TO: Honorable Mayor & Members of the North Port Commission
FROM: Peter D. Lear, CPA, CGMA, City Manager
TITLE: 2019 Utility Rate Analysis prepared by GovRates, Inc.
Recommended Action
Discussion and direction for staff to prepare and submit proposed user rate, Level of Service and Miscellaneous Fee adjustment recommendations for FY19/20, FY 20/21 and FY 21/22.
Background Information
In fiscal year 18/19 Commission approved funding for Utilities to move forward with a rate analysis to verify the sufficiency of the rates charged for water and wastewater services. The last formal rate analysis was conducted in 2015, which recommended rate adjustments for FY15/16 and FY16/17 and subsequent CPI adjustments during any other year a rate analysis is not being performed. Therefore, increases in costs for items such as chemicals, fuel, electricity and the payment to the Peace River/Manasota Regional Water Supply Authority over the last three years have been mitigated through these adjustments. To continue maintaining a positive financial outlook, the current rate analysis is recommending a 2% annual increase for wastewater rates and a 4% annual increase for water rates over the next three years, which produces a combined, average, annual utility rate increase of 3% and to re-evaluate the sufficiency of user rates thereafter to closely monitor changes in economic conditions, customer usage trends and regulatory requirements. For the average residential water and wastewater customer using 3,000 gallons per month, the FY19/20 increase would equal an adjustment of $2.20 a month. These changes will help the City maintain a healthy financial forecast by maintaining 150% overall debt service coverage with at least 90 days rate revenue, while fully utilizing internal funding sources.
Utilities would also recommend changing the current CPI indexing from Miami-Fort Lauderdale Consumer Price Index to the Engineering News Record (ENR) Construction Cost Index. The proposed index better reflects the annual growth rate that the City of North Port has historically seen. This will account for the change in construction costs that have been seen around the nation as well and help keep up with inflation which will help decrease the potential for rate shock. The rates would be adjusted based on the December to December increase in the ENR index, if any and would be implemented during years when a rate increase has not been recommended.
The rate analysis also analyzed all miscellaneous fees and has recommended increases in virtually all the fees to appropriately recover the costs for providing these specific services. In addition, the analysis recommended a new bulk reclaimed water fee to accommodate for the West Villages Improvement District’s (WVID) reclaimed water service which was developed based on WVID’s responsibility for the transmission and distribution end of the process and a flat wastewater fee for the future potential wastewater only residential customers. This rate was developed using the 3,000-gallon average usage based on our current customer base.
A review of the City’s Level of Service was also requested as part of this rate analysis. Many communities, including the City have used historic Levels of Service (LOS), with the basis being 100 gallons per day and an average household of 2.5 persons for a LOS standard of 250 for water and 225 for wastewater. The City has maintained this LOS since 2006. With the emphasis over the last decade on conservation, Utilities is pro-actively recommending to adopt a new LOS for water of 170 and wastewater of 155 to be more commensurate with actual usage as recommended in the Rate Analysis.
A summary of all recommended changes is more fully explained within the executive summary of the rate analysis along with detailed backup and methodology within the full report.
Strategic Plan
Promote sustainable growth and development, while maintaining or enhancing quality of life in our City
Financial Impact
This analysis was conducted by GovRates, Inc. for an amount of $27,000. There will be a negative financial impact if recommended changes are not instituted, such as the inability to complete necessary repair and replacement projects, maintain adequate debt coverage or maintain current level of service.
Procurement
Attachments:
1. North Port Utility Rate Analysis Report
2. Utility Rate Analysis Presentation
Prepared by: Michelle Tipp
Department Director: Richard J. Newkirk