The public is encouraged to attend a public work session at 6:00 pm on Wednesday, April 8th in the council chambers to learn about and provide input on water and sewer rates.
The financial consultants hired to perform a rate study for the City’s water and wastewater systems will present an overview of this project and solicit input from the city council and members of the public. In particular, the prioritization of “pricing objectives” will drive the rate-setting process. For example, which of the following pricing objectives are most important?
1. Conservation / Demand Management
2. Financial Sufficiency
3. Rate Stability
4. Revenue Stability
5. Equitable Contributions from New Customers
6. Affordability to Disadvantaged Customers
7. Cost of Service Based Allocations
8. Minimization of Customer Impacts
9. Simple to Understand and Update
11. Ease of Implementation
12. Economic Development
The 2015 budget includes funding for an outside consultant to complete new rate studies for both the water and wastewater systems. To help pay the costs of the study, city staff applied for a planning grant from the Department of Local Affairs and received notification in January that the application was successful. The grant will pay half of costs for the study. City Council awarded a professional services contract on March 3rd to Raftelis Financial Consultants who will work on this project over the next few months along with administrative and public works staff.
The last rate studies were completed in 2009 for the wastewater system in preparation for the major upgrade of the wastewater treatment facility and in 2011 for the water system to prepare for the water treatment facility upgrade and other capital needs. Both studies determined that the current rates were substantially insufficient to pay for necessary upgrades and support operations of the systems. As a result, base rates were increased substantially. The 2011 water rate increase caused significant criticism of the city government, which has not abated over time. This is one of the reasons that we are seeking to involve the public to a greater degree and at an earlier stage in the process.
As noted during council meetings and budget work sessions over the past two years, 2015 is an appropriate time to re-evaluate rates because we are reaching completion of the final phase of the treatment facility upgrades. Until the projects were actually completed, the total project costs and future operating costs could not be known with certainty. The City has also made substantial progress in replacing sections of deteriorated or undersized water and sewer lines. Although this work will continue for years to come, the costs are much less than to replace a treatment plant. In other words, the recent financial strain on the water and wastewater enterprise fund is behind us.
It should also be noted that the previous rate studies were completed using very different assumptions for development activity. New or expanded users of the water and wastewater system pay an upfront system development or “tap” fee, which helps to pay for capital improvements. The 2009 rate study factored in significant growth (such as the previously planned mixed-use developments at Vandeveer Ranch and the high density residential Miramonte subdivision), while the 2011 rate study assumed very little growth because of the recession. We are now experiencing development somewhere in between the previous estimates.
The rate study will also evaluate proposed rates in comparison to other Colorado communities. The most recent comparisons are available on pages 22 to 23 of the 2015 budget work session materials from the September 15 meeting.
We hope you can attend the meeting to learn more about this process and provide constructive input as we begin the study.