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HomeMy WebLinkAbout2007-09-27 - MinutesCity Council Water & Sewer Meeting Minutes September 27, 2007 Page I of 7 Member Aldermen Mayor Dan Coady Ward 1 Position 1 — Adella Gray V10 Ward 2 Position l - Kyle rt Cook CityAttorney Kit Williams � 1 Ward 3 Position 2—Robert Ferrell Ward 4 Position 2 - Lioneld Jordan City Clerk Sondra Smith ARKANSAS City of Fayetteville Arkansas City Council Water & Sewer Committee Meeting Minutes September 27, 2007 A meeting of the Fayetteville City Council Water & Sewer Committee was held on September 27, 2007 at 6:00 a.m. in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. MEMBERS PRESENT: Alderman Kyle Cook, Chair; Alderman Lioneld Jordan; Alderman Robert Ferrell; Alderwoman Adella Gray OTHER ALDERPERSONS PRESENT: Alderwoman Shirley Lucas STAFF PRESENT: David Jurgens, Paul Becker; Gary Dumas; Susan Thomas Alderman Cook called the meeting to order. Water & Sewer Rate Study Alderman Cook said at the last meeting we went over Mr. Tom Gould's presentation for the revisions to the water rates. From that point we got hung up on the sewer side. He said he believes the Committee gave Mr. Gould all the direction he needs to proceed, less the discussion on the sewer rates. He said he would like to dive into that discussion now. He asked the Committee and the audience if anyone had any comments. There were none. He updated Alderwoman Gray on the Committee's decision at the last meeting to go with Option 2 for the water rates which basically takes the cost -of -service results and stretches them out a little bit longer. Alderwoman Gray asked if everyone pretty much agreed that this option is the best. Alderman Cook said he doesn't know if everyone is happy about it but that is the direction finally agreed upon. Alderman Jordan said, for the record, he prefers the flat rate but he is going along with the cost -of -service with the caveat that we would look at a lifeline rate for people on a fixed income and the elderly in the city. Alderman Cook asked Alderman Jordan if that is something that we should include with this process or if it is something he wants to wait and bring back later. He said he isn't against 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 27, 2007 Page 2 of 7 bringing it up within this process and letting Mr. Gould bring some information to the Committee about it. Alderman Jordan said Paul Becker has provided him with some information, such as Federal guidelines, etc. He said we can include it in this process but he isn't sure how accurate we would be. He said he would hope that as we pass the water rates (the sewer rates are a different issue for him) that we would at least begin a study. He said we may want to include the study in this recommendation to the Council. He said he would like to have some input from the other committee members. Alderman Ferrell said we talked before about making the study a part of the recommendation to the Council. Alderman Jordan said if the Committee wants him to he will work with staff and do the research on this and the recommendation to Council could come out of the Sewer Committee. Alderwoman Gray said that sounds good to her. Alderman Cook agreed. He said he would like to see something from Mr. Gould on the potential impact providing these lifeline rates would have on the overall rates. He said he would like to have a time certain on this because he doesn't want to see something like this languish. Alderman Jordan said he won't let that happen. Alderman Cook said at the last meeting the Committee also talked about redefining the different classes of service and the Committee agreed on Alternative 2 (page 15). That will be defined by Mr. Gould and he will bring back information to the Committee on the dividing point for each class. The same was agreed upon for the sewer side (page 16). He explained that commercial users will be rolled into a non-residential class. The major user group is yet to be defined. There will be a tipping point at which a customer falls into the major user category. Steve Rust, FEDC said on the major user he would like to bring up a point for discussion or consideration. He referred to an exhibit entitled "City of Fayetteville Top Water/Sewer Utility Users of December 31, 2006". He said if you draw a line under Superior Industries on this page you will see there is a huge drop below that. Superior, Tyson and Pinnacle represent 2600 jobs. He thinks we should consider a "Major User" as well as a "Super User". Maybe there would be a different rate there. Alderman Cook said he is kind of curious as to what Mr. Gould will bring back. We haven't really defined what a major user is at this point and what that breaking point is. He said he is willing to keep Mr. Rust's suggestion in mind but would like to see first what Mr. Gould brings back. In response to a question from Alderwoman Gray, Alderman Cook said the final decision Mr. Gould needs from this committee is how we want to handle the sewer increase. Once he has that he will have all the information he needs to create his final study and bring that back to us. Mr. Gould said it would take him a couple weeks after he got the Committee's final decision. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 27, 2007 Page 3 of 7 Alderman Cook said the bottom line on the sewer side is that we have to have a 20% increase in 2009. We have been told that we can't stretch that out because the revenue has to be in place in 2009. The last handout presents two options. He asked for comments from committee members Alderman Ferrell said he wanted to mention one thing along the lines of considering existing industry. He said he found something on the internet that he thinks should be noted. He read "Traditionally government infrastructure expenditure arises from increased demand. In some cases though if obstacles or conditions arise that are detrimental to industry in some cases sewer lines have to be narrowed at great cost in order to cope with dramatically decreased demand for the demographically dying areas. It is not a question of sustainable growth but of sustainable lack of growth." He said he thinks this is one thing that we should take under consideration while making this decision. We have talked before about the dilatory affect and other affects of industry. He asked Mr. Jurgens if this is still a factor in the carrying of our sewage. David Jurgens said there is less of a dilatory affect. He said when we split into the two plants, the majority of our domestic flow will go to the west plant and a large volume of the flow going to the Noland plant will be industrial flow. He said a circumstance could arise whereby if industrial flow isn't going to the plant then we might not have enough flow coming in to sustain the plant. Because it is a biological process, if there is insufficient food there is a problem. He said staff has done a little bit of analysis on this issue of after the split, wondering about summertime during the two week period when the industries generally shut down over the 4th of July and over Christmas. From that standpoint this could be an issue. Alderman Ferrell said he just thinks this is a factor worthy of consideration. Alderman Cook said since industry seems to be the topic he doesn't think anyone wants to lose industry. He said he doesn't think the decision this Committee makes is geared towards that end. His problem is that we have got to cover our costs (operations, maintenance, replacement, future capital investment). We've neglected that in the past which has gotten us to this point. Alderman Ferrell said he agrees with Alderman Cook's description of where we are and where we need to go. His perspective would be that we are changing the paradigm and going to cost -of - service as opposed to where we have been. The hard decision is how we do it. He is taken back to what Mr. Gould said about a person preferring to keep his job. He said the adjustment would be about $1.45 (a month) in 2008 and he agrees with Mr. Gould that he would rather pay the $1.45 if there was any jeopardy of losing positions. Alderman Jordan said in 2003 we raised the rates 29% (over three years). We told people that would be enough. Then we had an overrun and we had to go back to the people and ask them for another quarter cent to handle that overrun and they gave it to us. He said he isn't saying the 20% wasn't discussed because it was. But he never at that time said he would support it. He said he would wait until the new rate study came in. He said in a month we will be discussing impact fees and Alderman Ferrell will probably say he can't support them. He (Alderman Jordan) will understand that. He said he will look at Alderman Ferrell now and tell him he is having a difficult time supporting this rate increase knowing what we have told the people. He said that is kind of where he is right now. Alderman Ferrell asked Alderman Jordan what his preference would be. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 27, 2007 Page 4 of 7 Alderman Jordan said he doesn't know. He is having a hard time with this. Alderman Cook asked what happened to Option 3. At one point we had an Option 3 on sewer but on this last presentation it wasn't thrown in. That option was 15% residential, 27% commercial, 30% industrial and 20% government. He wondered if there was any reason why that option fell out. Gary Dumas said the option that Mr. Gould tossed out at the very end of the meeting still had an increase of 18.9% for residential, 19.9% for commercial, 27.5 for industrial and 15.9 for government. He asked if that was the one Alderman Cook was talking about. Alderman Cook said he was thinking about page 10 of the August 28 report. Gary Dumas said going back to page 10 of the August 28 report, that Option 3 showed a 15% increase for residential. Alderman Cook said the two options we are looking at now are 19% and 18.9%. Alderwoman Gray asked if Alderman Jordan liked that option better. Alderman Jordan said personally he doesn't like any of the options. Alderman Cook said if we could get it down to about 10% he would like it a lot better. Gary Dumas said the issue is that there is so much volume in residential that when you adjust the residential percentage it affects all of the others significantly. He said he thought that residential accounts for about three fourths of the flow to the plant. Alderman Cook said they are half the system revenue also. He said he doesn't like any of the options either but in the interests of moving forward, he is going to suggest Option 3 on page 10 of the August 28 study. He said he agrees with Alderman Jordan's comments. We keep going back and back to people and he doesn't know how much more they can take. He said he believes all the customers feel that way, not just the residential customers. But the fact is we have a bottom line we have to get to. Alderman Ferrell wondered how true these numbers are since we are going to go to fewer classes of customers. Gary Dumas said the commercial and government will come together somehow based on volumes. He said he doesn't know what the percentage will be. Alderman Cook said the reason he wants to move forward is to see the final report. We will have more discussion once we receive that report. He is curious about what it will look like when these policy discussions are plugged into the real rate structure. And we won't know until we give Mr. Gould something to run with. Alderman Jordan said we could go back and talk about phasing it in - instead of starting in 2009 we could start in 2008. That's another option. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 27, 2007 Page 5 of 7 Alderman Ferrell said he wanted to make sure he is on the same page with Alderman Cook. He said on Option 3 basically the residential would be approximately 15% instead of 19%. He said industrial would be 30% as opposed to 20%. Gary Dumas said Mr. Gould mentioned when he was here that what we are talking about is approximately $1 in 2009 for the sewer side — from $3 to $4 for the typical residential user. He said he doesn't know what the impact would be on a monthly basis for some of the larger users. Alderman Cook said if we go with Option 3 and Mr. Gould comes back with numbers that we have a "hissy fit" about, we can say we want to tweak the option and see how the numbers fall out. This is not the end of the discussion. He said he wants to see the study. We are changing several variables in the study and he is curious as to where it will land. And without us giving him some direction to move forward with, we aren't going to know. Alderman Ferrell said he would like to go back to a comment made earlier. He mentioned the super user rate Steve Rust suggested. Alderman Cook said he doesn't have an issue with asking Mr. Gould to look at that. Alderman Ferrell said he would like to do that. He asked if anyone else would have a problem with it. Paul Becker said if you go to cost -of -service and then create a separate super user class within the industrial sector you will have to spread those costs across the other industrial users. Somebody has to make up the difference. David Jurgens said it could be that one of the breakouts is the major user class which simply has six customers that meet the criteria right now. Alderman Cook repeated that this is not the end of the discussion. Mr. Gould will bring us the study, we'll see the numbers and how they are affected by the decisions we've made up to this point. He would say let's go with Option 3 now and see how it comes out. He would like to hear Mr. Gould's comments on the super user rate and if there is a possibility for that. Alderman Jordan said he would also like to see him bring some point of discussion on a life line program. Alderman Cook said he would like to see that too. He said as far as his household is concerned these increases won't affect him that much. But there are people out there it will affect. Mr. Gould said he has had some experience with this issue. Paul Becker said Mr. Gould is an expert in the field. He's the guy who would have the information. He mentioned that there would have to be a contract amendment on the HDR contract because we're changed the scope of the work. Alderman Cook said he understands and expected that. Paul Becker reviewed what we want Mr. Gould to provide. He said he understands we want to keep the classes as discussed at the last meeting. We want to discuss a super user rate, life line 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 27, 2007 Page 6 of 7 rates and we want Mr. Gould to run the scenarios for Option 3 on the August 28 report. He asked if we want him to run numbers on an Option 2 phase in Alderman Cook said if he can give us both he would be curious to hear the numbers. Alderman Ferrell said he supports the study on the life line rates. He wondered when a recommendation goes to the Council if the lifeline rates will be implemented at the same time. He said he was under the impression we would implement the water and sewer and then follow up with the life line rates. Alderman Jordan said he thinks that is it but he wanted to bring it forward to get some information. Alderman Cook said he wishes it could happen in this rate study but he doubts that we can get to that point that quickly. But he would like to have some information so when we do take a recommendation to the Council we have some idea what we are talking about so we can get the discussion started. Paul Becker said it would be fairly complicated because we'll have to get census data, etc. Alderwoman Lucas asked if we go to Option 3 if we will ask Mr. Gould to show numbers for phasing it in. Alderman Cook said he thinks Option 3 was that these would be the increases in 2009. From there forward there would be inflationary adjustments. It will be similar to what Mr. Gould has shown in Option 1. We would take one hit in 2009 and then carry the inflationary adjustment forward. Gary Dumas said Option 3 on page 10 gives you the 20% in 2009 that is necessary for the system. He said he thinks what the Committee said earlier is that they want to go ahead and continue to move toward cost -of -service over the next several years. So there would be inflationary changes, but if you look at Mr. Gould's latest Option 2, it continues that cost -of - service progression so that the residential increases in future years were less and some other classes were greater — beginning to move all those classes toward cost -of -service by somewhere around 2014. Alderman Cook said what we are basically saying is run Option 3 and also this latest Option 2 which is on the last study Mr. Gould gave us. Paul Becker said he thinks with the Option 2 we would want to do a phase-in. Alderman Jordan said he doesn't disagree with the phase-in. Alderman Cook said that's what Mr. Gould has on the chart. Gary Dumas said he would like to clarify what is being said. The Committee is looking at these two options with a movement toward cost -of -service in seven years. Alderman Cook said he believes they have all agreed on cost -of -service. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 27, 2007 Page 7 of 7 Gary Dumas said neither one of these options are phase-in options. They are 20% in 2009. Option 3 does not move us toward cost -of -service over time. That is a separate decision. He said he thinks the Committee is looking at moving toward cost -of -service and the two options. Alderman Cook agreed. Alderman Ferrell, Alderman Jordan and Alderwoman Gray also agreed. Darrell Froud said he asked Mr. Gould a couple of weeks ago for information on how competitive we are versus the national average and the regional average for our water and sewer rates. He wasn't here at the meeting on Tuesday and wondered if Mr. Gould had addressed this then. Alderman Cook said he did not address this. Alderman Cook asked staff to ask Mr. Gould about this. Alderman Ferrell said he wants to make sure he understands correctly that when we get the information and numbers back from Mr. Gould that it is still subject to modification and adjustment. Alderman Cook said it is not a final recommendation, but is simply the next step. Paul Becker asked if the Committee would like for Mr. Gould to come back to make a presentation of these findings. Alderman Cook said he thinks he will need to. There being no further business, the meeting was adjourned. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org