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HomeMy WebLinkAbout11-13-02 Utilities Committee MVommitt poi t tt1ttt'o toutinittu The November 13, 2002 meeting of the Utilities Committee was called to order by its Chairperson, Council Member Al "Buddy" Kirsits at 4:00 p.m. in the Council Informal Meeting Room. Persons in attendance included Council Members Varner, Kirsits, Aranowski, King, Kelly, Kuspa and White; Mayor Stephen Luecke, Public Works Director Gary Gilot, Director of the Division of Environmental Services Jack Dillon, Chief Assistant City Attorney Aladean DeRose, Mr. Robert L. Miller, Sr., Mr. Terry Miller, Mr. John Skomp, Mr. Paul A. Kempf, Mr. John DeLee, Mr. Matthew S. Cullinan, Mr. Tim Baker, Mr. John Mountsier, Mr. William Hoye, Terry Bland of the gisouth Vienb griburce,and Kathleen Cekanski-Farrand, Council Attorney. Council Member Kirsits noted that the purpose of the Committee meeting was to review Bill No. 88-02 which incorporates proposed new sewer rates. He noted that the bill was referred to the Utilities Committee on Monday at the Common Council meeting for review and recommendation. Council Member Kirsits noted that there was not a quorum of the Committee present. He stated that the meeting would be informational only and that no vote or recommendation would be made today. He suggested that the City Administration utilize the first twenty (20) minutes of the meeting to review their proposal. He further suggested that the meeting last until approximately 5:30 p.m. so that all persons present would have the opportunity to be heard. Mayor Luecke thanked the Committee to review the revised bill addressing sewer rates. He stated that a sewer rate increase is needed and believes that the proposed rates are fair and equitable. Mayor Luecke noted that the first ordinance proposed earlier this summer placed.a burden on the large users and was withdrawn from further consideration at the request of the Council. He stated that the City Administration has listen to the concerns raised and are now coming back with a phased in increase. Mayor Luecke concluded his remarks by stating that they must meet capital expenses and that they should be on a pay as you go basis. Director of Public Works Gary Gilot then addressed the Committee. He provided a handout to the Committee entitled "South Bend Wastewater--A Strong Economic and Environmental Asset for Our Community" (copy attached) and summarized the document. along with Mr. John Skomp of Crowe Chizek. They noted that the new rates would be phased in over a three(3) year period. Mr. Skomp then highlighted information in the "South Bend Municipal Sewage Works South Bend, Indiana, Revised Cost of Service Study October 31, 2002" (copy attached) and specifically cited information on pages 11, 17-20, 22, 28,48, and 50. He noted that Section III was formerly in the appendix in the prior Cost of Service Study. He noted that the salaries and wages are based on 2003 rates and budget figures. Council Member White asked what amounts would be paid by I/N Tek and I/N Kote as well as the University of Notre Dame. A member of the public stated that I/N Tek and I/N Kote would pay an additional $1.49 million by year 3 and that the University of Notre Dame would pay an additional $1.325 million by year 3. Council Member Kirsits noted that there is a reduction proposed for residential users or small users in the first year under the phased in proposal. Utilities Committee November 13, 2002 Page 2 Council Member Aranowski inquired which outside users collect and deliver their products to us. Mr. Skomp stated that they all do. Mr. Gilot stated that they would not just sell plan services. Council Member Kirsits then opened the Committee meeting for public comment. Mr. Robert L. Miller, Sr., a local attorney, noted that he was representing Ramada Inn and other hotels and motels in the Roseland area. He then provided a handout entitled "Paradoy--The Robber Baron-Peter and Paul" to the Committee (copy attached) and read it into the record. Mr. Miller noted that with regard to consideration to tiers and wholesale rates that the City of Gary considered them and rejected them. He noted that the former Clay Utilities area would be treated unfairly by the proposed ordinance. Mr. Matthew S. Cullinan, Executive Assistant to the President of the University of Notre Dame, then summarized a letter which Rev. Edward A. Malloy, C.S.C. sent to the Mayor and the Common Council on October 31, 2002 (copy attached). He emphasized that the University of Notre Dame has been South Bend's neighbor for 160 years, and that they have been an important economic benefit to the area with their 4,000 employees. Mr. Cullinan also noted the many partnerships which have been positive over the years such as the Center for the Homeless, Northeast Park, and many other people commitments and partnerships. He stated that after a 14 years without a rate increase an increase is warranted, however it must be reasonable. Mr. Cullinan hoped that common ground could be reached between the parties. Mr. Paul A. Kempf, P.E., Director of Utilities at the University of Notre Dame noted that the University has their own collection system. He stated that they must be responsible to the Board of Trustees and the students. All have suffered by the bad economy, however they will be compelled to look at all alternatives. Mr. Kempf stated that there are issues of fact and issues of thoughtful consideration;however now the City of South Bend is proposing a fundamental change in public policy issues which need a lot of debate. He suggested that the Council "consider a plug for one year and work toward mutual agreement". Partnerships are important and there should be an opportunity to continue discussions. Mr. John Mountsier, President of I/N Tek and I/N Kote, stated that partnerships are important and then quoted from a 1998 +OUt J1 n erthi.tng article about a good model of working together between St. Joseph County, New Carlisle, Project Future and the City of South Bend and his company. Mr. Mountsier stated that steel industries are in dire straits with thirty (30) having filed for bankruptcy. He stated that the price of steel is the same as it was in 1988, and that they must compete on a global basis. They are planning to ship 20% more steel in 2003 with 14% fewer employees and a 10% lower overall budget. He requested that the Council review the Administration's material with"close scrutiny". As he drove US 20 he noted that very little money will be used for improvements along US 20 from the rate increase, even though the largest proposed payers would not benefit from the 50% surcharge. He noted that the sewer systems in the older areas of the City of South Bend will benefit from the surcharge. Mr. Mountsier stated that they will continue to look at more conservation measures. They will probably also look at having their own facility in conjunction with other large users. He noted that if all of the money which the City contends they need is borrowed, only a 6% increase would be necessary. He suggested that time should be taken to discuss an increase somewhere between the 6%rate and the Utilities Committee November 13, 2002 y 4 Page 3 300% proposed by the City. In summary, Mr. Mountsier suggested that there be no surcharge; he questioned the overall size of the proposed increase; voiced concern over the "accounting error" discussed by Mr. Skomp; and suggested that with continued meetings and discussions that a "win/win"for all parties could be pursued. Mr. Terry Miller of the Chamber of Commerce then asked several questions. Mr. Gilot responded that the $1.5 million service overflow was new. Mr. Miller stated that St. Joseph County is involved in a sewer and water district which has not been resolved. He suggested that a community-wide program should be reviewed since the area does not need two groups doing the same thing. He also noted that Elkhart has proposed to take over some sewer work in our county, which is another reason why a community-wide review is necessary. The current debt costs results in "free money to the city". Bonding is a real alternative in this area He urged the City to balance the needs, and noted that the businesses are without any pricing power. He suggested that only Phase I be considered at the present time. Mr. Tim Baker of Holladay Properties noted that his company owns several properties. Normally they would pass on expenses to their tenants, however, the rates suggested will be "virtually impossible to absorb". Mr. Baker suggested that someone "must have been asleep at the switch", for no rate increase to be proposed for 14 years and then such high rates now. He noted that the proposals would result on a strain on the business community. Mr. Robert L. Miller, Sr. Noted that the hotels and motels in the Roseland area and businesses in the former Clay Utilities franchise area are in the process of organizing. He stated that the city may be shooting themselves in the foot if the rate increase ultimately results in the loss the largest customers. Third class cities and towns will compete to provide services to these large customers. He noted that the City of Mishawaka just got one of South Bend's hospitals;and further noted that Mishawaka is delighted with what South Bend is proposing. Many area restaurants are near the breaking point now, and with a substantial rate increase resulting from the 50% surcharge, many will fail. Mr. Miller stated that 12 days between now and the public hearing is not sufficient time to study all of the issues. He noted that Evansville settled at a rate ranging between 15% to 35%. He noted that the Speedway case was different since different rates were in effect for a long period of time prior to the last surcharge. Mr. Miller contended that the 50% surcharge cannot be sustained and that attorneys have been retained to fight it. He noted that the vote by the South Bend Common Council was 9-0,with the issue then being that Roseland did not want to become a part of Clay Utilities. When the lease payments were to be paid in full, they were to be paying the same rate as South Bend residents. Ramada Inn is paying 35% more right now. He noted that a lot has gone wrong. Mr. Miller noted that Clay customers do not need all the services that are listed, and that the majority of those services are a direct result of South Bend's old sewer system. Mr. Miller cautioned that the city will regret the 50% increase; he suggested instead that discussions continue since the current proposal is not ethical or moral. Council President Kelly inquired whether a one-year rate increase with continued discussions on rates thereafter would be doable. Mayor Luecke stated that he believes that the proposed rates are fair and equitable and that one year increases will leave the City short of funds. Dr. Varner inquired about the flow rates and the volume measured and their differences. Mr. Skomp stated that the differences are due to the base charge. Utilities Committee November 13,2002 Page 4 Council Member Aranowski inquired about contingency plans. He noted for example that University of Notre Dame and I/N Tek 1/N Kote alone would bring in $4 million, and voiced concern if they would leave 3-4 years down the road. Mr. Gilot stated that he does not believe that they will leave. He stated that they would need large investments in capital. A representative from the University of Notre Dame stated that they are currently looking at all their alternatives and that it is still appears attractive to have their own system. He cautioned the City not to underestimate their alternatives. Council Member King noted that § 17-25 of the South Bend Municipal Code calls for a rate review every two (2) years. He inquired whether this provision would remain in effect since Bill No. 88-02 only addresses § 17-21 of the South Bend Municipal Code. Mr. Gilot stated that the language in § 17-25 would remain in effect and that he believes that a review every two (2) years provides a good check and balance. He noted that the City has done these reviews informally. Mayor Luecke noted that 1988 was the last time that a cost of services study was down and that the informal reviews during the annual budget hearings has taken place since then. A representative from the University of Notre Dame inquired that if the City has been reviewing the sewer rates every two (2) years, what has changed to warrant such a substantial change in rates. He also noted that no narrative has been provided to the cost of service study, which would be routinely provided in the private sector. Mr. Skomp stated that he does not normally provide a narrative, and further stated that the City Administration has provided much information. Mr. Gilot noted that the City has made a $24 million investment and are currently repaying the State Revolving Loan Fund. Mr. Robert L. Miller, Sr. Stated that the biggest problem is the lack of confidence in the figures. He stated that the City should give time to permit others to get their experts together. He suggested that the Common Council should have independent advice and should consider hiring one (1) expert to review the information. He suggested that "this is all family" with the City Administration and Council utilizing the same information provided by the City Administration. Council Member Coleman stated that it is a "bad sign when questions have not been answered". He stated that the Common Council would like to know what the questions are that have not been answered so that they can be addressed. He noted that there will be at least one (1) more Committee meeting so that all of these questions can be addressed. The Council Attorney suggested that documentation which has been provided to businesses outside of the City limits be filed with the City Clerk's Office so that all Council Members would have an opportunity to review that information. Chief Assistant City Attorney Aladean DeRose stated that she would file that information. Utilities Committee November 13,2002 Page 5 Council Member Kirsits suggested that another Utilities Committee meeting be held next Wednesday, November 20, 2002, at 3:30 p.m. He suggested that discussions be continued with the outside users. Council Member Coleman suggested that any discussions with the outside users include Council President Kelly and Council Member Kirsits, the Chairperson of the Utilities Committee. Council President Kelly suggested that anything new would be appreciated. A representative from the University of Notre Dame stated that they need the opportunity to discuss specifics. Dr. Varner inquired whether there is any interest in the Council having an independent review by their own expert. Council Member Coleman suggested that that issue be discussed at the next Committee meeting. Council Member Kirsits thanked everyone for taking the time to come to the Committee meeting. He stated that their are key policy decisions at stake and the very essence of why cities were created. He noted that there is no "free lunch" and that a fair share for services and benefits and quality of life must be addressed in light of the costs to provide such services. Council Member Kirsits stated that"we are at a real cross road". Council Member Kirsits then adjourned the Committee meeting at 5:35 p.m. Respectfully submitted, Council Member Al`Buddy"Kirsits, Chairperson Utilities Committee KCF:kmf Attachments