03-27-17 Council Minutes - Laserfiche WebLink

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REGULAR MEETING MARCH 27, 2017 reference to the City enacting a plan that does not fit its needs. Councilmember Davis asked Mr. Julien to clarify that point for him. John Julien, Umbaugh and Associates, 112 Ironworks Avenue, Mishawaka, IN, responded, After you've completed your process here, we go before the IURC in the hearing format and present evidence in support of the rates that are reflected in the ordinance. The IURC will judge that evidence in accordance with State statute. In the statute, it specifies that rates that are set at levels below the identified cost are in fact illegal rates. That was the basis of my comment at the committee meeting this afternoon. Mr. Julien explained that though he could not predict how the IURC would rule on the issue, the idea is that if they see that the City's water rates are too low to appropriately fund necessary capital improvements, that would open the door to allowing a rate increase. He stated, My experience tells me that they will probably defer to your judgment as to scheduling the capital improvements that go beyond what can be paid for from the rates of charges that are in the ordinance until a later period. Councilmember Davis asked Mr. Julien to explain the matter further. Mr. Julien responded, It's my experience that if the Administration and the Council is willing to defer investment in the capital that has been identified as needed until a later period, they will support that decision. If their staff strongly disagrees with what has been identified as the critical capital over the next six (6) years, and feels that was is critical goes beyond what has been proposed, they could order you to implement rates that are higher than what has been requested. Councilmember Davis asked, So, basically, in their deferment, if we present a plan that spreads out our increases to cover these kinds of needs — higher up- front, but spread out over time —then, you just shared that they probably could defer to our judgment regarding that? Mr. Julien responded, In the phasing plan that the City is proposing, it's not focusing on deferring investment in those capital needs, it's deferring in the portion that's going to be paid by the rate -payer by substituting rate -payer dollars with TIF dollars. So, it's not as if the City has identified these critical needs and pushed those critical needs out past the six (6) year timeframe. It says that we're going to address these planned six (6) year critical needs. We're going to use a combination of water repair revenues and TIF revenues to meet those needs. Councilmember Davis asked, Since, we have identified the critical needs for the next six (6) years, that's probably what they will not have an issue with. You're saying now that they may have an issue with how we fund the six (6) years? Is that correct? Mr. Julien responded, That is part of what they're going to judge. The fact that your plan is to utilize TIF dollars will be something that they're going to judge. Councilmember Davis laid out a hypothetical arrangement by which there would be more than two (2) rate increases, so that each increase would be smaller. Mr. Julien, What are your thoughts? Mr. Julien responded, My thoughts are that the commission would ask, "How can you balance out what you've identified as your legal requirements with the revenues that will be generated from that phased increase ?" You would have to have a definitive plan to eliminate that gap. Councilmember Davis asked, And if we can come up with a definitive plan through the finances, through the TIF, there is a good chance that they may consider it? Mr. Julien responded, Again, you would have to present that as part of the evidence and they would weigh that evidence as they'll weigh all the other facts presented in the hearing. Councilmember Davis gave the analogy of a car or house payment where spreading the payment period over a greater number of years means that each individual payment will cost less for the payer. He asked Mr. Julien if, in his experience, he had seen other cities pay over six (6) years instead of two (2). Mr. Julien responded, Well, this is a different concept, though. What we talked about is that you are presenting the case to the IURC, "This is our annual need and cost. This is the target we have to pay for each year to keep the utility functioning." In a typical scenario, that revenue would be 13