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HomeMy WebLinkAbout05/15/1989 Special Meeting 158 SPECIAL MEETING - MAY 15, 1989 _ JOINT MEETING WITH YAKIMA COUNTY COMMISSIONERS 1. ROLL CALL The City Council met in session on this date at 2:30 P.M. at the County Courthouse, Yakima, Washington. Mayor Pat Berndt, presiding, Council members Clarence Barnett, Henry Beauchamp, Lynn Buchanan,; Jerry Foy, and Bernard Sims present on roll call. Council member Lynn Carmichael absent and excused. Yakima County Commissioners present were Chuck Klarich, Alex Deccio and Graham Tollefson. City staff members present were City Manager Zais, Assistant City Manager Stouder, Dennis Covell, Director. of Engineering and Utilities, Chris Waarvick, Wastewater Superintendent, Glenn. Rice, Director of Community and Economic Development, Chuck Greenough, Budget Analyst, and City Clerk Roberts. County staff present was Dan Hesse, Public Works Director..: Also. present -was . Bob Wubbena,; County. , from Economic and Engineering Services,.Inc. ., :c 2. DISCUSSION REGARDING YAKIMA SEWER RATE SURCHARGE Commissioner Tollefson called the meeting to order and commented the purpose of this meeting is to share information. He stated when the County received the City's surcharge proposal, they hired a firm to do an analysis of that matter. After his report was received, a copy was forwarded to the City for comments. Commissioner Tollefson asked Bob Wubbena to review his report so Council can understand the points on which the County's analysis of the surcharge revolved. Bob Wubbena summarized the instructions and objectives given to him by the County. He then reviewed the 1976 agreement, highlighting the preamble. He said he was instructed to look at the underpinnings of that agreement. The second objective was to review where the County is at this point in time. The County still supports the premises of that agreement, but they have a responsibility to make sure the surcharge rate is equitable. He said he sat down with the County's and City's staff to review and reconstruct how the City calculated the surcharge. He said he would like to summarize the comparison based upon the City analytical process and why he arrived at a number somewhat less than the City. He distributed his calculation sheet, which he then reviewed. Under the O &M expenses where we have 3.5 %, we went back to the Brown and Caldwell 1981 City cost of service study, and went through an analysis category by category. Usually the owner of the system has to pay for all excess capacity but he did not try to calculate that difference. The purpose of this comparison is to illustrate that you can show the numbers in the allocation of cost using the City's own approach, but looking at the flow and return on investment a little bit differently, resulting in a different bottom line, $434,000 vs $589,000. He said he received the City's critique of his report, but believes his numbers are correct and to provide better numbers would require an in -depth analysis. City Manager Zais referred to charts and distributed supplemental material to Council and the Commissioners. He stated the City takes the view that City residents are owner /investors, as well as users. He stated Council passed an ordinance at the beginning of the year providing for successive annual sewer rate increases of 16 %, 16% and then 10 %, assuming there would be an increase in the surcharge. If a resolution is not found regarding this issue, the City will lose the revenue programmed for capital investment projects, and may have to assess all customers an additional 4 %. He reported Chuck Greenough, a staff CPA, the law firm of Preston, Thorgrimson, a rate economist from CH2M Hill, and Chris Waarvick, Wastewater Superintendent, were involved in the development of the surcharge rate. He reviewed the second chart, Cost Basis Comparison, based on 1987 operations cash requirements: O&M - $2.4 million, Debt Service - $637,000; Capital Reserve - $547,000, /1 • 158 SPECIAL MEETING `= f40AY 15, 1989 JOINT MEETING WITH YAKIMA:COUNTY COMMISSIONERS • .totaling $3.6 million versus amount col=lected, leaving a difference of $117,950. The utility charge deficiency from County customers is $138,000. In calculating this figure, he stated the interceptor lines weren't included in the costs. He stated the return on investment is calculated on City costs only. The City's treatment • facility plant figure was calculated by subtracting the Federal participation; return on investment is. calculated on this amount. Commissioner Klarich asked what is the annual debt payment for the $1.3 million? Chuck Greenough stated that $1.3 million represents the total City investment - both debt and cash investment. He said he can't separate that amount but he could come up with an estimate Commissioner Klarich asked that the City give them the annual payment the City makes to its own budget to _pa off the $1.3 million for the payment on the interceptor. City Manager Zais then reviewed another chart, Sewer Surcharge Fact Sheet. Commissioner Tollefson said they have problems with the CCRC issue. City Manager Zais commented this chart shows where we are vs what is proposed - compares City rates for City and County customers. Commissioner Klarich asked how many customers are there in the County? Chris Waarvick stated there are 22,000 customers in the service area and about 2,000 in the County. City Manager Zais stated the adopted rate went into effect; residential rate is • $10.16 for City users and $15.21 for outside City customers. In the 1989 budget the inside rate was $10.16 and the outside rate was $19.91 at the 96% increase. From what is adopted now, the $19.91 is a 30% increase. Bob Wubbena commented he thinks the City's presentation is consistent with what he understands was the City's approach. He said he thinks it's important `use the proper numbers. He said he's not saying.the approach is not proper, but the numbers that went into it sway. the bottom line. Council member Sims stated the O &M expenses at $174,000 are not in dispute by the County Commissioners and if that is right, he asked if they would clarify the area of dispute. Commissioner Tollefson said they did not 'question.the City's operations costs; they are questionin9 how much of the plant equipment retains depreciation costs and return on investment. He said the County's goal is to provide sewer service at the lowest cost. .Council member Sims stated if the O &M is not in question, the focus is on the depreciation and return on investment: Commissioner Klarich stated his problem is that 10% of the people would pay of the cost.' Mayor Berndt stated it boils down to the owner versus the non - owner. Mr. Tollefson stated it pressures them to say we need to. be on the owners side then.. . (Alternative No. 1) Dan Hesse, Count Public Works Director, requested a different cost analysis be done within the next 90 days • and have it by a subcommittee from the Joint Committee mentioned, in the 1973 Agreement. The 50% surcharge would remain in effect during that time. Council member Barnett asked if the cost of the study would be shared by the City and County? Mr. Hesse said they are ready_ to discuss that, but feel that is a cost of the utility and should be done anyway. Council member Foy asked if the County would support the findings of the study if it supports a 94% or 96% surcharge? Our problem is we forecast it into our budget, so we are already behind on our projected revenue. Mr. Hesse stated he doesn't think the cost analysis will say if either percentage is right, they would look at methodology and we know at • the end, we all agree on a figure. Council member Sims stated he thinks their proposal is a good one, but it gets back to who is going to pay for the lost revenue since January until this-study is done. He proposed the rate be retroactive to January 1989, so we can make up the difference in revenue'loss. Commissioner Klarich stated we are talking about a two month extension, about a $30,000 loss out of $2.6 million budget, which should not be a stumbling block for the City. City Manager Zais stated every dime is important to the City and this is $30,000 - 50,000. The issue of the surcharge being retroactive should be considered by the County as much as the City considering the additional cost of the analysis. - The figures may end up to be less than 96 %, but we will have to recapture the lost revenue. /2 160 SPECIAL MEETING - MAY 15, 1989 JOINT MEETING WITH YAKIMA COUNTY COMMISSIONERS Dan Hesse stated there is another alternative; (Alternative No. 2) under the 1973 Agreement, we could declare an impasse and get an arbitrator to resolve the matter. (Alternative No. 3) Another alternative is the County could provide sewer service to its citizens. -We don't want to go into the sewer business, but we don't believe the 96% is equitable. City Manager Zais said the City has exclusive rate - making authority a virtue of its ownership and would have to get a legal opinion to see if rates can be an,issue of arbitration. Council member Foy stated he heard three different thrusts to consider and request a copy of these alternatives. He said he thinks we have some feeling on where each other is caning from. Commissioner Tollefson stated that is all they expected today. Ines Rice, 4409 W. Arlington, stated she has been in this since the early 1970's, attending the Council and Commissioner's meetings so she is aware of the background of these issues. She asked why these signed agreements are not being honored. She said she feels . sorry for the County people having that high rate, but she feels sorrier for herself because she doesn't want to subsidize the County user, and that is what she would be doing. There being no further business, the meeting adjourned at 4:04 P.M. READ AND CERTIFIED ACCURATE BY:_, %%- I - //)) CIL fro / ATE j COUNCIL 1 w , DATE c ) .„at -7 /1 / 7 MAYOR ATTEST: 0 >2 (.1,) CITY CLERK • • /3