Title
Proposed 2019 Utility Budgets and Rates
Report
UAC Deliverable:
Briefing only. Recommendations to City Council in September.
Staff Contact:
Andy Haub, Water Resources Director, 360.753.8475
Ron Jones, Senior Program Specialist, Waste ReSources, 360.753.8342
Previous Utility Rate Items Before the UAC:
The Utility Advisory Committee reviews City Utility finances, capital investments, and rates annually. The evaluation begins with review of the Capital Facility Plan (CFP) and concludes with Utility rate and general facility charges (GFCs) recommendations in September or October. UAC recommendations are important to subsequent City Council decision-making.
Staff briefed the UAC on the draft 2018-2023 CFP on May 3. The UAC will continue the CFP discussion in September within the context of overall utility finances and rates.
Background and Analysis:
The City Utilities provide vital public health services for our community - safe drinking water, sanitary sewers, waste reduction and disposal, flood management, and environmental protection. Utility staff emphasizes effectiveness and efficiency in the delivery of these services.
The City Utilities are municipal enterprise funds. They are financially self-supporting without the input of general tax funds. Conversely, Utility revenue does not support tax-based City programs. However, the Utilities pay a fair share of various City overhead costs (e.g., building mortgage, legal and executive services). Annual savings remain in the Utilities and carry-over to the following year.
Utility rate increases over the past decade have been substantial. In 2018, the combined and weighted rate increase was 2.7 percent or approximately $6.55/bimonthly, broken down as follows:
• Drinking Water 4.4 percent
• Wastewater 0 percent
• Waste ReSources 6 percent
• Storm and Surface Water 0 percent
• LOTT 2 percent
Single family residential accounts are commonly billed $232 - $249 every two months. Commercial and multifamily accounts are charged based on water and solid waste usage. For storm and surface water, charges are based on the amount of onsite impervious surface and level of onsite stormwater management.
Also in 2018, general facility charges (GFCs) were increased 3.7 percent or $484 per single family residence. GFCs are a one-time charge collected from new development. The charges reflect the financial value of the existing Utility infrastructure and the benefits the system provides to new development. Each of the water-related Utilities collects a unique GFC. The LOTT Clean Water Alliance collects a similar fee called a capacity development charge.
GFCs are determined by a State-guided set of calculations that define the value of the existing and planned infrastructure and the distribution of costs among current and future users. Every few years, City staff hires independent financial consultants to evaluate the GFCs. Combined GFCs and CDCs are $14,875 for a single family residence.
Potential 2019 Rate Increases
Once again, we are likely to propose substantial rate increases for 2019. Consistent with community expectations, the proposed rate increases ensure that Utility services continue reliably and without interruption. Fortunately, the City utility programs, infrastructure and finances continue to be in good shape. Local, state, and federal public and environmental health mandates are either met or being addressed.
Key budget drivers include:
• Increasing cash funding for capital projects in the Storm and Surface Water and Drinking Water Utilities
• The addition of one new maintenance worker shared by drinking water and wastewater
• Continued funding for the proposed new solid waste facility
• Responding to increasing tipping charges for recycled materials due to volatile international commodity markets; and
• More material going to landfill due to changes made to the commercial organics acceptance list.
As a placeholder, we are considering a 0.3 percent rate increase to offset the revenue loss associated with potentially expanding the customer assistance program (Lifeline rates). The rate increase would accommodate doubling participation in the program.
Staff propose that the UAC’s May 3rd discussion of potentially expanding the utilities’ customer assistance program (Lifeline rates) be continued. In mid-May, we briefed City Council’s Finance Committee on your discussion. The Committee encouraged the UAC to develop a specific recommendation for Council consideration.
Waste Resources and Water Resources staff will provide the UAC with an overview of our budget dynamics:
• Projected 2018 year-end finances
• 2018 status to date
• Emerging trends and concerns
• Potential magnitude of 2019 rates and GFCs
The June 7th discussion with the UAC will set the stage for more detailed discussion and ultimately recommendations to City Council in September or October.
Financial Impact:
None at this time. However, Utility rates are substantial and impact our community.
Attachments:
Summary of Bi-Monthly Utility Bills, GFCs and CDCs 2014 - 2018
Projected 2018 end-of-year balances
2018 revenues to date
Utility Rate Survey