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Minutes - 03/05/2001 Workshop COUNCIL WORKSHOP MINUTES MARCH 5, 2001 TAPE READING Tape 1 Side A DATE. COUNCIL CHAMBERS, CITY HALL, CITY OF WOODBURN, COUNTY OF MARION, STATE OF OREGON, MARCH 5, 2001. CONVENED. The Water Master Plan workshop convened at 6: 10 pm with Mayor Jennings presiding. ROLL CALL. Mayor Councilor Councilor Councilor Councilor Councilor Councilor Jennings Bjelland Chadwick Figley Kilmurray Nichols Sifuentez Present Present Present Present Absent Present Absent Water Master Committee Members Present: Mike Kilmurray, Preston Tack, Charlotte Hillyer, Scott Burlingham Staff Present: City Administrator Brown, Public Works Director Tiwari, Public Works Manager Rohman, Water Superintendent Sutter, City Recorder Tennant Consultant: John Ghilarducci, Financial Consulting Solutions Group, Inc. Public Works Manager Rohman reviewed the committee work completed to date on the Master Plan. He stated that the committee has been working on a treatment pilot study, review of the location, source water production, regulatory updates, and rate and SDC study review. Water treatment was reviewed by the committee for the purpose of (1) satisfying public requirements which included removal of iron and manganese and treatment processes that would avoid the use of chlorine, (2) complying with changing federal and state regulations, (3) providing adequate water storage for fire and emergency situations and to improve the efficiency of operations, and (4) economically meet future water needs of the community. The committee is proposing that the following improvements be incorporated into the master plan to meet City needs to the year 2015: A) Water treatment plants be located at: 1) Industrial Park near National Way, 2) Parr Road near Centennial Park, and 3) Country Club Road adjacent to the existing water well, and B) Storage facilities (2.2 mil gallon in size) to be located at Industrial Park and Parr Road adjacent to the treatment plants. Another area addressed by the committee involved Source Water Protection which is a program administered by the Health Division and the Dept. of Environmental Quality. A Page 1 - Council Meeting Minutes, March 5, 2001 COUNCIL WORKSHOP MINUTES MARCH 5, 2001 TAPE READING required element of the program include delineation of existing wells and determining susceptibility for contamination which is currently being done by the Oregon Health Division. Voluntary elements of the program are developing a Drinking Water Protection Plan, and submittal of the plan to the Dept. of Environmental Quality for certification. He also reviewed the upcoming federal regulatory rules that the City will need to address such as arsenic levels, groundwater, radon, radionuclide, and contaminant monitoring. In regards to the water storage tanks, it was noted that these tanks will be located at ground level rather than elevated. John Ghilarducci stated that the water rates and system development charges are the two major sources of revenue for the water service. The last increase in water service rates was implemented in July 1992 and, in order to meet operational and capital improvement costs, a rate increase will be necessary between now and 2005. Key policy issues reviewed by the committee included 1) how to schedule the rate increases for the period of 2002 through 2005; 2) a cost of service analysis to determine the rate allocation for residential, commercial, and industrial customers; 3) conservation incentives in the water rate structure consistent with the cost of service analysis; 4) and the system development charge based on potential demand rather than the estimated actual demand. He briefly reviewed the rate study process utilized to develop two options relating to revenue requirement. The first revenue requirement (known as Scenario #1 which was adopted by the committee) would adopt a series of rate increases beginning in 2002. The rate increase would be 27% in 2002,27% in 2003, 20% in 2004, 20% in 2005, and 8.05% in 2006. After the year 2006, rate increases would be more in line with cost of living increases. The second revenue requirement (known as Scenario #2) would provide for a one-time rate increase in 2002 of 110% and the next rate increase would not be required until 2006 at which time the rate increase would be approximatelyI2.95%. He reiterated that the committee recommended Scenario #1 which does provide for a growth assumption of 3.4% per year whereas water demand would only increase by 1.4% per year based on conservation methods being used by customers. It was also noted that there will be a fixed charge based on meter size and a volume charge based on actual usage of water. Committee member Tack stated that the committee had compared the two rate systems to the year 2012 and they felt that the steady increase in water rates would be the best method to follow in order to meet estimated revenue requirements. Side B Consultant Ghilarducci then reviewed the cost of service allocation methods used to generate sufficient dollars to meet the revenue requirements outlined in scenario #1. The committee had reviewed 3 rate alternatives that could be implemented to meet the revenue requirements. The committee recommended Rate Alternative #1 as the rate structure to be implemented beginning in the year 2002. Discussion was held regarding the proposed rate structure which provides for a fixed charge based on meter size, and a Page 2 - Council Meeting Minutes, March 5, 2001 COUNCIL WORKSHOP MINUTES MARCH 5, 2001 TAPE READING volume charge for each 100 cubic feet of water used. It was noted that the current rate structure does allow for some volume of water to be used, such as 400 cubic feet for a residential customer, without having to pay additional charges. It was also noted that industrial users will pay a higher volume and fixed rate than residential and commercial customers due to higher fire flow requirements and higher peaking. Committee member Tack requested that charts show 100 cubic feet rather 1 ccf since the customers are used to see numbers based on 100 cubic feet. Mr. Ghilarducci stated that he would change the charts to show 100 cubic feet rather than using the standard ccf method of listing the data for the purpose of internal consistency. In regards to System Development Charges (SDC), Mr. Ghilarducci stated that there are 2 components to these charges one being reimbursement fee and the second component being improvement fee. He stated that these charges are one-time fees paid at the time of the development. The reimbursement fee is a buy-in to unused capacity in the existing and the improvement fee is a fair share of capacity increasing of facilities to be built. As a reminder, SDC's are governed by state statute and he suggested that these fees be tracked separately so that they can be used accordingly. He reviewed the proposed SDC's for each type of fee along with the administrative cost recovery that is allowed by statute. Based on the proposed SDC rate structure, the residential SDC rate would increase from $1,452 to $2,085 which is a 44% increase. Mr. Ghilarducci also reviewed the residential water rate comparison chart which compared 13 cities with Woodburn. As a reminder, each city has different needs but, based on the average monthly cost, Woodburn is approximately 56% lower than the average. Assuming the proposed rate is implemented, Woodburn will still be 27% lower than the average monthly water rate charged by other cities. Tape 2 Mayor Jennings stated that he felt comfortable with the recommendation from the committee for funding water system improvements. Councilor Figley stated that she in interested in knowing if any public feedback has or will be obtained on the issue of incremental increases versus a one-time increase. Committee member Tack stated that regular communication with ratepayers on their monthly bills will be very beneficial in getting feedback from the consumers well in advance of making a final decision on the type of increase implemented. Public Works Manager Rohman stated that the committee did take into consideration the proposed rate increases submitted to the State by the utilities which would go into effect about the same time as the City's rate adjustment. Director Tiwari stated that the City will need to obtain some funds from a bond sale and, on a $14 million project, the City will need to solidify a program which will have a Page 3 - Council Meeting Minutes, March 5, 2001 COUNCIL WORKSHOP MINUTES MARCH 5, 2001 TAPE READING favorable interest rate return and assure the bond underwriters that a rate schedule has been implemented to meet principal and interest payments. It was also noted that a future Council could adjust the rates, however, they would still be required by law to set rates based on operating expenses, debt service, and coverage. Director Tiwari stated that staff intends to have an open house on the proposed master plan thereby giving the citizens an opportunity to discuss rates and talk to staff and the consultants. Following the open house, another meeting with the committee will be held to go over the comments from the public. A presentation will also be made to the Council prior to finalization of an ordinance to implement any rate increases. He reminded the Council that the City water rate is the second to the lowest on the comparison table and he does not feel that the City should be overly concerned that the rates will escalate to the top of the comparison chart. He reiterated that the our water division is doing a very good job but improvements will require the City to increase rates to meet the rate increase as a financial resource. Once the plan is adopted, it will be another year before the engineering work will be completed. Committee member Tack questioned what effect, if any, the proposed water treatment program will have on those consumers who currently use water softeners. Director Tiwari stated that the filtration system will remove iron and manganese, and reduce the arsenic level in the water. He stated that it is his understanding that water softeners do not reduce the arsenic level. By installing the water treatment plants, the City will be complying with federal and state rules especially in the area of arsenic level reduction. Mayor Jennings commended the committee for the work they have done to date on this project. The meeting concluded at 7:57 p.m.. APPROVED ArrEST ~~ Mary ennant, Recorder City of Woodburn, Oregon Page 4 - Council Meeting Minutes, March 5, 2001