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HomeMy WebLinkAboutA, Utility Rates� EN HILLS Request for Council Action Prepared By: Sue Iverson, Director of Finance and Administrative Services Council 1Vleeting Date: February 27, 2012 Water Rate Discussion Budgeted Amount: Actual Amount: Funding Source: N/A N/A N/A Recommendation: 1. Discuss Water Rates and Meter Charges Supporting Documents: 1. Memorandum from Sue Iverson dated February 27, 2012, 2. November 2011 Proposal. 3. Current Rate Structure. 4. February 2012 Proposal . �� EN HILL5 MEMORANDUM DATE: February 27, 2012 TO: Honorable Mayor and City Council FROM: Sue Iverson, Director of Finance and Administrative Services SUBJECT: Water Rates and Meter Charge Discussion Background: At the August worksession, Council asked staff to look at reducing the cost for the users of minimum gallons included in the Water Meter/Rates. Staff presented a revised rate structure at the November worksession which lowered the minimum from 10,000 gallons to 5,000 gallons. This proposed change required a 40% increase in the highest tier and a$16.40 per quarter increase to everyone who used more than 10,000 gallons. The Council directed staff to go back and do more analysis and to present more options to the Council in early 2012 so that they could be implemented by 2"d quarter of 2012. One option was to possibly provide a discount for those who used less than 10,000; another option was to charge for all water usage. Discussion: Staff has done a number of iterations to determine how to achieve this result, while still maintaining the require conservation rate structure without a complete overhaul of the current rate structure. This has been quite challenging. The meter charges cover the City's "iixed costs" to run the system, while the usage charges cover the "variable costs." I have attached the analysis from the last worksession for your information. Providin,g a Discount to those using less than 10, 000 Staff evaluated this option and found that it is very labor intensive. Using the data from the December 21, 2011 billing, staff estimates that manually placing a rebate/credit on accounts that fall under 10,000 would take approximately 2 full days and add to the time it takes to process the utility bills. When we just look at the December 31, 2011 billing we have to remember that we have a lot of "snow birds" who are gone for the winter and consumption is at its lowest during this time as there is no watering or gardening. Following is a summary of the accounts in each from December 3 l, 2011: Memo City Council Water Rates and Meter Charge Discussion 2 Total Residential_Accounts _ _ J ___� _ ;___ 2,426 �Accounts below 5,000 � „341 _ �_. _ _ �Accounts below 10,000 __� 764( _ _ _ __ _ _?__.._Subtotal __. ��� _. �._.�.___�__ _� 1,105 1 Accounts over 10, 000 � 1, 321 This shows that 46% of our accounts in this last billing period were under 10,000. When we did this analysis last summer it showed on a yearly average that 35% of our users were under 10,000. Using the December figures, giving a$2.00 discount would amount to about $8,840 a year and the actual staff cost involved in implementing this would be $2,091 a year totaling $10,931. Staff does not recommend this option as we do not feel this would solve the complaints that we are currently hearing and it would increase staff workloads and the ability to get the statements out on time. Adjustin��the Meter Cha�e and change to chargin for all water used One of the biggest complaints we have received is that "we are paying for water we do not use." A way to correct this would be to charge for all water used and to adjust the meter charge. Staff has done a number of calculations and has attached a proposal that seems to address this concern while still keeping our conservation rate system in place. This option reduces the meter charge by $4.08 which (using December numbers) would reduce revenues far fixed costs (meter charges) by $39,592 a year, but would generate $55,722 more in revenues for variable costs (water usage). Of course this variable revenue could vary from quarter-quarter depending upon the type of year we have and how many snow birds we have. It would, however, achieve the objective of everyone paying for the water they use and reasonably keep our fxed costs covered with minimal impacts to the customer. This option would not be labor intensive to our staff and would only require that we change the tiers in the system. Based on the analysis that have been run by staff, to do any further configurations will require an in- depth rate study to look at the total revenues generated, total consumption, and needs of the funds. 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