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UTILITIES NOVEMBER 25.2013 5:26 P.M. Committee Members Present: Valerie Schey, Henry Davis, Oliver Davis, Karen White Other Council Present: Tim Scott (AB), Dr. Fred Ferlic, Dr. David Varner, Gavin Ferlic, Derek Dieter Citizen Members Present: Carol Davis Others Present: Mark Neal, John Murphy, Eric Horvath, Kathryn Roos, Kathy Cekanski - Farrand, Erin Blasko, Jennifer Wilson —Crowe Horwath Agenda: Bill 64 -13 Sewer Rates thru 2017 Valerie Schey, Chair of the Utilities Committee led a half -hour discussion of bill 64 -13. The bill submitted by the administration would incrementally raise sewer rates by approximately 9% annually, through 2017. While this was not the first time the Council was made aware of the proposed increases, it was this bill that would actually raise the rates. Eric Horvath, the Director of Public Works made the ease for the increases. Justification for the level of increases and duration was supplemented by Jennifer Wilson from Crowe Horwath who the City contracted for the financial analysis. Eric began by recounting the mandate from the EPA (Environmental Protection Agency) to separate the City combined storm /sanitary sewer system. Overflows of untreated sewage to the St. Joseph River during wet, high -flow conditions mandate the separation project. The cost, over years, running to hundreds of millions of dollars need to be paid for by the issuance of bonds supported by the proposed rate increases. The following Council reaction to Eric's explanation focused on the needed scope and pace of conforming to the mandate. Councilman David Varner questioned the acceptance by the City to embark on a project exceeding mandate requirements. He advocated doing minimum compliance hoping to renegotiate the terms at a later date. Other councilmembers expressed deep reservations about the increases and the ability of customers to absorb them. Valerie Schey wondered if costs associated with a separation project like those for new street lights and landscaping could be foregone to lower the costs. Oliver Davis worried about inflation factors over years would outpace the $460+ million projections. Others including Dr. Varner expressed dismay at the Council not being a part of earlier compliance negotiations. Henry Davis suggested a rate tier structure to the proposed rate increases. This would charge a higher rate to the largest users. He said failure to do so creates a regressive tax situation penalizing those who can least afford to pay.