Tuesday, May 10, 2016

City Council 5-Apr-2016: Utility Rate Study, Library Re-write …

imageAbout 30 people attended the meeting. Most were there to participate in the discussion on a rezone request for 7.25 acres of land located in the northeast quadrant of Highland. One of the most interesting items on the agenda was the library report. The other was the Utility Rate Study update. 

As a preamble to the meeting notes I would like to give some background and share personal thoughts relative to the Utility Rate Study underway which will recommend rate increases for each of the utilities. Please note that since I am publishing this so late I’ve included the utility rate data from the May 3rd council meeting which has the final recommendations (see item 10).

My Perspective On the Utility Rate Study

There are charges that appear on each of our utility bills which generate revenue for the following enterprise funds:

  • Culinary water (water base + water overage)
  • Pressurized Irrigation (PI Water)
  • Sewer (Sewer + Timp Sewer District)
  • Storm Drain/Sewer

2015-2016 Utility Expense Budgets

Each fund is managed as a separate entity with its own revenue source and expense items (personnel, maintenance, and capital expenses). By law the city cannot use excess cash from these funds for general fund expenses (roads, parks, police, fire …) unless the council approves the action and the transfer is treated as a loan. Note, enterprise funds may be transferred to the general fund without the payback requirement if the council goes through the notice and transfer requirements required by state law. The council can transfer cash from the general fund to an enterprise fund but has not done so for at least 5 years.

Over the last year city staff has produced 10 year maintenance and operation plans for each of these enterprises. These were reviewed and approved by the council, often after much discussion. These included not only projected maintenance costs (e.g. pump rebuilds) but also anticipated capital expenses (pump replacement, sewer line expansion …) Our instructions to staff on approving each of these was to review and update these on an annual basis.  Note, if you go the end of any of these plans you can see a summary of the maintenance and capital expenses in table form.

After reviewing these plans it was quite obvious that a rate study was warranted and we put a bid out to have the study performed by an outside firm. Zion’s, who performed our impact fee study, won the bid and the study is nearly complete. The study used the approved plans as input and looked at each fund from the standpoint of what rate will be required for each fund to maintain a sufficient reserve and cover the planned maintenance and capital expenses. Zion’s provided both a pay as you go model and a model where 20-year bonds were used to create a smoother cost curve for residents.

From the outset I vigorously opposed the bonded approach. I also believe that we should take an analytical approach to this rather than a political approach. By this I mean we should see where the numbers fall instead of dictating that they cannot exceed a certain amount because that would be unacceptable to some residents.

As we reviewed the progress of the study, each of the prior approved capital expense items were looked at again. As a result several items were taken off the list such as those related items which would be required solely as a result of development of the state owned land between the High School and the Development Center. Pressurized irrigation meters were also eliminated because of the high cost. Additionally, the installation of chlorination systems at each culinary water well was not moved up (I supported budgeting to be able start this within the next 3 years).

I believe it the city council’s obligation to approve a plan that we deem is in the best long term interest of the city, be sure that this is based on the best data that we can gather and share this with residents. I have endeavored to do this by providing notes on each council meeting and by giving you access to the same data we see. I also believe the most accurate picture is provided by giving you the best estimate we can on how your rate will be impacted in specific dollar amounts rather than simply citing a percentage. Leading with the percentage increase or decrease can create confusion. For example, if I told you a specific rate was going to be raised by 20% you might think that was OK unless the base rate was $250/month. On the other hand you might be very concerned if I told you a rate was being increased by 100% even though the base rate was $2.00.

Note, some have compared a utility rate increase to a tax increase. I suppose that if you think of it as “the government” getting more of your money then that could be true. However, unlike a tax it is not a crime to get behind on a utility bill. Your water can be shut off (not sure how your sewer can be shut off) but the city cannot take your home. I think a more fair comparison is to your electric bill, which by the way has increased by about 4.3% per year for the last 10 years. Our last utility rate change was in 2011. From my point of view the utilities are a government owned business (scary, I know) which needs to break even each year plus have a sufficient reserve to handle unforeseen expenses and planned maintenance and capital expenses. Any increase is a cost of living increase but no different in my mind than an increase in the electric power rate.

If a utility fund does not have a sufficient reserve or enough cash to pay for planned expenses then I believe it is our responsibility to revise rates to ensure it does. The PI reserve fund currently stands at  $520. Not much for an enterprise that spends $1.8M per year. So even if we had no maintenance or capital expenses to save for we would still need to raise PI rates.

Fun Facts RELATED To The Utilities

  • You may have heard that the pressurized irrigation system provides residents with an unlimited supply of water to use on our land. Prior city staff members have made such statements but this is absolutely not true. All of the properties served by pressurized irrigation put water shares at rate of 3 acre feet per acre into the system (note,1 acre foot = 325,851 gallons). That means that if you have a 1 acre parcel you are entitled to use up to 3 acre feet of pressurized irrigation water per year. On low water years the city may only receive 60% of is water allotment. In this case each property owner is only entitled to use 60% of its share. Since we do not meter PI water this is unfortunately impossible to enforce. It would cost over $4M to add meters to all existing PI connections which is not really feasible in the near future.
  • The largest part of your sewer bill (in my case 87%) goes to the Timpanogos Special Service District and is a rate we do not control. We do have one council member (Brian Braithwaite) who serves on the 13 member board.
  • Highland drinking water is not treated prior to reaching our tap. It comes to us directly from underground wells. We are the largest city in Utah that does not chlorinate its drinking water.
  • The Pressurized Irrigation Bond will be paid off in 2022. Bond payments are about $428,000 per year. That is the primary reason for the projected drop in PI rates in 2023.
  • Recent staff and council actions that have saved the city money:
    $700,000 was saved by rerouting the Highland Fields sewer line
    $150,721 saved over 11 years by refinancing the Building Bond
    $379,197 saved over 11 years by refinancing the Parks Bond
    $17,600 saved per year by outsourcing street sweeping service
    $175,000 saved from the road reconstruction budget by simultaneously upgrading the sewer on the 10400 North reconstruction

By the way city staff and put together an excellent summary of why the rate study is being conducted, where we are at, and what the next steps are in the process. Click here for details. I appreciate the effort that they’ve made to be transparent. I know this is a an issue which concerns many residents. I personally welcome any input and especially appreciate it when people do their homework first.

Council Meeting AGENDA / MINUTES

Public Comment

  • Representatives from the Distinguished Young Women of Highland thanked the council for discounting the conference room rate (actually, Councilman Irwin had offered to pay for the room) and gave council members tickets to their upcoming program.

  • Dennis Kane wanted to know if culinary water was more expensive than pressurized irrigation water. He explained that he is paying more for water than gas or electricity. We invited him to stay to the end of the meeting where we would be discussing the utilities rates. Note, he did stay and then said afterward regarding our discussion “if all residents were here they would have a lot more confidence that the council was trying to manage funds in the best interest of the residents.”

Presentations

  1. Room for Everyone, Highland City Library Renovation Plan – Janae Wahnschaffe, Library Director and Carol Rice, Outreach Director
    Since joining the library a couple of months ago Janae has worked with staff to re-evaluate the physical organization of the library and has put together an plan entitled “Room for Everyone: Highland Library Re-Write.” The council and library board are very supportive of this and the other changes Janae has implemented that more effectively utilize our tax dollars.

    2016-04-05 Library Re-Write

    The Re-Write will make significant changes to the children’s section, create a teen area and increase the number of books available to patrons (which qualify Highland to becoming a full member of the North County Library Coop). Funding for the “Re-Write” will come from donations.

    Click here to view a short presentation on the “Re-Write” and here for additional details.

CONSENT ITEMS

  1. MOTION: Approval of Meeting Minutes for the City Council Regular Session – March 1, 2016: Approved unanimously. Click here for details.

  2. MOTION: Approval of Meeting Minutes for the City Council Regular Session – March 15, 2016: Approved unanimously. Click here for details

  3. MOTION: Final Plat Approval – Pincock Estates located at 10215 Alpine Hwy. This is for a 5 lot R-120 development as shown below:

    2016-04-05 Pincock Estates - sm

    Approved unanimously. Click here for details

  4. MOTION: Lifting of the Temporary Land Use Regulation – Application and Approval of Final Plats North of 11800 North. Because of the uncertainty on how a lawsuit regarding a prior unpaid debt that the city lost track of we froze the approval of land development north of 11800 N. Had we been aware of the debt impact fees would have been revised. With the issue settled (see item 6) the restriction can be lifted. Approved unanimously. Click here for details.

  5. MOTION: Ratification of the Settlement Agreement with HIWO Investments - DAE/Westbrook Development Agreement. DAE/Westbrook developed infrastructure (roads, sewer, water) that benefited homes built north of 11800 N east of Highland Blvd. The city agreed make payments towards a $700,000 debt to  DAE/Westbrook beginning in 2002. This debt was purchased by HIWO as a result of DAE/Westbrook’s bankruptcy.  The city had made no payments towards the $700,000 obligation. The debt was settled for $400,000, $200,000 of which will be paid this fiscal year and $200,000 which will be paid next. Approved unanimously. Click here for details.

  6. MOTION: Approval of a Contract for the 10770 North Storm Water Overflow Project - Cole Peck Co. This is to repair a hillside that was washed out by a large storm event this past year. Approved unanimously. Click here for details

ACTION ITEMS

  1. PUBLIC HEARING / ORDINANCE – Property Rezone – 11550 North 6000 West: The owner of 7.25 acres of county land that is surrounded by Highland city requested that the land be annexed into Highland and zoned R-1-20 (half acre lots). Additionally he asked for waivers to several Development Code and Design Criteria. The surrounding property is R-1-40 and the master plan shows the property to be zoned R-1-40. Most of the neighbors on the north and south would prefer that the property remain R-1-40 although the property owner to the east would be OK with R-1-20.  The planning commission voted to recommend denying the rezone and waivers by a vote of 5 to 0. The property in question is shown below.

    2016-04-05 N Gable Ridge

    After much discussion, including a lot of resident input, the property owner withdrew his request. He will re-design the project and then take it back to the planning commission. Using a R-1-30 zone was discussed although this new zone had not yet been approved. Click here for details

  2. MOTION: Provo River Aqueduct Construction Financing – Murdock Canal. When the Murdock Canal was piped the cost of the project was apportioned to the cities which benefited from the project. We are helping to pay off a bond that was issued for this project. The debt is due October 2017. Our share of the payoff is $234,000 plus $52,000 a year in annual payments. New water shares were created by piping the canal (this represents water not lost through seepage and evaporation). The question on the table is whether whether the city should sell approximately 40 of the 202 shares of new water. Note, these shares will be sold to developers building in Highland. The council unanimously approved this action with a note to verify that the owed amounts are correct (Ed Dennis had expressed some concern that there might be an issue with the amount we were deemed to owe). Click here for details.

MAYOR, CITY COUNCIL & STAFF COMMUNICATION ITEMS

  1. Utility Rate Study – Matt Millis, Zions Bank. Click here for an up-to-date summary with background data of the utility rate study. Click here for the most recent (May 3, 2016) presentation.

    The total monthly utility bill (culinary water, pressurized irrigation, sewer, and storm sewer) for a home on a sitting on a 1/2 acre lot and which uses 12,000 gallons of culinary water and 9,000 gallons of waste water will rise to $94.84 from $81.15 (storm sewer will increase by  $1.32 and PI  by $12.37). Following a rate change Highland would go from having the lowest rate in the surrounding cities to the 3rd lowest. In dollar terms whereas our rate was $11.07 lower than Alpine it would be $2.62 higher. The new rate is still over $15 less than the average of Highland and the surrounding cities. Please note, that unlike Alpine or Cedar Hills, Highland does not have a monthly EMT/Public safety fee (this fee is not included in the comparison chart). See charts below:

Click to open up a separate window to view the chart and data in Google Sheets.



2016-05-03 Utility Rates Total
  1. Speed Sign Information – Justin Parduhn, Public Work Operations & Maintenance Director. March data from the speed signs had not yet been downloaded. In general based on the data the feeling is that the radar speed signs had helped keep speeds level. A long term benefit is that the city can watch trends and identify when areas need to be patrolled.

STAFF AND COUNCIL ACTION ITEM LIST

Description

Requested by / Owner

Due Date

Status

Road Capital Improvement Plan for FY 15-16. Prioritize and Communicate to Residents

City Council

Est. June 2016
 

Study underway

Determine Park Use for Recreation

City Council
Parks Staff

2016

In progress

HW Bldg. – PW Storage Status

City Council
Mayor/PW

Ongoing

In progress

Council Policy and Procedures City Council
Jody
Aug 2016

In progress

Salt Storage Building

Council
Justin

Apr 2016 Engineering review
Election Policy City Council/
Jody Bates
Aug 2016 In progress

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