11-09-16 Utilities - Laserfiche WebLink

Home Browse Search

Committeemember Regina Williams- Preston announced that she would soon have to excuse herself from the meeting, but asked Mr. Julien first to clarify whether or not the forty -three percent (43 %) rate increase affected only water. Mr. Julien confirmed that it only affected water. COMMITTEEMEMBER REGINA WILLIAMS- PRESTON LEFT THE MEETING. Mr. Julien explained how the budget would be allocated toward various expenditures, leaving $4,100,000 for capital. He explained that this amount, which comes as a result of the forty -three percent (43 %) rate increase, is less than the targeted pay -as- you -go capital accruement plan has identified. He stated, There is already a recognition that we are going to defer those investments. One thing about capital —it's not really a question of whether you need to. do it, it's more a question of when you need to do it. What you can't afford today, you're pushing off to take care of at some point in the future. He explained that the percentage increase was a very large one, but that the dollar increase for the average rate -payer would not be too burdensome at just over $5. He stated, It's a larger number than you would like to see, but it's also a reflection of the fact that it has been quite a few years since the rates have been adjusted. It's our recommendation that you move forward to try to generate this additional revenue with that forty -three percent (43 %) rate increase. He explained that these rate increases would not put the City out -of- market —that other communities have had to raise their rates, therefore South Bend residents would not find cheaper rates by moving out of the City. Councilmember Scott asked, I don't remember your budget off the top of my head, but what are we putting aside for PM and for capital each year? I know that we outgrew the lowest rate within the land, but what are we doing to do that? Mr. Horvath responded, The 2006 rate increases were set to generate $2,000,000 a year in capital. He explained that that number eventually dropped to less than $1,000,000. Councilmember Jo M. Broden asked, If we put this rate in place, does IURC limit our ability to restrict capital? Mr. Julien responded, You're double - regulated. You're regulated at the local level because you will make a decision as to what you go to the Commission for, and then the Commission will conduct their own study. In this instance, when they look at this — because of the duration, they will probably give you a pass —you haven't been spending $2,000,000 on capital because your operating costs have caught up with you. When we ask for this rate case —and I expect them to give us the forty -three percent (43 %)—I would not be surprised if they included in the order, "I don't want to see you spend $4,000,000 a year on capital." And you'll be able to do that for the first several years, but health costs are going to go up; as your assets wear out, the cost of maintaining is going to go up. Besides the Commission, there are two (2) other things that can come into play, as it deals with your cash. When you have bonds outstanding, you make promises and minimum requirements to bondholders. You have never come close to violating those. You've been conscientious about that. The other thing is an administrative policy decision that you could make that says this is our policy. You control that. It would probably be considered a good business practice to do that. But of the three (3) things, it has the least weight because what you set today you can change tomorrow, and if you violate it you're just violating 7