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HomeMy WebLinkAbout1999-008 Irrigation rates t, OPTION I ORDINANCE NO. 99 — 08 AN ORDINANCE relating to increasi it g the irrigation rate charged for operation and maintenance, amending Sections 7.24.100 and 7.24.110 of the City of Yakima Municipal Code. BE IT ORDAINED BY THE CITY OFYAKIMA. Part 4. - Chapters 7.24.100 and 7.24.110 of the City of Yakima Municipal Code is hereby amended to read as follows: 7.24.100 Annual rates and charges Annual charges shall be calculated as a function of the total square footage ( "TSF ") of each lot tract, or parcel served. This annual charge is comprised of the following components: Operation and Maintenance ("O&M") charge = $0.0137 0.04 -29 x TSF; and • Capital Improvement Program ( "CIP ") charge = $0. 0059 x TSF. All moneys billed and collected p to this Section shall be deposited in the Irrigation Operating Fund pursuaint to YMC Section 3.112.020. 7.24.1 Effective date for rates The rates set forth in YMC Section 7.24.100 shall become effective on January 1, 1998 March 16, 1999 and shall remain in effect until amended by action I of the City Council. PASSED BY THE CITY COUNCIL, signed and approved this 16 day of February 1999. ATTEST: John Puccinelli, Mayor X f � , Karen Roberts, City Clerk Publication Date: 02 -19 -99 Effective Date: 03 -16 =99 • • BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. 1 `f For Meeting of February 16, 1999 ITEM TITLE: Proposed Irrigation Rate Adjustment. SUBMITTED BY: Dueane Calvin, Water /Irrigation Manger Dave Brown, Water /Irrigation Engineer Glenn Rice, Assistant City Manager CONTACT PERSON/TELEPHONE: Dueane Calvin 576 -6480 SUMMARY EXPLANATION: The rate increase (6 %) recommended in the 1998 Irrigation Cost of Service and Rate Study (COS) received a tie vote from the Council at the December 1998 budget hearings. At that time additional information was to be provided for future reconsideration by the Council. Accordingly the additional information has been provided for the Council's review and potential action. The City Attorney advises that the time has lapsed under Council rules for a general reconsideration motion. However the matter may now be introduced as a new item of business for the Council agenda. The original recommended operation and maintenance increase of 6% contained in the 1998 COS is presented hereinafter as Option I. At the request of Councilman Barnett staff has also provided basic information and legislation for a second option that embodies a one year, 4% increase in the operation and maintenance rate. continued Resolution Ordinance X Contract Other (specify) Funding Source 475 Irrigation Operat' g Fund & 479 Irrigation Capital Fund APPROVED FOR SUBMITTAL: ity Manager STAFF RECOMMENDATION: Staff respectfully requests City Council to enact by ordinance, an Operation and Maintenance Rate Increase per Option I, or alternately per Option II. COUNCIL ACTION: Option I Ordinance ($0.0137) was passed. ORDINANCE NO. 99 Option 1: The COS estimated that with a 6% increase in rates, there should not be a need for a further increase in the operation and maintenance charges until after the year 2000. It is estimated that a 6% rate increase will generate additional yearly revenues of approximately $40,000 in 1999. Actual revenue levels will vary due to implementation timing, and other factors. Option 11: It is estimated that a 4% rate increase will enerate additional revenues of approximately $26,670 in g pP Y 1999 due to the timing of implementation. However, due to the historic, and volatile nature of the financial needs of the irrigation system, thisi; increase is recommended for only 1999. Actual revenue levels will vary due to implementation timing, and other factors. Capital Improvement Rates: The capital improvement project being proposed for implementation in late 1999 and early 2000 will utilize funds being generated by the existing Capital Improvement Charge, as will the funding for completion of an Irrigation Comprehensive Plan, which is expected in late 1999. 1I II ik Jf MEMORANDUM ?} ; Water/Irrigation Division Tuesday, February 09, 1999 To: Honorable Mayor, Members of City Council and City Manager From: Glenn K. Rice, Assistant City Manager Dueane Calvin, Water/Irrigation Manage Subject: Further discussion materials related to proposed 1999 Irrigation Rate Increase We are requesting that Council give further consideration to the major factors that are driving the operations cost -of- service adjustment proposed for 1999, and to give the utility financial relief in the form the proposed 6% rate increase in operating revenues, or approximately $40,000 annualized. Listed here in bullet form are the items that staff considers to be the most significant drivers behind the proposed rate increase: 1 • Acquavella litigation � • Extra - ordinary repairs • Properties being withdrawn from the Utility • Labor settlements /reclassification • Canal company water share increases • Total operating reserves These factors are discussed individually and in detail in the follow paragraphs. Acquavella litigation I The last three years have seen significantly higher legal costs in this litigation, which have created a large drain on the financial resources of the utility. In mid to late 1995 it was determined that our prior efforts in defense for this litigation had not been up to the highest standards, and in fact could place much of the City's water rights in jeopardy. At that time it was decided that there should be a complete analysis made of the City's claims and defenses to date. l During the first several months of 1996, the City Attorney, Water /irrigation Division staff and outside attorneys researched and reviewed all documentation then in the court record. As a result of that research and review a memorandum was prepared, and a motion to the court requesting that the City's hearing record be re- opened. This was so that the record could be more fully addressed in matters surrounding those claims and their defense. The judge disallowed that motion, but was thoroughly informed on the basis of the content of the memorandum, and its significance to our claims. In 1996 the City spent $49,934 in irrigation funds and $73,606. of water funds in the research of the court record and ultimately in the submittal of that motion to re -open. Although the judge denied the motion, the research and findings supporting the motion provided a significant foundation for the City's presentation at the exceptions hearing conducted in early 1998. Further extensive research and preparation were conducted by staff and outside attorneys througI out 1997 preparing for the exceptions hearing, at a cost of $56,422 to Irrigation and $135,671 to Water. The exceptions hearing which was conducted in response to the judges preliminary report took place in March 1998, as previously indicated a substantial amount of time for both staff and the outside attorneys was required, and at a cost of $55,000 from the irrigation fund and $98,205 for water fund. For 1999 we have budgeted a minimal amount of$35,000 from irrigation funds and $75,000 from water funds for Acquav litigation. Based on our belief that the bulk of challenges to the courts final order will be with the domestic side of our water rights. These costs could escalate significantly, should Judge Staffacher deliver his Final Report during the course of the year. 11. Extra - Ordinary Repairs • Another significant factor is the escalating cost of making extra - ordinary repairs to a failing irrigation system. In the last few years this cost has risen from $6,000 — $12,000 per year to be in excess of $35,000 per year. Each time we must make a repair the totality of the involvement continues to escalate. This is all directly related to the size of the breaks /leaks that occur and on their frequency. The earlier sited example on "F" street is not isolated incident, but is more the norm in today's operation and maintenance program. The professional services line item in our budget where the `outside' assistance are expensed does not include any materials costs, and continues to be a relatively large budget item. In late 1997 staff presented a request to Council asking_for approval to reconstruct and 3,000 ft., of 32" dia., steel pipe that was severally deteriorated. Aside from the extremely poor condition of the pipe, there was i4the added fact that it crossed diagonally under a large number of private properties. This reach extended from 29 & Castlevale to 20 and Willow. The potential liability for damage from leaking and failed pipe sections through area was extreme. With Council's approval the work was undertaken, and completed just short of the start-up for the irrigation season in the spring_of 1998. All but $21,000 dollar of the$356,000 project was funded by a loan from the City's credit line. The $21,000 came from the irrigation cash reserve. In the fall of 1998 irrigation paid a $20,000 interest payment on the borrowed monies. The preceding rehabilitation project was the first such project that has ever been undertaken on the irrigation system. Unfortunately, this rebuild did not make any significant gains in our ability to serve our customers, and we believe that this circumstance will continue to permeate the first few years of our future reconstruction involvement. ii This issue (money spent with no apparent gain in service) often drives much of the discussion centered on the irrigation utility. We hear, "You continue to raise the rates • and my service continues to get worse, when are you going to do something to change that ?" The extensive deterioration th many of the systems, and primarily the 308 means that every time we make { a large repair in one location we generate bigger problems at other locations in the system. Some of these become evident almost immediately, other may not surface until some future date when the leak has become so large that the ground can no longer take in all the water leaking from the system. The cost of `repairs and maintenance' alone, which basically represents the costs associated with the purchase of specialized pipe, fittings, and valves to accomplish this function, have risen from approximately $55,000 in 1996 to a budgeted amount of $80,000 for 1999, a 45% increase. 1 Property withdrawn from the Utility The one time loss of revenues that h been brought about as a result of properties withdrawing from the utility is fairly substantial, approximately $17,000. In 1998 the withdrawals amount to approximately 1,326,949 sq. ft., or 1.5% of the assessable square footage. Historically, and in the 10 years preceding the creation of the Irrigation Utility square footage remained relatively stable. In fact the overall change had been quite small during that time period, per following table: 1982 . assessable sq. ft 91 ,735,311 1988 a' 91, 503, 579 1997' l 90, 649, 715 1998 89, 322, 766 r Labor settlements /reclassification f • The 1999 projection for Salaries & Benefits vs. Total Budget are shown below for irrigation. The numbers in the last two columns identify the increases that are directly related to the contract settlements fo f the last three years, and are as follows: Budget Salaries /benefits % AFSCME % $ Amount 1:999 1,663,906 475;864 28.56 3.0 14,276 1998 1,670,709 401,779 J 24.05* 2.61 10,486 1997 1,110, 850 366,264 j 32.97 3.0 10,987 Canal Company water share charges Over the last several years the Canal Companies that provide irrigation water to the Utility have had to increase their charges in response to the same rising cost of operation and maintenance that faces the City. In _1996 the city budgeted $160,000, and 1 1997 and 1998 numbers are for the - end -of -the year. 2 Numbers have extracted from the preliminary budget documents for the respective years. III . II in 1999 we budgeted $170,000. Several of the canal companies still have not conducted their annual meetings, where the assessments are determined for the coming year. One canal company has informed us that f they will increase the cost per share by 10% for 1999. That will amount to approximately $6,000 over and above our budgeted amount for water shares in 1999. Total Operating Reserves Historically the level of reserve that we tried to maintain was approximately 6 months our estimated operation expenses for the coming year. In 1997 and again in 1998 this level was projected to be $325,525. Even with the increase it is estimated that our reserve level will fall to about 1/3 of that level approximately $106,000. Based on the 1999 estimate of expenditures, prorated for one (1) month (total divided by 12) the required amount would be $143,600+ Today most utilities, in fair to good conditions, have established operating reserves at one and one -half month estimated expenses. Summary o Again we wish to point out that under Option 1, the proposed 6% increase for 1999 would be budgeted for approximately 10 months of 1999. However due to the timing for implementation of the increase, and the billing and payment cycles the actual revenue generated by the increase for 1999 will be approximately $40,000. Generally this same circumstance applies under Option 11 the proposed 4% increase would be budgeted for approximately 10 months of 1999. However due to the timing for implementation of the increase, and the billing and payment cycles the actual revenue generated by the increase for 1999 will be approximately $26,670 The original study previously submitted for your consideration indicates that by enactment of a 6% rate increase, and barring some extreme, unforeseen circumstance, further rate increases for operation and maintenance are not anticipated until after 2000. This confidence in the financial stability of the irrigation utility declines rather rapidly, if the increase is granted at some lessor figure. Recommendation Staff respectfully requests City Council to enact by ordinance, an Irrigation Operation and Maintenance Rate Increase per,;Option I, or alternately per Option II. 3 This Option was developed at the request of Councilman Barnett. Iv II OPTION II ORDINANCE NO. 99 AN ORDINANCE relating to increasing the irrigation rate charged for operation and maintenance, amending_Sections 7.24.100 and 7.24.110 of the City of Yakima Municipal Code. BE IT ORDAINED BY THE CITY OF YAKIMA. Part 4. - Chapters 7.24.100 and 7.24.110 of the City of Yakima Municipal Code is hereby amended to read as follows: 7.24.100 Annual rates and cha Annual charges shall be calculated as a function of the total square footage ( "TSF ") of each lot tract, or parcel served. This annual charge is comprised of the following components: Operation and Maintenance ( "O &M ") •charge = $O. 0129$0.0134 x TSF; and Capital Improvement Program ( "CIP ") charge = $0. 0059 x TSF. Au moneys billed and collected pursuant to this Section shall be deposited in the Irrigation Operating Fund pursuant to YMC Section 3.112.020. 7.24.110 Effective date for rates • The rates set forth_ in YMC ,Section 7.24.100 shall_ become effective January 1 1- 998March 16, 1999 and shall remain in effect until amended by action of the Council. • PASSED BY THE CITY COUNCIL, 'signed and approved this 16 day of February 1999. . ATTEST: John Puccinelli, Mayor Karen Roberts City- Clerk Publication Date: • Effective Date: •