Loading...
HomeMy WebLinkAbout03-13-17 Utilities 04S()UTRg�� 4 � U C PEACE a a + 1865 OFFICE OF THE CITY CLERK KAREEMAH FOWLER,CITY CLERK UTILITIES MARCH 13, 2017 5:05 P.M. Committee Members Present: Oliver Davis, Randy Kelly, Regina Williams-Preston Committee Members Absent: Dr. David Varner Other Council Present: Tim Scott, Jo M. Broden, John Voorde, Karen White Other Council Absent: Gavin Ferlic Others Present: Adriana Rodriguez, Aladean DeRose, Graham Sparks Presenters: Eric Horvath, John Julian Agenda: Substitute Bill No. 66-16-New Water Rates & Charges (Discussion Only;No Committee Action) Committee Vice Chair Oliver Davis called to order the Utilities Committee meeting at 5:05 p.m. Committee Chair Dr. David Varner was absent and therefore excused from the meeting. Committee Vice Chair Davis introduced the members of the committee and then turned the floor to the presenters for Substitute Bill No. 66-16. Substitute Bill No. 66-16-New Water Rates & Charges (Discussion Only; No Committee Action Eric Horvath, Director of Public Works with offices on the 13`h floor of the County-City building, stated, I would like to go over an update in terms of where we are for the facilities improvement plan as well as the condition of the facilities. I'd like to thank the council members that took the time to go out and visit the facilities. If you haven't already,please let us know and we can take you around. It is something to actually see the things we will be talking about. In relation to where we were with the last ordinance, we did put a revised substitute ordinance in. It is reflective to what the Council wanted. There was a concern of trying to split this over two (2) years, or multiple years. We did it over two (2) years. What we are doing is a forty-four percent (44%) increase. We will have two (2)twenty-two percent(22%) increases. The first one would take place in 2018 if this were to pass soon,the other would be in 2019. The other thing that was asked for was an explanation on the use of TIF. What I would like to point out is even with the funding we have in place with these two (2)twenty-two percent(22%) increases, we are nowhere near having a funding plan that meets the capital needs. So long term,we are going to 455 County-City Building•227 W.Jefferson Boulevard•South Bend,Indiana 46601 Phone 574-235-9221 •Fax 574-235-9173•TDD 574-235-5567•www.SouthBendrN.gov JENNIFER M.COFFMAN ALKEYNA M.ALDRIDGE JOSEPH MOLNAR CHIEF DEPUTY/DIRECTOR OF DEPUTY/DIRECTOR OF POLICY ORDINANCE VIOLATION CLERK OPERATIONS need to raise rates to have a more sustainable rate. This will be an ongoing issue that we have to address in the future. But short term, it made sense to use TIF to shore up some of the immediate capital needs and it does two (2)things for us. It gets the stuff done right away and because this is delayed, the monies we will see with the increase will go into operation expenses and not capital expenses. The increase in 2019 will give more money to the capital expenses. We are using TIF as a short term mechanism to do some catch-up in areas that we are really concerned with in utility. Ultimately, I would like to have a sustainable rate that meets the needs of the utility. The ASC did their infrastructure report card every year that came out just last week. Nationally,the infrastructure received a D+ and drinking water received a D. We have a number of different pumping facilities and treatment facilities throughout the City, we have nine (9) total. Our focus primarily is on the supply side in the initial years because we have pumps going down and we are close to not meeting the needs right now. We are storage deficient in the City, meaning we have focused more on the supply side with all the well fields as opposed to storing the water. Putting elevated storage in, at this point, is a very expensive option,typically running around$7 million or$8 million for every 2 million gallons put up in the air. Those are capital projects we look at in future years. The distribution system is also in need of a lot of upgrade and repair. In our current system, max demand is 31.5 million gallons a day. Our peak hour demand is about 79 million gallons. Our system capacity 77.2 million gallons if everything is working to maximum capability. The problem is right now, only 42 million gallons are available to pump. We are going to have an issue if we aren't careful about getting some of this stuff back up into operation. This is where our priorities are in the next couple of years. The facility's condition in a number of areas are very poor because there was not money to fix them. There was a report on the 7 million gallon tank done in 2012 and it highlighted over$400,000 dollars of repair investment needed to be done.None of the repairs have been done because there were no funds available for it. For our distribution system,we have five hundred and eighty-three (583)miles of water main and 5,400 hydrants. The current rate of replacement for water mains is six hundred and thirty-four(634) years and hydrants every one hundred and sixteen(116) years. Obviously the water mains do not last that long and we will need to invest in water mains over a period of time. The reason we chose not to do that upfront is because we felt the supply issue was more important and critical right now. The budgets have been pretty conservative over time. It's not a matter of concern for operating costs raising as it is the demand that has increased, while the budget has remained the same. Of the five hundred(500) largest water users in the nation, Flint, Michigan has the highest water rate. South Bend is ranked four hundred and eighty-eighth (488) of the five hundred (500)which means we have a pretty inexpensive water rate for how much we produce. We are averaging a delivery of the equivalent of three thousand four-hundred (3,400) bottles of water to each household for one ($1) dollar. The most recent study by the Indiana Finance Authority puts South Bend at half of the average rate for large users in the state of Indiana. Mishawaka just recently had a rate increase that is generating approximately$57 million on capital side and $43 million on the sewer side. Mr. Horvath then briefly went over the hand-out he provided that outlined the six (6)year Capital Improvement Plan, which is on file in hard copy in the City Clerk's Office. He then went over a view of the Capital Projects in the presentation. The presentation is electronically filed and available in the City Clerk's Office. He also handed out a list of capital projects that will still be unfunded if this forty-four percent(44%)rate were to pass. This list is filed and is available in hard copy in the City Clerk's Office. 2 Committee Vice Chair Davis asked, So even with the rate increase, all of these projects will still not be funded? What happens then? Mr. Horvath answered, There has been a lot of time spent on this discussion. We have a remarkable staff that has been used to just keeping things running. We are trying to figure out what the most critical pieces are. We are going to do our best to just keep the things running and to focus on the most critical pieces. Our use is flat-lined, we have great quality water coming out of the ground and the supply is good. How our well fields are distributed is also helpful because not all our eggs are in one basket, so to speak. If one goes down„ not every other field is shut off. The hope is as we put things back online,we are in better shape to serve the needs of the community. We will continue to monitor it. Our facilities are old and we just haven't been making the capital investments that have been needed over the years. Committee Vice Chair Davis asked, Is there a percentage in mind that would take care of it all? Mr. Horvath answered, The City of South Bend tried to opt out of the IURC a couple years ago and it wasn't successful. Mishawaka opted out and they were able to do the multiple year funding mechanism. The thing is,we aren't even sure if we can do the two (2)year agreement. We can't go to the IURC and propose any increase without a fixed known measurable over a period of time and without knowing, specifically, the projects the money will be going into. Committee Vice Chair Davis asked, Have we come to a point where we need to renegotiate our involvement with the RJRC? Mr. Horvath answered, The value in IURC is that they are watchdogs over both the Council and Public Works. If you trust Council to watch over the rates and not raise them willy-nilly,then absolutely, local control would be best. The problem with going through opting out now is because there is a proposed rate increase, it would look like you're trying to get out of it because of that. The public would think there is something underhanded behind that. John Julian,partner with Umbaugh and Associates, stated, There are a couple things to consider. The rules in which separate rates are established in Indiana are through state law. Whether you're in or out of the commission, the protection is there, so it's a matter of who is going to judge those laws. The expense of being regulated is approximately$150,000 per rate case. So until you adopt an ordinance,they won't start looking at it. So you've done all the heavy lifting, the vetting, the inspection, and then you have to pay another$150,000 on top of that. I have a hard time funding any time that is justified in a municipal owned utility. Committeemember Randy Kelly asked, So why is it we weren't able to opt out? Council Attorney Aladean DeRose answered, It requires a ballot vote and the voters voted against it. Committeemember Regina Williams-Preston asked, Will you come back to us after 2019 with another plan? 3 Mr. Horvath answered, Yes. We will take a second look at this a couple years out with Council to see where we are and go from there. Councilmember Tim Scott stated, Ironically I heard a segment on NPR today about this happening in Montgomery County, West Virginia. The water source is so poor there that health problems are occurring and citizens are forced to buy bottled water. They are so far down with their infrastructure that they are now having to turn the system on and off when problems arise. Committeemember Kelly stated, Thank you Eric, for this presentation. The fact is if we don't give you the resources you need to succeed, then it's on us, and that would be criminal. We have to get this done and get this started. Councilmember Jo M. Broden stated, If we are going to use TIF dollars, we have to be intentional in letting people know why we are using TIF funds for this. I would like to reference the original consultant's recommendation on how to get this done. Councilmember Scott stated, This was set to come before us for decision and vote tonight. There was some confusion on the legalities of the advertisement because we did delay it indefinitely and so the re-advertisement on that was in question. We made the decision it needed another ten (10) day window of notice before a vote. We erred on the side of caution to advertise it correctly before we vote on it. With no further business to discuss, Committee Vice Chair Davis adjourned the Utilities Committee meeting at 5:58 p.m. lly Sub er Davis o Vice Chair 4