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Home My WebLink About43-91 RESOLUTIONRESOLUTION NO. 43-91 A RESOLUTION AUTHORIZING THE CITY ATTORNEY TO TAKE LEGAL ACTION AGAINST THE CITY OF ELKINS AND THE MT. OLIVE WATER ASSOCIATION FOR OUTSTANDING WATER BILLS. BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1.- That the Board of Directors hereby authorizes the city attorney to take legal action against the City of Elkins and Mt. Olive Water Association for the outstanding balance of the water bills. nA copy of the past due billing is attached hereto marked and made a part hereof. PASSED AND APPROVED this 51-h day of March APPROVED: . By:21,002// Mayor cd? 1311.1.1 7.14: ZEd. • d 47>-.ZNI. daf SATTEST: c a oz -a "BY : CitY....C- 4;:tsci1/4 rates- - td4<ft • • , 1991. • 0** 51523•10+ 14,350•92+ 284•06+ 49769•09+ 61523•99+ 9,384•21+ 7.05 UTILITY MASTER HISTORY INQUIRY AghACCOUNT #- 02160124010 MIME- ELKINS WATER DISTRIC _ SERVICE ADDRESS- 1858 S VAN MOOSE DR WC 139 AMOUNT DUE WATER WATER TAX DUE SEWER 9090.37 .00 .00 MISC . 00 OTHER DUE . 00 PENDING PAYMENT - CURRENT DUE - 30 -60 DAYS DUE - 60 -90 DAYS DUE - 90 -120 DAYS DUE - OVER 120 DAYS- MISC TAX DUE .00 PENALTY .00 .00 AMOUNT INV DATE (cae7.523„Q . 00 . 00 . 00 03-80 SA MW 12/28/90 REFUSE .00 SEWER TAX DUE . 00 REFUSE TAX . 00 TOTAL DUE DATE DUE 9090.37 1/17/91 - CO, 21p14rericl N ) 523, (0 KS IM 11 SI KB, 7:06 • UTILITY MASTER HISTORY INQUIRY ACCOUNT ll- 05690012510 SME- MT OLIVE WATER ASSN SERVICE ADDRESS- 3985 S BLACK OAK RD WC 57 AMOUNT DUE WATER WATER TAX DUE SEWER 28092.66 .00 .00 MISC MISC TAX DUE . 00 .00 OTHER DUE PENALTY . 00 .00 PENDING PAYMENT - CURRENT DUE - 30 -60 DAYS DUE - 60 -90 DAYS DUE - 90 -120 DAYS DUE - OVER 120 DAYS - .00 AMOUNT INV DATE 74 1/11/91 2/12/90 03-80 SA . 00 . 00 MW KS REFUSE .00 TOTAL DUE 28092.66 IM SEWER TAX DUE . 00 REFUSE TAX . 00 DATE DUE 1/31/91 Si11 KB 7.07 UTILITY MASTER HISTORY INQUIRY ACCOUNT 4- 07850031010 WAM E- MT OLIVE WATER ASSOCIATION SERVICE ADDRESS- 664 E WALLIN MTN RD WC 32 MAST AMOUNT DUE WATER WATER TAX DUE SEWER 526.40 .00 .00 'MISC . 00 OTHER DUE . 00 PENDING PAYMENT - CURRENT DUE - 30 -60 DAYS DUE - 60 -90 DAYS DUE - 90 -120 DAYS DUE - OVER 120 DAYS - 03 -80 SA MISC TAX DUE .00 PENALTY .00 .00 AMOUNT INV DATE 2 1/18/91 284.06 12/19/90 . 00 . 00 . 00 REFUSE .00 TOTAL DUE 526.40 KS IM SEWER TAX DUE . 00 REFUSE TAX . 00 DATE DUE 2/07/91 4 7.08 UTILITY MASTS HISTORY INQUIRY ACCOUNT #- 06710881510 11114E- WASH WATER AUTHORITY SERVICE ADDRESS- 6600 W WEDINGTON DR MAS AMOUNT DUE WATER WATER TAX DUE SEWER 12068.63 .00 .00 MISC . 00 OTHER DUE . 00 PENDING PAYMENT - CURRENT DUE - 30 -60 DAYS DUE - 60 -90 DAYS DUE - 90 -120 DAYS DUE - OVER 120 DAYS - 03 -80 SA • MISC TAX DUE .00 PENALTY .00 .00 AMOUNT MW INV DATE 1/16/91 12/14/90 KS REFUSE .00 • TOTAL DUE 12068.63 IM SEWER TAX DUE . 00 REFUSE TAX . 00 DATE DUE 2/05/91 Si11 KB 7.09 UTILITY MASTER HISTORY INQUIRY ACCOUNT #- 06720043210 OM- WASH WATER AUTHORITY SERVICE ADDRESS- 800 W MAIN ST MAS AMOUNT WATER TAX DUE . 00 WATER 13742.93 MISC . 00 OTHER DUE . 00 PENDING PAYMENT - CURRENT DUE - 30 -60 DAYS DUE - 60 -90 DAYS DUE - 90 -120 DAYS DUE - OVER 120 DAYS- MISC TAX DUE . 00 PENALTY .00 .00 AMOUNT INV DATE 721 4 1/16/91 dialim.12/14/90 . 00 . 00 . 00 03-80 SA MW DUE SEWER . 00 REFUSE . 00 TOTAL DUE 13742.93 KS IM SEWER TAX DUE . 00 REFUSE TAX . 00 DATE DUE 2/05/91 11 51 KB 7.10 UTILITY MASTER HISTORY INQUIRY ACCOUNT #- 06720095510 aNE- WASH WATER AUTHORITY SERVICE ADDRESS- 3899 S CATO SPRINGS RD MAS AMOUNT DUE WATER TAX DUE SEWER . 00 .00 WATER 17759.15 MISC . 00 OTHER DUE . 00 PENDING PAYMENT - CURRENT DUE - 30 -60 DAYS DUE - 60 -90 DAYS DUE - 90 -120 DAYS DUE - OVER 120 DAYS- MISC TAX DUE . 00 PENALTY .00 .00 AMOUNT INV DATE 8224.•tL 1/16/91 (---9384.21_)12/14/90 . 00 . 00 . 00 03-80 SA • MW REFUSE .00 TOTAL DUE 17759.15 KS IM SEWER TAX DUE . 00 REFUSE TAX . 00 DATE DUE 2/05/91 11 S1 KB 7.11 • • HISTORY ON THE WHOLESALE WATER RATES NEGOTIATIONS In September, 1989, the City of Fayetteville contracted with Black and Veatch Engineers to perform a cost of service study and develop water and sewer rates for the next five-year period. For the next several months, City staff worked a tremendous number of hours with representatives from Black and Veatch and provided numerous documents to assist in the completion of the rate study. On July 12, 1990, the City of Fayetteville held a Public Hearing for all rate payers to review and discuss the final document and the proposed water and sewer rates. Most of the opposition that the City experienced at this Hearing was voiced by the wholesale water authorities. Wholesale water customers include Washington Water Authority, Mt. Olive, the City of Elkins, and the City of West Fork. These customers retain water supply contracts with the City of Fayetteville for purposes of buying water in bulk from the City and reselling this water to surrounding rural areas and other communities. (Note: The City of West Fork is not challenging the water rates established by the City of Fayetteville). After the Public Hearing, City staff arranged a meeting with the wholesale group and with representatives from Black & Veatch Engineers (consultants that performed the water and sewer rate study) to address any questions posed by the wholesale customers. Unfortunately, we were unable to satisfy all reservations that the wholesale group had pertaining to their proposed water rates. The City postponed the passage of the wholesale water rates and agreed to give the wholesale customers until September 15 to further review their proposed rates. This agreement was made contingent upon their hiring of an engineer to review the rate study prepared by Black and Veatch. In mid-August, the wholesale customers hired C.H. Guernsey & Co. of Oklahoma City to review our rate study. Upon reviewal of this study, they prepared a preliminary analysis. We then held a meeting on August 21, with the wholesale group where they presented the report from Guernsey. We were not able to resolve the issue at this meeting, but requested time to review their analysis with our consultants. Upon this request, the wholesale group decided to initiate a full cost of service study. They submitted a request to the City for various information needed to perform the study. City staff supplied this information for them as requested. After meeting with Black & Veatch, we found that the figures in the Guernsey report are in agreement with our report, with the exception of the differential rate of return. They have applied a negative .5% rate of return to the wholesale rate configuration which is actually the overall rate of return (average to all users). This configuration is not feasible for two reasons. One, 7.12 7.13 • we still feel that all outside -city users should pay a rate of return more -than that of the inside -city users. And two, to not charge an equitable rate of return, would mean to subsidize the investment that the City has in the plant. Consultants for the City of Fayetteville indicate that the Guernsey Company is primarily experienced in dealing with private electric utilities that are governed by the Public Service Commission, such as the electric cooperatives. With the private utility, there is no distinction between "owners" and "non -owners" of the system. Therefore, the rate of return is usually the same for all users. Our consultants further state that if the rate of return for water rates was set by the P.S.C., they estimate that their calculation methods would set our overall rate of return at over 10% for all users. In the latter part of August, we sent a copy of our rate report to the P.S.C. for their review and comment. Due to the fact that municipally owned utilities are outside their jurisdiction, they replied that they were unable to render an opinion on our methodology. Guernsey then completed their cost of service study, which we received late in September. We proceeded to forward a copy of this study to our consultants with Black and Veatch for their reviewal and response. After reviewing the report, we found that there were •no real issues that showed any error in the methodology used with the Black and Veatch study. Guernsey's figures were simply a difference in methodology and allocations. Furthermore, it appears that the Guernsey report has utilized a model designed for the development of electric rates for their analysis. Attached is a copy of the letter received by Black and Veatch in response to the Guernsey report. Upon consulting with Black and Veatch representatives concerning this report, City staff feels comfortable and agrees with the methodology that Black and Veatch has used in the preparation of water and sewer rates for all classes of customers for the City of Fayetteville. We further feel that the methodology used in the 1990 report is consistent with the methodology used in the past for developing water and sewer rates for the City of Fayetteville. The methodology that the city uses is a standard of the industry; it is the recommended methodology of the American Water Works Association. However, in an effort to resolve this issue as quickly as possible and to prove our willingness to work with the wholesale customers, the City of Fayetteville made the following adjustments to their water rates: The City reduced the maximum day demand factor for the wholesale class to 2.35%, which is the same level as all other outside city customer classes. The Guernsey study recommended the reduction of this element to 1.90%. 7.14 • • 2. The City eliminated the one percent 1% "risk" element included in the rate of return in exchange for long-term supply contracts (minimum of 30 years). The Guernsey study recommended a -.524% rate across the board. 3. And, of course, the City eliminated the allocations for fire protection to the.wholesale class. The City of Fayetteville strongly feels that these adjustments were extremely fair and generous. The Guernsey study recommends that a rate increase for the wholesale customers not be needed until 1992. We then held a meeting on October 26 to discuss this matter with the wholesale group. We had our representatives from Black and Veatch present in order to provide additional information and clarification, and the wholesale group had representatives from the Guernsey Company present. However, we were still unable to reach an agreeable solution. The wholesale group offered to pay a multiplier factor of 25% above that of the inside -city customer rates. Staff did not feel that this was acceptable for the reason that, one, this type of methodology is not very defendable in court, and two, this would mean another rate increase to all inside -city customers of 5.9%. We then sent various options to the Board for approval at the November 6 Board Meeting. The item was Tabled at this meeting and the Board then asked City staff and the wholesale customers to each submit a brief and address various points of view. These briefs were submitted to the Board and the item was reviewed again at the November 20 Board Meeting. The Board then voted 5-2 to approve staff's recommendation for wholesale water rates. The following pages are the options that were submitted to the Board; Option 1/2 is the water rates that the Board approved on November 20. KDC/sgl ADDENDUM WHOLESALE WATER RATES 7.15 OPTION il - Original Proposal by Black & Veatch - With fire protection charges adjusted out 1990 1991 1992 1993 1994 Wholesale rates per 1,000 gallons 1.76 2.12 2.44 2.66 2.88 OPTION 12 - Reduce maximum day demand factor for the wholesale class Eliminate the 1% risk factor for the wholesale class - Eliminate the fire protection allocations for the wholesale class Loss of Revenue = 1% $ 60,000 per year 1990 1991 1992 1993 19%4 Wholesale rates per 1,000 gallons 1.67 2.00 2.29 2.49 2.70 OPTION #3 - Reduce maximum day demand factor for the wholesale class - Eliminate the 1% risk factor for the wholesale class - Eliminate the fire protection allocations for the wholesale class - Reduce the rate of return to 6% for all outside customers Loss of Revenue = 4% $ 208,000 per year This 4% would have to be passed on to all inside city customer classes per year in order to retain current revenue requirements. OPTION 14 - RECOMMENDED BY WHOLESALE CUSTOMERS - All outside customers would pay a multiplier factor of 25% more that inside city rates Loss of Revenue = 5.9% $ 303,500 per year This 5.9% would have to be passed on to all inside city customer classes per year in order to retain current revenue requirements. a • OPTION i5 - All outside customers would pay a multiplier factor of 50% more that inside city rates Loss of Revenue = 2.7% $ 137,800 per year This 2.7% would have to be passed on to all inside city customer classes per year in order to retain current revenue requirements. • 7.16