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HomeMy WebLinkAbout01/23/2001 Adjourned Meeting / Study Session 95 CITY OF YAKIMA, WASHINGTON ADJOURNED MEETING /STUDY SESSION OF THE CITY COUNCIL JANUARY 23, 2001 - 7:30 A.M. POLICE STATION /LEGAL CENTER - 200 SOUTH 3 STREET 1. ROLL CALL Present: Council: Mayor Mary Place, presiding, Council Members Clarence Barnett, Henry Beauchamp (present after 7:47 a.m.), Lynn Buchanan, Larry Mattson (absent after 8:25 a.m.), John Puccinelli, and Bernard Sims Staff: Dick Zais, City Manager; Glenn Rice, Assistant City Manager; Rita Anson, Director of Finance and Budget; Chris Waarvick, Director of Public Works; Dueane Calvin, Water and Irrigation Manager; Dave Brown, Water and Irrigation Engineer; Cindy Epperson, Accounting Manager; Edna Pettyjohn, Accountant; Bert Tabayoyon, Customer Services Manager; and City Clerk Roberts Also: Paul Wagner, Corolla Associates, and Pam Lemoine, Black & Veatch 2. COST OF SERVICE STUDY FOR DOMESTIC WATER Dueane Calvin, Water and Irrigation Manager, stated that a video presentation had been prepared to discuss the capital improvements study as well as a power point presentation on financing the improvements. • Video presentation is shown to Council The video described the locations and costs of the improvements that are being recommended: 1) Installation of improvements to the fish screening at the Water Treatment Plant intake; estimated cost $550,000 2) Flash mixer outside the Water Treatment Plant at the point the water first comes into the plant; estimated cost $105,000 3) , Replace and move certain chemical feed systems inside the Plant; estimated cost $615,000 4) Update chemical feed system at the Plant; replace with gas chlorine generation system; estimated cost $645,000 5) Install mechanical flocculation system and smudge removal system outside the Plant; estimated cost $1.6 million 6) Replace pipes that control water flow; estimated cost $550,000 7) Replace filters at the point water discharges from pipes; estimated cost $1.5 million 8) Install fluoridation system at the plant required by voter referendum; estimated cost $420,000 ($180,000 paid by WA Dental Association, plus possible $120,000 additional grant money) 96 JANUARY 23, 2001 — ADJOURNED MEETING 9) Replace existing backwash recycle lagoon with concrete lined solid system and pump; estimated cost $1.5 million 10) Relocate Wright Avenue Well (20 Avenue at River Road) to Elks Park, transfer water right to Kissel Park; estimated cost $125,000 11) Future water capital needs (from City review); estimated cost $415,000 12) Construct two, million - gallon, reservoirs for southeast part of the city; estimated cost $250,000 13) Construct 9.5 million - gallon reservoir near 24 and W. Lincoln Avenues for fire flow capacity in the mid -city area; estimated cost $1.7 million 14) Complete looping of dead -end water main in Terrace Heights near Marti's Restaurant and 1 -82; estimated cost $75,000 15) Replace deteriorated, private galvanized water mains and eliminate dead - end mains in the city; estimated cost $175,000 each year for four years 16) Replace Viola /1-82 pipe crossing (under freeway) with larger water main; estimated cost $180,000 17) Connect two dead -end water mains (Longfibre Road and another near South 1 Street) with new 12" main; estimated cost $155,000 18) Replace water mains on East Mead between South 1S Street and 10 Street with new 12" main; estimated cost $175,000 19) Repair water main on West Mead Avenue and loop to South, 18 Avenue; estimated cost $175,000 O Corolla consultant provides detailed information about proposed improvements Paul Wagner, consultant with Corolla Associates, made a power point presentation to provide additional details about the most significant proposed improvements, including the project to move the intake upstream, construction of new flash mixer, upgrading the chemical feed system, installation of inside chlorine generation system, modification of contact basin, rebuild of the filter pipe gallery, rehabilitation of filters, and construction of new lagoons. He, Dave Brown, and Dueane Calvin, responded to Council's questions about these projects. © Black and Veatch consultant gives presentation about the Cost of Service Study Pam Lemoine, consultant with Black and Veatch, provided Council with a copy of her power point presentation on the cost of service. Council Member Sims commented that although we are building something new, he didn't see any study on the cost to operate. Dave Brown responded that the cost of chemicals, with the power cost, is slightly more than the current cost. However, there would have been costs for meeting process safety management rules that offset those increases. In addition, chlorine will soon be listed as a pesticide and,not having to accommodate the new safety regulations will save the City money. Council Member Sims also pointed out that nothing was said about increasing the plant capacity. Mr. Brown replied that would be done with the new wells. Ms. Lemoine focused the Council's attention on the cost of service methodology reviewing and expanding on the information contained in her handout. The following is a list of the information provided: 2 JANUARY 23, 2001 — ADJOURNED MEETING 97 1.. The Role of Rates in Strategic Financial Planning • Recover total revenue requirements • Comply with state and federal legislation • Reduce business risk • Be fair, equitable, and reasonable in the distribution of costs and design of rates • Encourage conservation • Meet policy objectives 2. Primary objective in Setting Rates • Ensure financial viability /stability Pay O &M expenses Pay debt service Provide for renewals and replacements Maintain /build reserves Meet debt service coverage requirements 3. Secondary Objective in Setting Rates • Be fair, equitable and reasonable in the distribution of costs and design of rates • Requires a cost of service analysis 4. Cost of Service Rate Analysis • Four Step Process Identify costs Allocate costs to functional areas Distribute costs to customer classes Design rates to recover customer allocated costs and meet other goals 5. Cost of Service Rate Analysis Ms. Lemoine reviewed two flow charts for projecting revenues, annual costs and data collection to develop a capital financing plan. The next step would be to develop units of service for customers, distribute allocated costs based on service requirement, and then develop the cost of service rates. 6. The Financial Plan Identifies Total Cost of Service Ms. Lemoine reviewed a chart that indicates the total revenue requirements for operating expenses and capital costs for test year 2001. The operating costs and capital costs have to be identified and then subtract revenue from other sources to arrive at a total cost of service which ends up being different than total revenue requirements. 7. Cost of Service Allocations • Accepted, equitable allocation procedure utilized AWWA manual M1 Recognized by Public Utility Commissions Accepted by courts 8. Cost of Service Allocations • Operating costs allocated directly, when possible, on the basis of the function being performed • Capital costs are allocated on basis of net plant investment 9. Cost of Service Allocations - Objectives • Costs allocated to utility functions • Each class' estimated individual and unique service requirements • Unit costs of service 3 98 JANUARY 23, 2001 — ADJOURNED MEETING • Proportional distribution of revenue requirements to customer classes • Determination of existing rates effectiveness in recovering allocated costs 10. Cost of Service Allocations — How Accomplished • Allocate costs to utility functions according to "cost causative" parameters • Estimate total customer class service requirements for each cost function • Divide costs by requirements for each function to get unit costs of service • Distribute costs to each customer class based on its share of total requirements for each cost function 11. Cost Causative Parameters • Annual volume of water used — base cost • Peak daily rate of water use — maximum day and maximum hour extra capacity costs • Number, size and type of customer (e.g., bills, meters, fire protection) • Type of service (e.g., retail, master meter) 12. Cost of Service Concepts Ms. Lemoine explained they allocate cost to maximum day as well as annual average day to the treatment plant. We do this with the water mains, too. 13. Service Requirements Determine Customer Costs Customer class demand characteristics Volume of water used Peaking characteristics Number of customers 14. Result of Cost of Service Analysis • Allocated total costs by customer class • Unit costs to be used in rate design 15. Result of Cost of Service Analysis (Financial Data) This chart provides financial information for Test Year 2001 for the customer classes inside city limits and outside city limits. 16. Design Rates to Meet Utility Goals • Balance needs Cost of service Utility policies /goals • Questions are entertained by the consultants and staff Ms. Lemoine and staff responded to Council's question regarding the misuse of the phrase "20% rate increase" when really meaning "20% increase in revenue needed." Asked what a private fire protection system is, Mr. Brown gave Boise Cascade as an example of a private fire protection system and explained why they are charged a monthly rate. He also explained how the projected increase in consumption was calculated to include infill within the city and change of uses. Referencing the volume - related charge, Council Member Sims asked how the 25.48% rate for residential was calculated; he requested the details. He also requested information on the top 50 users of volume in each category. Mr. Calvin stated staff would provide the detailed information. Council Member Barnett stated he still has questions about discrepancies in this report and the Municipal Code. Council Member Sims asked for information on the three -year average of consumption by each class of water unit. 4 JANUARY 23, 2001 — ADJOURNED MEETING 99 • 3. EXECUTIVE SESSION It was the general consensus of Council that those Council members who are able to stay can meet with the consultants and staff after the Executive Session to ask further questions. Mayor Place adjourned the meeting at 9:09 a.m. to Executive Session for the purpose of discussing pending litigation for approximately 20 minutes, to then meet again on February 6, 2001 at 7:30 a.m. for a Study Session on annexation. 4. RECONVENE At 10:03 a.m., the meeting resumed with a quorum of the Council present. Present: Council: Mayor Mary Place (in and out of meeting to accommodate other appointments), and Council Members Clarence Barnett, Henry Beauchamp (absent after 10:09 a.m.), Lynn Buchanan (absent after 10:46 a.m.), and Bernard Sims (absent after 10:45 a.m.) Staff: Dick Zais, (present after 10:23 a.m.); Glenn Rice, Dueane Calvin, Dave Brown, Edna Pettyjohn, Bert Tabayoyon, and City Clerk Roberts Also: Paul Wagner, Corolla Associates, and Pam Lemoine, Black & Veatch Staff and Ms. Lemoine responded to several specific questions asked primarily by Council Members Barnett, Buchanan and Sims. The questions, for the most part, concerned conflicting information in the Study and current provisions in the Municipal Code, the calculation of rate increases, and the impact to residential and industrial users. Council also asked staff to clarify several points in the Study and pointed out a few errors. 5. ADJOURNMENT The meeting adjourned at 11:00 a.m. • READ AND CERTIFIED ACCURATE BY: 17, / - L1 /7 © / ; UNCIL A; MBER ) SAT OUNC'r ME S R o DATE ATTEST: CITY CLERK d MARY PLACE, MAYOR An audio and video tape of this meeting are available in the City Clerk's Office 5