SUBJECT:
Title
An Ordinance of the Town Council of the Town of Erie Updating the Town's Water Service Charges and Storm Drainage Fees
Body
DEPARTMENT: Utilities Department
Finance Department
Department
PRESENTER(S): Todd Fessenden, Utilities Director
Sara Hancock, Finance Director
First Name Last Name, Title
TIME ESTIMATE: 15 minutes
only required for non-consent items
POLICY ISSUES:
Based on detailed study, the proposed rates are needed to provide sufficient revenue to operate and maintain the Town’s existing water, wastewater, and stormwater systems.
STAFF RECOMMENDATION:
Recommendation
Approve the updated water rates.
End
SUMMARY AND BACKGROUND OF SUBJECT MATTER:
The Town of Erie Financial Policies require the Town to have a formal rate study performed on the utility fund (water, wastewater, and storm drainage) charges at least every five years. Bond indentures also require the Town to ensure that its fees are adequate to ensure compliance with all bond covenants. Staff conducted the last formal rate study for these funds in 2020. In 2020, the Council reviewed and adopted the results of those rate studies, setting rates and fees for the period 2020-2024.
Staff began the current rate study process in late 2023. The Town contracted with Raftelis Financial Consultants (Raftelis) in August 2023 to perform the formal rate study for water, wastewater, and storm drainage monthly customer charges, water and wastewater tap fees, raw water dedication fees, and storm drainage impact fees.
Summary of Rate Study
The goals of the rate study are to determine the revenue needed to cover annual operations and maintenance costs and capital improvement projects, meet debt service requirements, provide for sufficient operating reserves, and maintain the utility’s self-sufficiency over a 5-year period. Moving forward for as long as construction costs continue to escalate rapidly, staff recommend evaluating fees every two years, with a more in-depth study every 4-5 years to address capital projects and rapid growth.
The key assumptions used in the rate study are as follows:
• Residential growth: 650 taps per year
• Target Reserves: 90 days of operations plus one year’s depreciation expense
• Debt Service Coverage: As required by the respective debt covenants
Monthly Utility Customer Charges
The rate study develops a financial plan and the cost of providing water, wastewater, and storm drainage services to its customers. The financial plan identifies the revenues and expenses over the study period and determines if the current rates generate the revenue necessary to cover operating costs, debt service payments, capital improvement projects, reserve requirements and provide the necessary revenue to meet bond covenants.
The study also develops the cost of service by customer class (residential, commercial and irrigation) and it recognizes the differing service characteristics based on the meter size and service demands. Based on the cost-of-service information, the study recommends minimal increases water storm drainage, with no change to wastewater rates. These changes were proposed to ensure that each customer type covered their cost of service and to provide incentives for water conservation.
Recommendations From Community Roundtable and Impact on Water Rates
Per Council direction, the Town engaged in a roundtable with developers, resident representatives, and Town staff to develop collaborative recommendations for changes to the current recommended rate study. Recommendations from this roundtable have been reviewed by Town staff and the consultant for feasibility. Because the cost of operating the water, wastewater, and storm drainage funds is established, Roundtable participants considered only recommendations that do not jeopardize the Town’s financial position, infrastructure maintenance, and growth-related obligations as an alternative to the fees as recommended. Staff and Roundtable participants also considered if any changes to these fees would impact the residents’ water rates, which are currently proposed as an average 4.5% increase. Staff and consultants confirmed that recommendations from the roundtable will not have any impact on residents’ water rates.
COUNCIL PRIORITY(S) ADDRESSED:
ü Prosperous Economy
ü Effective Governance
ü Fiscally Responsible
ATTACHMENT(S):
1. Ordinance 042-2024