HomeMy WebLinkAboutMIN 11.10.2009 CC-WThe City Council of the City of Georgetown, Texas, met in Regular Session on the above date with Mayor
George Garver presiding.
Council• a -i
Gabe Sansing, Dale Ross, Ben Oliver, Bill Sattler, Keith Brainard
Patty Eason, Pat Berryman
jStaff Present:
Paul E. Brandenburg, City Manager; Jessica Hamilton, City Secretary; Mark Sokolow, City Attorney;
j Rachel Saucier, Assistant City Secretary; Micki Rundell, Chief Financial Officer; Jim Briggs, Assistant I
1 City Manager for Utility Operations; Glenn Dishong, Water Services Manager; Kevin Russell, Director of I
,j Human Resources and Civil Service; Terry Jones, Support Service Manager
Tel 1:1111111TE R!''171:1`11
A. Update regarding Public Safety Needs Assessment and related impacts to the City's Facility Plan -- Terry Jones,
Support Services Construction Manager and Micki Rundell, Chief Financial Officer
B. Presentation on water conservation, water rates and related financial policies -- Jim Briggs, Assistant
City Manager for Utility Operations; Micki Rundell, Chief Financial Officer and Glenn Dishong, Water
Services Manager
Jim Briggs presented the "Water Rates & Related Financial Policies" workshop. He said this workshop deals
with water rates and financial policies related to water revenues, and the presentation is included on
muniagenda with minor changes for readability. Briggs noted the issues and objectives are as follows: In April
and May 2009, prior to the summer, the City expected large capital improvements in the future and those plans
were blended with conservation plans. He said discussiosn with the General Government And Finance
Committee (GGAF) reviewed the upcoming plans, and the conversations addressed water revenues included
current water rates and risks, conservation impacts, capital improvement needs, proposed rate and policy
revisions, non -potable irrigation and the next steps in the process.
He recalled the rate structure was established in the 1980s when the rates fit the usage of the time, but recent
growth has outpaced the system. Briggs clarified that the original policies used a simple volumetric use (gallon
use charges to consumers each month) instead of placing capital on the more appropriate fixed elements of the
rates (versus variable expenses). According to Briggs, the general philosophy was selling more water to acquire
more revenue for capital improvements, consequently no incentives existed for conservation because the City
needed water sales revenue to earn capital for improvements.
Briggs spoke to the original structure's encouragement of growth, low income assistance, and fit to the system
with 4-5,000 users in 1985. He mentioned if consumption was low you did not pay much. Briggs identified
present day changes in the City's system and community demographics which"now serve over 20,000 users at
over 200 gallons per capita. He detailed the monthly base rates of $16.50 for 314 inch meter that has been the
City Council Workshop Minutes/November 10, 2009
Page 1 of 4 Pages
standard. He informed Council of the value of the 3/4 inch meter due to the operational issues occurring with
the 5/8ths meter. He said new irrigation and sprinkler systems cause poor pressure performance for domestic
flows. The cost differential between the meter sizes was negligible while performance and flow needs became
problem. Briggs said the utility system did not want to charge customers for dual meters, additional costs for
size change, and installation charges, so the 3/4 inch meter became the standard. However, the $16.50 does
not cover fixed costs such as debt service on capital.
He said a scaling factor can determine what a meters can handle, and this scaling is based on volumetric
mathematical calculations. Variable rates (225/1000) fund more than variable costs, so this exposes the City to
weather related revenue risks such as increased demand impacting revenue during hot and dry periods and the
potential revenue shortfalls during wet periods. He told Council that during wet seasons, with this effect, the City
will not have enough funds to cover the debt service and the minimal operational needs. Briggs commented
that each summer a conservation block rate is implemented to meet the summer peak capacity units that must
be on-line to meet the demand.
Briggs stated the water conservation plan's goal of reducing average consumption and saving customers
money. The current average use is 200 gallons/day. The City's goal is 180 gallons/day by 2020. Briggs
relayed The Texas Water Development Board (TWDB) recommendation of 140 gallons/day, but operationally
this rate is not feasible and will not sustain our community's quality of life. He added that conservation is also a
way to save on irrigation costs. Conservation rates were designed to impact consumption and reduce rates on
irrigation, and users are aware that it costs more to put water on the ground during conservation periods. Briggs
talked about conservation rates established in 1997 as a way to effect 10-15% of users peaking the system, and
those rates were intended to pay for necessary expansions and capital additions. Lower per capita
consumption lowered the revenue requirements and expansion was not as available. Briggs said this process
did not allow for managing demand. Briggs showed Council a chart demonstrating water usage of residential
customers from May through September, and indicated how conservation can save customers money.
Capitol improvement needs include a surface water treatment plant expansion beyond what was recently
approved to cover the current issues of fire protection and the immediate needs on ground water volubility.
Surface water is needed due to the growth and demand on system. Currently, the proposed $12 million
expansion of the Lake Water Treatment Plant (LWTP), is a shared system with Chisholm Trail Special Utility
District and The City of Georgetown, and based on it's capacity it's not wholly ours. There is an area system
demand for increased capacity and demand on our water resources. The fixed cost and debt service could be
$750,000/year basis and could have a significant dollar impact on the rates.
Briggs gave Council a detailed review of the rate methodology. He said the proposed rates will implement a 3/4
inch base meter at $18.50 (currently the rate is at $16.50) over two years, and scale the existing base rates for
larger meters to meet the American Water Works Association's ( AWWA) standard base. This will be consistent
to fixed rate applicable to each customer's use based on meter size over 4 years. Modifications to the 1 st block
on the conservation rate will be from 19 to 18 and the creation of a 75,000 gallon (and above) conservation
block. Proposed rates will apply residential conservation block rates to small commercial users with similar use
patterns such as residential offices and small businesses. Changes to the ordinance will include a review of
rates with impact fees every 3 years to consider inflation adjustments and the regional CPI Index. Every 3 years
there is a review of impact fees, a cost study, and a full financial analysis of utility, water and waste water to
allow for small adjustments as needed. Staff wants Council to consider a demand related charge in lieu of
"super user" rate. The scheduled cost study and complete financial analysis is an appropriate time to review
water rates.
Sansing asked and Briggs said GGAF was involved with the discussion regarding a more frequent review so as
to not duplicate staffs workload. Briggs said from staffs standpoint, since water utilities are undergoing a
financial analysis, it is an opportune time to evaluate rates on a 3 year timeline without duplicating studies and
workload. He added there was discussion on creating a super user rate and discussions about applying electric
utility principles for making rates. Essentially a demand rate would be used for extremely high volume use such
as individual owners of large meters or owners of many meters with an aggregated consumption of 10 million
gallons or more per month.
Briggs showed Council a chart of the proposed rate revenue impact over the next 5 years. He said these rates
are static and do not include any system growth or additional meters, and he noted conservation will have some
impact, but conservation rates will be in effect during those months. Briggs showed Council a base rate
comparison graph of the surrounding cities. The first Georgetown line shows the Citys current condition, the
second line is part of a 2 year phasing in 2010, the 3rd line shows the ultimate goal after project is phased in
(AWWA figures). These are the base rate minimum charges associated with each count between $16.50 and
$18.50 over 2 years. Conservation rate block comparison is all over the board from nearby cities. Austin
City Council Workshop Minutes/November 10, 2009
Page 2 of 4 Pages
started at $9 at 19,000 gallons to $10 before you get to 30,000 gallons. This climb in price, in Austin, is pretty
punitive pretty quickly. Sansing asked about cities owning their own utilities with exception of Leander, Cedar
Park, and Pfluegerville.
Additional recommendations are to create a funding reserve within the Water Fund and use water revenues
from dry years, where revenues are high, to offset potential revenue shortfall in wet years. This process will
require issuing more debt and reserving cash for weather related impacts. The current "cash on hand" will not
be used to fund the LWTP. Creation of a low income discount to a base rate will maintain $16.50 rate and a
lower option for the Old Mill property will be included for people who are on low to moderate income. Sansing
asked how the City would deal with someone who lived in a low income area and used a lot of water? He also
asked at what point do other water users stop subsidizing the water wasters? Briggs said education and
working with Caring Place on water conservation has been done in the past. He said working with the people
will address the issue, but he's not aware of any water wasters at this point.
Berryman returned to the dias at 4:16 p.m.
Briggs said non -potable irrigation rates are currently under review, and noted they do not fund the cost of
services or the five year CIP plan. The current rates are at 85 cents per 1,000/gallons, and there is a proposed
2 -step increase at 95 cents per 1,000/gallons effective January 1, 2010. There will be a six month notification
process for large irrigation customers. After January 1, 2011, a rate change of $1.05 rate will cover enough to
meet debt service ratio. However, even with these rates in place, the fund is only able to cover debt service
ratio because it's blended with water/waste water. Oliver asked and Briggs said the rate has been at 85 cents
for 6 years. Briggs said there were small increases in rates, but the rate has been based on the original cost of
electricity.
Briggs explained the next steps in the process.
Mayor asked to see the slide on the 4 year increases from 2010-2013. $382,000 is above and beyond revenue
being collected. Mayor is troubled by the threefold increase in round numbers in revenue and wants the rational
aside from 'we need it'. What justifies a threefold increase? What are the dollar allocations that need to be
funded to justify the increase so it can be justified to community . Mayor says the increase is staggering. Mayor
asked and Briggs said the LWTP expansion is the reason the City needs to increase the rate. He noted the debt
service needed to cover our portion of the project, including the water treatment plant's capacity to put the water
on the ground, is over $750,000. Sattler wondered why the existing facility needs a $12 million expansion and
whether the treatment capacity is currently at its maximum He asked if new homes and businesses will require
an expansion of the plant to ensure good service for current customers and efficiency for future city growth.
Briggs said the existing lots, in addition to the new developments, are reasons for this plant expansion. He said
the LWTP expansion project is the cheapest option for plant capacity because the City already has the land,
tanks, and pumps to ensure water quality.
Sattler asked and Briggs said this plant expansion will allow the City to move water to areas that need it Sattler
asked and Briggs confirmed that this process will ease pressure on taxpayers because the City has the ability to
make rate adjustments based on the fact that it has off -system sales and alternative revenue coming in. Sattler
asked and Briggs said we have the ability to sell water to Round Rock and other local areas as we have done in
the past.
Sansing commented on how the City has never implemented a conservation program. He said he feels that the
City needs both the plant expansion and the promotion of conservation measures. Briggs agreed that
conservation is necessary. Mayor asked about the conservation figures and noted if the City has a 10%
reduction in usage, people are not buying as much water. He added, therefore, there is a revenue shortage.
He asked where does the City go with that? Briggs replied the City cannot count on conservation. There may
be a 10% fluctuation at one period in time but that is when variable costs are high, we cut variable costs and
that does not affect the fixed costs.
There was much discussion.
Eason asked and Briggs replied that these rates deal only with drinking/potable water. Sattler asked whether by
doing this partial build there any environmental issues that will cause EPA or water quality boards to come back
and say there is a problem.
Dishong and Briggs are not aware of any problems, but obviously cannot
tell the future. Briggs indicated that
the City is
a tenant of
the Army Corp of Engineers, and the City has filed
the ultimate development plan with the
army core
for vetting.
By building the base and putting the steel on the ground,
the footprint is already on the
ground so
some environmental issues are mitigated. Site expansion will
eventually be pushed to 40 million
gallon, but
we cannot
afford to put that foot print on the ground right now.
City Council Workshop Minutes/November 10, 2009
Page 3 of 4 Pages
C. Overview of Health Insurance coverage through participation in the Texas Municipal League Inter -governmental
Employee Benefits Pool -- Kevin Russell, Director of Human Resources and Civil Service
Russell introduced Brett Bowers from the Texas Municipal League (TML). Mayor welcomed Bowers.
Bowers presented the background on TML, an overview of the benefit processes, and the differences between
the nonprofit TML and other for-profit companies. TML serves the entire state and has a service center just
down the road. TML utilizes a Risk Pool with 700 participating political subdivisions. TML is a political
subdivision itself and has a board of directors that meets every quarter. Currently, TML covers 30,000
employee lives and upwards of 65,000 people when including dependents. Underwriting game is played and
TML ensures extra monies go to member equity, and all money will roll back to members if TML ever had to
close their doors. At this time, 85 cents goes to paying claims out of every dollar received by TML.
Bowers said TML was established in 1979. He noted there are 611 groups served including municipalities,
appraisal districts, school districts, water utility districts, and they have the option of being fully funded or self
funded. TML could help the City move to self funded option; However, many cities are moving toward rate
stability with different funding options. There are current self funded members that want to move to risk pool
due to the cost of health care. The pool allows problems to be spread across all members. He said TML is
moving toward public / private partnerships and noted profit providers were offering better cost for services
because of size and partnerships and better discounts. TML interviewed with the private sector to get better
deals for customers and entered into an alliance with United Healthcare Network for comparable price for
service.
TML is the administrative arm of the Public Employee Benefit Alliance (PEBA). This alliance leverages their
pool, and enhances cost efficiency in purchasing. TML is a full service organization and can work directly with
the City or through a consultant. Most cities work one on one with TML due to the cost efficiency. The TML
satisfaction survey shows over 98% of customers were satisfied with TML services.' TML is not an insurance
company, and they are not governed by the Department of Insurance. TML is governed by Chapter 172
protection which states no bid requirements have to go out every 3 years, and for anyone over 18 years of age,
TML will mail $150 incentive for healthy initiatives after the individual has undergone preventative check-ups,
personal health coaches, no cost preferred lab, no cost generic drugs at CVS pharmacy,
http://bewellattmliebp.or-q/, under and over 65 years retiree coverage options are services provided. PEBA and
Caremark help bring these benefits to the City. He spoke about how TML treats retiree benefits.
Mayor asked Russell to review the details of the interlocal agreement. Ross asked about proposals and the
large claims from last year. Ross wanted to know if TML will help with the spikes in claim history. Russell
replied that TML has a risk pool with a the large number participating in the pool. He said the maximum
increase last year was 16%, and noted the size of the pool helps carry those with big issues and other years
there are few claims. Ross said he wants to make sure the TML pool will help smooth out the City's high and
low claim years. Russell confirmed that TML will help with the spikes. All $3.3 million that City has paid to the
previous provider, Humana, will stay with Humana, and the City will be starting fresh in January with TML.
Council recessed to Executive Session at 5:02 p.m. under Sections 551.071, 551.074, and 551.086.
Council returned to Open Session 6:05 p.m.
The meeting was adjourned at
City Council Workshop Minutes/November 10, 2009
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