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08092010CouncilMinutes-SPECIAL WS CITY OF AMMON CITY COUNCIL – SPECIAL WORK SESSION MONDAY, AUGUST 9, 2010 AGENDA: CITY OF AMMON 2135 SOUTH AMMON ROAD CITY COUNCIL AGENDA – SPECIAL WORK SESSION MONDAY, AUGUST 9, 2010 – 5:30 P.M. DISCUSSION ITEMS: 1.Water Rate Increase MINUTES City Officials Present: Mayor Steve Fuhriman Councilmember Dana Kirkham Councilmember Lee Bean Councilmember Rex Thompson Councilmember Sean Coletti Councilmember Russell Slack Councilmember Brian Powell City Planner Ron Folsom City Clerk Leslie Folsom City Engineer Lance Bates City Attorney Scott Hall City Treasurer Jennifer Belfield City Officials Absent: None DISCUSSION ITEMS: Mayor Fuhriman opened the meeting at 5:32 p.m. at the City Building located at 2135 South Ammon Road. 1. Water Rate Increase: Mayor Fuhriman would like to work with DEQ to make a payment of $1 million and receive a zero percent interest rate. He talked about a possible projected rate increase for three years. Councilmember Kirkham said DEQ would not give us a year reprieve. She proposed a concept concerning bond repayment that would help stop such a large increase. The City could increase the fee $5 the first year, with 4,554 users. The City would be short $779,910.00 and would pay that amount out of reserves. The next year increase $5 again and would be short $500,000 and pay that out of our reserves. The third year increase $5 and would be short $200,000 and pay that out of reserves. At the fourth year, we would be at the $20.00 and we would be taking nothing out of reserves. Lance has some shortfall for O&M (Operations and Maintenance) and figured a percentage increase across the board to cover the costs, regardless of what zone they are in. She asked Council their thoughts. She approached the Council concerning putting meters throughout the system to get future data. Councilmember Bean asked Lance how short we are in O&M. Lance said he’s not sure of a definite amount. In the first year, he would only gain $54,000 for O&M. We have a lot better system, which is new, but he might need to cover something unexpected, and the budget would be too tight for the City to fix it. Ray Ellis, Public Works said we won’t know the O&M needed for a few years with the new system and it is hard to budget for it. Mayor Fuhriman said most of the shock is over with the constituents and wondered if going $10 would be palatable, which would gain us a whole year on our reserves. Councilmember Coletti said we have two different statements regarding what we are going to do. Councilmember Kirkham said back when the bond was passed, nothing came from the City that said the total rate increase would be $10, only the Post Register said it would be $10, which was a misquote. Councilmember Powell would be ok either way, but wants the O&M included. Scott said the legal issue is you can decide what you want this year, but you can’t bind future Council’s and he is concerned in a future year a new Council might do something different. Councilmember Council Minutes 08-09-10 Page 1 of 7 Kirkham said we gave future rate increases in the flyer. Scott said it’s different. Councilmember Bean said that’s a proposal and the public bought into the bond with the vote. Scott said with public financing you can’t obligate yourself for future expenditures. He explained the bond was their approval for the rate. He suggests being cautious. You can project what the increases are in the future but you can’t bind them. Councilmember Powell said this Council will be here next year. Scott said yes absent death, reappointments, etc. Scott said you can’t bind them beyond the term of this Council. Councilmember Bean asked if they could vote for $10 this year and $10 next year. Scott said yes. Councilmember Slack said he is concerned voting on an item that hadn’t been discussed with the constituents. The City isn’t far off of the other metered rates with the majority of the State. The residents received a benefit from not having the increase for the past years. Councilmember Slack said his concern is the constituents that cannot afford it. He wondered about putting aside a fund for relief like what Rocky Mountain Power does. Council said it opens up legalities. Scott said most of these funds are created by patrons that make additional contributions to their bill for a circuit breaker type plan and it is decided internally, if criteria are met. It is administratively a hard issue and you would have to cover the staff’s costs. Councilmember Coletti commented about the Salvation Army and their abilities and wondered about maybe having public information available at the front desk. Leslie said if they go the circuit breaker route, they would have to increase staff. Councilmember Kirkham is concerned with defaults and shut offs. Councilmember Powell said you have a lot of people who have not been able to budget for this large of an increase. The option of a $10 increase this year and $10 next year was discussed. We cannot bind the next City Council, but everyone will be here next year according to terms. Leslie said you can change the rate every six months, if you prefer. Councilmember Thompson spoke as a citizen he has been paying into the emergency fund since 1991. He talked about the $6 million and five years of operation expenses and he feels that we should use it. He would like to put $4 million of the reserves into the bond payments. He talked about increasing the rates $2.50 over an 8 year period. Councilmember Kirkham said it doesn’t change the payment enough. Councilmember Thompson suggested if we have 275 people more for sewer, it reduces the payment by $1. The growth will pay for the shortfall, rather than a $10-$13 shock now. Councilmember Slack said being able to pay for another water tower in 15 years without a bond would be hard, if we use up the reserves. Councilmember Thompson talked about the developers paying for this. Councilmember Kirkham said they do not pay for the tanks. Councilmember Powell asked how many residents this system will handle. Ray stated the City is at 80% capacity right now. Councilmember Kirkham commented that we are wasting water, as well. Ray talked about old Ammon being at the end of its life span. Councilmember Powell said we won’t be able to get another bond, it will fail. Councilmember Bean said the reserves do have some funds for capital improvements. Scott said you can set increases into the future, as long as we are at the $60 published rate, however future Council’s could come in and change it. Councilmember Coletti asked if the City has ever considered making the bond repayment unequally across the board. Councilmember Kirkham stated the bond repayment has nothing to do with usage. It was discussed it does cost more to pump up hill. Councilmember Kirkham talked about the citizens voting for the bond. Councilmember Powell said the tank and the rest of the improvements benefit the entire system. Councilmember Bean asked are we going to consider bond only, or bond and O&M? Councilmember Kirkham suggested just the bond. Councilmember Thompson said what we are considering is the final cost to the patrons. Councilmember Bean is fine with looking at both. Councilmember Slack said if the City is looking at splitting the increase in a couple of years, the City should probably add some O&M. Councilmember Kirkham inquired what each Councilmember felt in regards to reserves. Councilmember Slack suggested keeping reserves where they are. Councilmember Thompson would like us to use it to the barebones. Councilmember Bean said he would like to keep our reserves. Councilmember Kirkham stated the same. Councilmember Powell said he would like to keep the reserves. Councilmember Coletti said reserves keep the City safe. Councilmember Kirkham said we won’t use reserves. Council discussed that the decision needs to be two or three payment increments or whatever. Lance said the first year would be using approx. $1 million in reserves. Mayor Fuhriman asked to look at another concept, which is how we replace the reserves over the next ten years. Lance said this isn’t in here at all. Councilmember Powell said he isn’t comfortable going out for another bond and feels unsafe with this scenario. Councilmember Bean said there’s no question that we might have more reserves than we should, but we have to decide how much do we need in reserves. Councilmember Kirkham said $2 million was earmarked to be set aside for meters. Council Minutes 08-09-10 Page 2 of 7 Councilmember Bean said we have approx. $1 million in reserves for meters. Councilmember Kirkham stated that there was $1 million set aside, plus the $2 million from reserves to be able to meter the entire City. Lance said the $2 million will cover most areas where there are meter pits, but won’t cover the rest. Councilmember Bean said we have to determine our capital replacement fee. He asked should it come from monthly payments to the reserve or should it come from capacity replacement fees. Councilmember Bean said the patrons have to pay for O&M for replacement of old lines. Ray said if the City has a $15 million system that has a 20 year life span, then you should have $15 million in 20 years plus inflation. Councilmember Powell said by the time the bond is paid off, you will need funds to replace it. Councilmember Slack’s concern is we don’t know what costs will be to replace Hillview and Old Ammon and if we will have enough reserves for that area. Rick Miller, Rexburg, Idaho stated the old area will be eligible for the low income residents grant based upon a blanket survey over the area and sometimes from census information, for $1/2 million in funds to help put the lines in including meters. Councilmember Bean commented that is strictly low income. Councilmember Bean asked how low income is derived. Rick said it is determined by census income levels. Rick said it would cost about $3 - $4 million to take care of the whole City for just meters. Ray said it will have to include water, sewer, curb and gutter, and roads when the meters get added. Councilmember Kirkham inquired about the possibility of grants. Councilmember Bean stated he would like to have pressure gauges on individual homes. Lance said we have pressure gauges on the fire hydrants. Lance said they look at the fire hydrant pressures first and then look at the individual homes. Councilmember Kirkham said let’s get back to the rates. Councilmember Slack said if we do this in two increments, then we won’t be short in reserves after the first year. Councilmember Kirkham said you would be using $500,000 in reserves, if we do this. Mayor Fuhriman said they would have the constituent’s perception that we have considered their issues. Councilmember Thompson asked how much we have taken out of reserves in the last 10 years. Leslie talked about the maintenance for the existing lines and the cost. Leslie said her main line capacity went from ¾ inch to ¼ inch and all of Hillview is getting old and breaking frequently. Councilmember Coletti said to raise it $7 and use $1 million in reserves, then $12 next year. Councilmember Bean asked how much it would cost to not raise it and only use reserves. Councilmember Kirkham said $1,053,000, the cost of the annual bond payment. Councilmember Powell said he would like to know the costs before raising O&M and using reserves this year. Councilmember Bean asked how you would run your business, if you did not know your operating costs for the next year – would you take it out of savings or would you adjust the price of the product. Councilmember Powell said he would make things cheaper, cut costs further. Lance said he has had a hard time budgeting for this, also. He expects costs to go up and it might not cover all of it, but even though it may not cover all of it, it will cover more than nothing. Councilmember Powell said he thought we were deficient in O&M by $33 - $35,000. Lance said the electricity costs are lower in the winter, but not the rest of the year. Council discussed a seasonal rate. Councilmember Bean said they could take $10 now and $10 next and put in $2-$3 for O&M to begin in October of next year. He talked about being able to cut it back if needed, just as long as we make sure we are covered. Councilmember Slack would like to put $1 in for this year for O&M, since you know it will be greater. Scott said you can always reduce your rates. Councilmember Slack favored $10 this year. Councilmember Bean asked Lance to look at $10 the first year, then $5 the second year, and $5 the third year. Lance said it would use approx. $800,000 in reserves. Councilmember Powell said $2 for O&M will give Lance $109,000 a year. Lance said as the City moves forward more manpower will be needed for regulating the system, replacing old parts of the system, installing and maintaining meters, monitoring flows on houses and fire hydrants, etc. Councilmember Bean said the manpower shouldn’t go up this next year. Lance said the City has doubled the lines and there are new tanks, motors, generators, buildings, etc., which need people to look at and monitor them. Councilmember Bean asked Lance what he tells people when they ask the City to cut expenses. Lance said that is why the $109,000 won’t cover everything he needs to do; he will try to deal with emergency things that come up. He is not saying right now that we need another person. He doesn’t want to have to dip into reserves for an extra person. Ray said every valve in the City should be exercised twice per year. Lance said we aren’t doing it now and the City is cutting corners now on the maintenance. Councilmember Bean said to build in 3%, because we Council Minutes 08-09-10 Page 3 of 7 don’t know what the costs would be and if it is less then we will cut the bill back. Councilmember Thompson said $2.50 every year would take $3.5 million out of reserves out of an 8 year period. Council discussed the various charges that have been collected for meters throughout the years. Jennifer generated a report for the meter information and the City has just over $55,000 in the meter fund reserves. In May 2008, before we had a separate reserve account, a transfer was done from the past and since then the figures are put into this account. Council talked about not depleting reserves so we can replace lines, if needed. Councilmember Thompson said people can afford $2.50 per month and that is what he is trying to do. He feels the $10/$10 is too much. Councilmember Powell talked about 3 years of $8.00. Leslie said in the Resolutions of 2006 it showed $250 for meters, but in 2005 there was nothing. It was discussed it may be in a building resolution. Councilmember Kirkham said if you do three years of $8 and you take $794,548 and then at the end of three years you can start to pay back reserves. Councilmember Kirkham stated she is for 3 years at $8.00. Councilmember Slack does not want to touch reserves. Councilmember Slack said this would bind a Council past the current terms of the Councilmembers. Councilmember Powell said the compromise from the public hearing is a happy medium, which would use some of the reserves. Councilmember Coletti said everyone was upset that we hadn’t previously raised it. Councilmember Bean stated he is not sure we have $6 million in the reserve fund. The amount of the fund was discussed. Ray said when you spread things over time you are taking risk. Lance said he has purposely been careful to keep costs down. Jennifer clarified the accounting procedures. Ray said last year’s budget was based on an increase that never happened, so we might have to go into reserves this year. Councilmember Thompson inquired what it would cost to replace a mile of line. It was discussed this is what we don’t know. Leslie asked about O&M. It was discussed the longer we push the rate increments out, the more risk there is. Councilmember Powell said the warranty is one year on the new system. Councilmember Coletti asked starting from when. Ray said some of it is already expiring. Leslie said what Lance isn’t saying was the one warranty issue we just had, they would only repair it, which would take three weeks and we needed it now, so we had to purchase a new one and we will have the old one for future breaks. Councilmember Slack asked how many errors we have to correct from past Council’s and why not take care of this now. Councilmember Kirkham said she agrees, except for the hardship placed upon citizens from the $20. Councilmember Slack said he prefers $10 and $10. Councilmember Powell said three sets of $8, which gets $4 for O&M. Councilmember Slack said why not $11 for two years. Councilmember Powell said you break that threshold. Lance said using the three $8’s goes over the published rate. Council said this might go over the published rate and we might need to publish for the third year increase. Ron said the City has applied the O&M now. Leslie suggested 50/50% each year. Lance said percentages will mess things up. Lance went over the areas where this scenario would not line up with the published rates. Council talked about houses with two water lines. It was discussed regardless of 10/10 or 8/8/8, we would still be over published rates. Council had discussions as to how to keep the scenario below the published rates. Leslie said the biggest hit on the budget is from the R-1 and smaller lot size zones. Council discussed 7/7/7. Lance said the bond payment is based on every connection. $7.50 was also discussed. Councilmember Powell said apply $8.50/$7.00/$6.00 and you will have to address the apartments in 2012. Councilmember Bean talked about the restricted rent properties. Councilmember Slack talked about the $8 across the board and to reduce the rate for condos. Councilmember Powell asked if you take away from one group then which group pays it? Councilmember Powell said the Council is looking at collecting enough funds to cover O&M. Councilmember Thompson suggested 5 years of $5. Leslie stated you have to trust that future councils will collect this. Councilmember Slack said $10/$10 is safe. It was discussed it may be $10/$13. It was discussed it will still be over the published rate for some areas. $10/$12 was discussed, but was also over. It was discussed $10/$10 is safe, but it is still over on the condos. Councilmember Powell suggested 10/10/7, but we are still over and the Council could have a public hearing in 2012. Council discussed that you would be putting more on a future council. Councilmember Kirkham said we need to look at meters and we need to make that decision this year. It was discussed it will be harder to meter in the future. Councilmember Kirkham stated we need to make the bond repayment, but O&M would be figured in with metering. Leslie talked about publishing for apartments now and then you would need another public hearing. Councilmember Bean asked if apartments/condos are too low. Leslie said yes. Councilmember Bean said this might push people into Idaho Falls, if we increase those. Councilmember Bean stated he hates to have the public leave our apartments. He wants to deal with the bond now and get information for O&M. Councilmember Slack said do $10/$12 and adjust the apartments down to make it reach. Councilmember Bean asked how many commercial properties have meters. Leslie said approx. 40%, but the rest do Council Minutes 08-09-10 Page 4 of 7 not produce enough water usage. Council discussed 8/8/8 and then have a hearing in 2012. Councilmember Coletti said to apply it unequally over two years with apartments separate. Councilmember Powell said if we do a 4.9% increase the next two years, then we will get our O&M and you will stay within your published rate. Scott said you can’t bind the Council. Councilmember Powell said we need to put it on the calendar. Scott stated you are still going over on the condos. It was discussed to have a public hearing for the condos. Discussions ensued with all the previous scenarios that were discussed and apartments were published at $17. Councilmember Powell suggested increasing the apartment rate $3 less than the increase to other properties and adding $3 properties to the RP/RPA properties to make up the difference. Council talked about being subjective. Scott said the RPA properties uses much more water. Councilmember Powell talked about the 8/8/8. Councilmember Bean talked about finding a legitimate rate that we feel comfortable with. He is not comfortable with increasing people at different rates. He wonders if condos/apartments are lower than what they should be. Councilmember Bean stated he feels we need to look at individual categories. It was discussed we need data to back up our decisions. Leslie said let the reserves support the apartments, until you get the data to adjust the rates properly. Councilmember Slack suggested mixing O&M with the 10/12. Councilmember Kirkham suggested making the increase effective October 1, 2010. Councilmember Bean asked how many apartments there are for the bond repayment. Lance said there was one payment for every two apartments; however, with some of the scenarios it would be every apartment. Councilmember Bean feels that is not fair. It was discussed they have a much bigger line than a household does. Ron stated we have some meters on some apartments that stemmed from the last increase. It was discussed these meters don’t have the ability to be remotely read. Councilmember Kirkham said we don’t have the data so we have to make the best guess, because we cannot come to a resolution. She suggested 9/8. Councilmember Slack said do the 10/10 and reduce the apartments to make it work on the last year. Councilmember Slack discussed all the options: 8/8/8 with third year shortfall with maybe a possible hearing, 8/8/8 and cap those over the published rate, 10/10 cap those over the published rate, 10/12 to include O&M and cap those over the published rate, adjusting each individual category, 5/5/5/5/5 or doing each unequally. Councilmember Kirkham asked Rick about DEQ funding and their requirement for metering. Rick said they keep hearing it, but he is unsure when it will go into effect. Councilmember Coletti said a bigger home uses more capacity. It was discussed it is very subjective, if you do not have meters. Ray said if you put $3 million in meters then you will reduce your usage by 30%. Ray suggested doing a flat per 1000 gallons usage. Scott said you would have to cover your bond repayment then use the meter rate. Council went down the list and eliminated adjusting each category. 5/5/5 was discussed and only one Councilmember voted for it. Councilmember Bean said he doesn’t want to force the public hearing on the next Council and feels this Council should have to deal with it. He feels we do $10 now and have another hearing next year. Councilmember Slack said we won’t have enough data in one year it will take two years and he is not in favor of having a public hearing next year. Council discussed that they were forced to have a public hearing now. Leslie said just have a public hearing for apartments only. Councilmember Kirkham said she believes the Council will need another public hearing in two years no matter what we do, so let’s look at all the assessments at that time with data. Councilmember Slack went back to the elimination: 8/8 and another public hearing. Councilmember Powell said he doesn’t like that one, because we need to go to the minimum published rate of the condos. Councilmember Bean said the public had issues with the increase of 100% on R1’s and 70% on RPA’s. Scott stated that is why cost of living doesn’t work and said percentages never close a gap it only widens it. Councilmember Bean does not want to force another Council into another hearing. Councilmember Powell said he thought the Council was trying to subsidize the rates to help the impact. Councilmember Bean wants to deal with year 3 right now. Council nixed this option. Councilmember Slack said 10 now and another public hearing in 2011. Council decided no, because we still won’t have data. Councilmember Bean talked about having a public hearing for just the condos. Leslie said people are going to scream over the RPA increase. Another Councilmember said we need to decide if RP/RPA has to subsidize R1, etc. It was discussed that it could be the opposite, because we do not have the data. Councilmember Powell said we take $3 O&M off the apartments and move it to the RPA. Councilmember Bean said this is the proper way of describing it. Councilmember Powell said remove the $3 for O&M from the total, or $12.50 - $3, to get $9.50. It was discussed that most patrons wanted $10, and $10 only. Councilmember Kirkham said 9.50/9.50. Councilmember Kirkham asked Lance how much meters would cost. He thinks 800 meters would be $400,000. It was discussed to put this in the budget. Councilmember Powell said make RP, RPA $3 over and apartments $3 under. Councilmember Powell said 9.50/10.50. Council agreed. It was discussed we only had to Council Minutes 08-09-10 Page 5 of 7 take $2 off. Councilmember Powell said in order to take the $20 fee per connection, then you have to do $3/$3. Councilmember Thompson said we pumped 175 million gallons and from what we collected, it is approx. 95 cents per 1000 gallons. Leslie said you have to be careful not to make blanket statements and need to wait for data. Councilmember Bean said we have to subsidize apartment units. Leslie asked how the Council addressed the senior citizens who wanted a reduced rate. Councilmember Slack said 80% of the retired have huge savings, even though they live on a fixed income. Councilmember Powell said he is only concerned with $2.60 per 1000 gallons. Councilmember Powell said we don’t have enough data with all the new tanks, etc since we do not have a complete year of data. Lance said in order to determine commercial users’ portion of the bond payment, he used an average of 15,000 gallons per commercial user. It was discussed our commercial rate is based on the flat rate or metered rate, whichever is greater. Council discussed totally revamping the rates. It was agreed to live with this for two years and then go forward when data has been collected. Council went into discussion on commercial rates and wanting to restructure the rating system. It was discussed it is $1.88 for the meter rate per 1000 gallons. Schools and churches rates were discussed. It was discussed they would have a base, plus the flow rate. Leslie is not positive the computer will be able to figure this. It was discussed that those with meters will pay base, plus flow. If they do not have a meter, they will just pay the base. The $1.88 amount was discussed. Leslie stated we do not have enough data to do this. Leslie talked about how she might be able to do a rate plus another add-on for a water charge on the computer system and she is unsure if the computer is capable of doing this kind of computation. It was discussed to revamp just the first gallon for the bond repayment. Councilmember Bean asked if she can build in a fixed charge. Leslie stated she can do a side charge. Councilmember Powell said that is building an eventual meter system. It was discussed this is different than what we published. It was discussed we are proposing to bring the base rate to $56. Councilmember Powell talked about changing to a new minimum. Leslie stated she would have to create a new rate for the computer, since the change would apply to metered and unmetered customers. Council discussed holding another public hearing for apartments and commercial properties. Councilmember Kirkham stated we have a shortfall to address in two years, no matter what. She suggested living with this for two years and reevaluating it when we have more data in two years. Council discussed how much of the $46.50 goes to bond repayment. Lance talked about a ratio he used. Lance wanted to spread the bond repayment. Leslie stated you are looking at revamping the whole system for 80 customers. Councilmember Kirkham stated they are big customers. It was discussed we do not have a good way to bill them. Leslie stated if you raise the meter rate by 10 cents, you will recoup the bond payment. Council discussed to go to $1.98 per 1000. Lance will do a dollar for dollar adjustment per person/room for the hotels. Councilmember Bean inquired if there will be 2 bond repayments for those with two lines. It was discussed that an additional water line is $9 and $12.50 for the published rates. It was discussed to leave it at the published rate. The sprinkler only areas were discussed. Ron said they would be paying $15.00, plus $1.88 per 1000 gallons. Leslie asked if we could have an irrigation rate, as well. Councilmember Powell asked what the next monthly bill for the Quail Ridge retention area was, since June was around $1800. They said they cut their watering in half after getting that bill. Councilmember Powell stated common areas are similar to a RPA and wondered if they could be charged based on acreage. It was discussed we would have to change the ordinance to do this. The Quail Ridge retention area is about 3 acres. Leslie said Quail Ridge used 1,204,407 gallons in June and 1,114,161 in July. Ron asked does it include all the water they are using. Councilmember Kirkham suggested adding this to Thursday night’s agenda for discussion and vote. Councilmember Powell looked at what Pocatello’s rate would be for Quail Ridge. Leslie said Hawks Landing was 216,163 for July and Founders Point June was 1,086,072 and July 968,523. It was discussed that Chubbuck’s is $1.15 per 1000. The Council decided to figure out Founder’s and Quail Ridge later. Councilmember Powell said the associations needed time to adjust for the rate. Leslie stated the Idaho Irrigation District approached us to pay $150 for irrigation rights and wants to make sure it is okay to pay. Council stated it was fine. Leslie stated there are pictures from Ammon Days on disk. Leslie stated Lee, Brian and Rex are up for election next year. It was discussed Council will meet at 7:30 on Thursday. Council Minutes 08-09-10 Page 6 of 7 Councilmember Kirkham motioned to adjourn the meeting. Councilmember Bean seconded. Roll Call Vote: Councilmember Kirkham – Yes, Councilmember Bean – Yes, Councilmember Powell – Yes, Councilmember Coletti – Yes, Councilmember Thompson – Yes, and Councilmember Slack – Yes. The motion passed. The meeting adjourned at 9:27 p.m. _____________________________________ Steve Fuhriman, Mayor __________________________________ Leslie Folsom, City Clerk Council Minutes 08-09-10 Page 7 of 7