Council consideration in 2015. The planning process will include a comprehensive evaluation of Waste ReSource's costs of service.
Neighborhood/Community Interests (if known):
The overall impact of the proposed utility rate increases to a typical residential customer in 2015 will be 4 percent or an $8.58 increase in their bi-monthly bills ($4.29/month).
City Council held a Public Hearing on the 2014 budget including proposed utility rates on November 18, 2013.
Options:
Option 1: Move to approve the attached ordinance approving utility rates and
charges for 2015.
Implications:
o Supports essential City public and environmental health services.
o Increases rates for customers and charges for new development.
Option 2: Modify or decline the proposed 2015 increases.
Implications:
o Avoids, or lessens, additional customer costs.
o Risk failures in fulfilling City public and environmental health responsibilities.
Financial Impact:
The proposed rate and GFC increases will generate revenue to implement Council-adopted utility master plans and ensure financially responsible management of City Utilities.
Attachments:
2015 Utility Rates Ordinance
Signed UAC 2015 Rate and WW Volume Bases Rate Recommendation Letter