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Item # 3.
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| Town Council Regular Session |
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| Information |
| SUBJECT: |
| PUBLIC HEARING: RESOLUTION NO. (R)18-19, AUTHORIZING AND APPROVING INCREASES IN WATER RATES AND SERVICE FEES FOR THE TOWN OF ORO VALLEY WATER UTILITY |
| RECOMMENDATION: |
| On February 20, 2018, the Water Utility Commission voted to recommend that Council approve the proposed water rate increases included in the Preferred Financial Scenario. Staff also recommends Council approval of the rate increases proposed in the Preferred Financial Scenario detailed in the Water Rates Analysis Report dated March 2018. |
| EXECUTIVE SUMMARY: |
Pursuant to A.R.S. § 9-511.01 the Council adopted a Notice of Intent to increase water rates on March 7, 2018. The Notice of Intent established a public hearing date for May 16, 2018. The Water Rates Analysis Report was made available for public review and the Notice of Intent was published in the Daily Territorial on April 20, 2018 thereby completing the statutory requirements.
The Preferred Financial Scenario in the Water Rates Analysis Report proposes an increase in the potable water base rates. The financial impact of the proposed rates for a customer with a 5/8-inch meter is an increase of $1.83 per month. Customers with a 5/8-inch meter represent 88 percent of the total customer base. The average residential customer uses 8,000 gallons of water and would experience a 4.4 percent increase in their monthly water bill. The financial impact to all customers may be found in Appendix B of the Water Rates Analysis Report.
The Preferred Financial Scenario also proposes an increase in the NSF Returned Check Fee. The current fee is $25 and the proposed fee is $30. These fees allow the Utility to recover the costs associated with processing checks returned for insufficient funds.
If the proposed rates and fees are approved, they would become effective on July 1, 2018. |
| BACKGROUND OR DETAILED INFORMATION: |
Town Code Section 15-2-6 states the Oro Valley Water Utility shall be a self-supporting utility funded solely from revenue generated from utility operations. Revenues include water sales, service fees and interest income. The Utility does not receive any funds from the Town’s General Fund.
In accordance with the Mayor and Town Council Water Policies, Water Utility staff review water rates and charges on an annual basis. The Oro Valley Water Utility Commission evaluates staff recommendations based on a rates analysis to assure the recommendations meet Town policies and bond covenants. The Commission voted to recommend the Preferred Financial Scenario in the Water Rates Analysis Report on February 20, 2018. The Preferred Financial Scenario includes financial projections for a five-year period; however, the water rates are only approved for the first year of this five-year projection period.
In the past, emphasis was placed on developing commodity rates that would promote water conservation. The current tiered rate structure for the commodity rates encourages water conservation as intended. Because of the decline in water consumption, the emphasis of the rate design will now transition to increase the Utility’s fixed cost recovery to assure revenue stability. This will be accomplished with increases in the monthly base rates. The recommendation for rate increases for FY 2018-19 are as follows:
- Increase in the potable water monthly base rates
The financial impact of the proposed rates for a customer with a 5/8-inch meter is an increase of $1.83 per month. Since this is a base rate increase only, the increase will be the same for all customers with this size meter regardless of the volume of water used. Customers with a 5/8-inch meter represent 88 percent of the total customer base and include residential, commercial and irrigation classifications with the vast majority of those being residential. The average residential customer uses 8,000 gallons of water and would experience a 4.4 percent increase in their monthly water bill. The financial impact to all customers may be found in Appendix B of the Water Rates Analysis Report.
The reclaimed base rates and commodity rates will not increase as the reclaimed operating costs are being met with reclaimed revenues from the existing rates. Likewise, the potable and reclaimed groundwater preservation fees (GPF) will not increase since the expenses funded with GPF revenue are being met with revenues collected from the existing GPF rates.
The Preferred Financial Scenario includes an increase in the NSF Returned Check fees. NSF Returned Check Fees are charged to customers when payments for water bills are returned for insufficient funds. The Utility is proposing an increase of $5 per returned item. The current fee is $25 and the proposed fee is $30. The increase will allow the Utility to recover costs associated with processing checks that are returned for insufficient funds.
If the proposed rates and fees are approved, they will become effective July 1, 2018. |
| FISCAL IMPACT: |
| The proposed rate increases are designed to generate sufficient revenue to meet the revenue requirements, increase fixed cost recovery, assure revenue stability and maintain the overall financial health of the Town’s Water Utility. |
| SUGGESTED MOTION: |
| I MOVE to (approve or deny) Resolution No. (R)18-19 authorizing and approving increases in water rates and service fees for the Town of Oro Valley Water Utility. |
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