Item 8B,~•
CITY OF ATLANTIC BEACH
~"" CITY COMMISSION MEETING
STAFF REPORT
AGENDA ITEM: Restructuring of Water and Sewer
SUBMITTED BY: Jim
DATE: June 18, 2004
AGENDA ITEM #8B
JUNE 28, 2004
BACKGROUND: Attached for your review is a report from Burton and Associates
dated June 11, 2004 concerning the proposed restructuring of water
and sewer rates. Burton was originally contracted to make various
projections concerning rate options many months ago to implement
water-conserving rates required by the State and to make other
changes. Earlier reports were presented both to the St. Johns
Water Management District (WMD) and to the City Commission.
The WMD is requiring Atlantic Beach, as well as other water
suppliers, to amend our rates to provide financial incentives for
large residential water users to cut back. WMD representatives
agreed with the last proposal for the residential water rates from
Burton, with the stipulation that there be no phase-in so that the
impact would be most strongly felt by the larger residential
customers with the assumption that they would make larger
reductions in their water usage. The City had previously proposed
to phase in the implementation of water and sewer rate changes
both for residential and commercial customers. Upon receiving
word of the WMD's comments on the phase-in of the new rates,
several proposals were presented to the Commission. The one
most favored was to implement the residential rates immediately
while phasing in the commercial rate changes. However, a
question was raised about the revenue neutrality of this to the City.
While the commercial rates were to be amended by increasing the
base charges for water rates to be more in line with those of other
cities, the residential rate changes not only had significant
increases for the largest residential users, but also had decreases
for some of the smallest users. The overall intent was to be
"revenue neutral" to the City. Phasing-in one portion of the
changes while implementing the others may have caused for a loss
to the City during the phase-in period.
The attached report from Burton and Associates outlines a
proposed water and sewer restructuring that is no longer revenue
neutral to the city. This rate instead is designed to change the
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AGENDA ITE1~'I #8B
JUNE 28, 2004
current rate for residential customers as little as possible except to
add the increasing blocks for the larger users and to increase
revenues for the City. The State Revenue Generation charge, has
been eliminated and spread into the base charges for both inside
and outside customers. Customers with irrigation meters would
have their rates begin at one of the higher blocks to offset the fact
that they have two meters. Most inside City customers would
experience something between a small decrease up to a 5%
increase. The larger customers would have much more significant
increases depending on their usage.
The elimination of revenue neutrality is recommended due to
declining water and sewer revenues. Atlantic Beach has
experienced lower water and sewer sales over several years. Staff
believes that this is a result of some conservation already taking
place as well as the installation and retrofitting of new low flow
plumbing fixtures. Also, several of our larger customers have
found and repaired major leaks in their systems. There may also be
a slight reduction in the accuracy of some of the city's meters,
which are becoming older. Most of the meters were replaced at one
time in 1996. Older meters sometimes read less volume than what
actually passes through them. However, the water production from
the plant has also been dropping over several years, which would
indicate that most of the reduction in sales is not due to meter
accuracy.
The City's water and sewer rates have only increased by one and a
half percent over the last two and a half years while inflation and
other factors have increased costs substantially more. The result of
all these factors is that our water and sewer revenues are running
below budgeted projections and the City may not meet it's bond
coverage ratio this year. The recommended approach by Burton
and Associates would generate approximately $380,000 in
additional revenue next year for the City. Our preliminary
estimates for the upcoming budget indicate that this would allow
the City to satisfactorily meet the bond coverage ratio for the next
year.
The Burton and Associates report does not address the previously
proposed amendments to the commercial rates. However, given
that the residential restructuring is no longer on a revenue neutral
basis, an in depth calculation of the phase in cost is no longer
necessary. The commercial rates can be implemented through the
phased in process as recommended by the City Commission
several months ago.. Staff hopes to have an estimate as to how
AGENDA ITEM #8B
JUNE 28, 2004
much additional revenue this would bring in prior to the next City
Commission meeting.
BUDGET: Implementing the revised water and sewer rates as outlined in the
attached report by Burton and Associates would increase the city's
revenues by an estimated $380,000 per year.
RECOMMENDATION: That the City Commission receive input from the public on a
proposed water and sewer rate restructuring during the two
Commission meetings in July and that revised water and sewer
rates be adopted in accordance with the Burton and Associates
report and with requirements from the WMD.
ATTACHMENT: Report from Burton and Associates dated June 11, 2004
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AGENDA ITEM #8B
JUNE 28, 2004
~.
~NS~RiI~~R~i~~~~
June 11, 2004
Mr. Nelson Van Liere
Director of Finance
City of Atlantic Beach
800 Seminole Road
Atlantic Beach, Florida 32233
Re: Water and Sewer Rate Study
Dear Nelson:
~"" We have completed the development of water and sewer rates that will provide sufficient
revenues for a test year of FY 2003 and will provide the water conservation incentives
required by the St. Johns River Water Management District (SJRWMD) as a condition of
~"" the City's Consumptive Use Permit (CUP).
Rate Development
The rates developed were designed to include as little change as possible from the City's
current rate structure with the following exceptions:
The current Wastewater State Revenue Generation Charge has been
eliminated and the revenue generated from that charge has been spread
among the fixed monthly sewer charges of inside City and outside City
customers,
~" 2. An inclining block water rate structure has been included to replicate the
inclining block water rates of the fifth year of the implementation plan that
was submitted to the SJRWMD and suggested by the District as an
"'~ acceptable rate structure.
By using this approach to the development of water and sewer rates, it is estimated that
the calculated rates, if they had been in place in FY 2003, would have generated
approximately $380,000 of additional revenue, or approximately $5.883 million. Figure
1 at the end of the letter presents a summary of the calculated rates that would have
generated this level of rate revenue in FY 2003 with the same billing determinants as FY
2003.
Water and Sewer Rates Worksheet
„~, We have also developed a Water and Sewer Rates Worksheet (Worksheet) to assist you
in developing rates under the structure recommended herein that will provide sufficient
Burton & Associates
a/w 2902 Isabella Blvd, Suite 20 • Jacksonville Beach, Florida 32250 • Phone (904) 247-0787 • Fax (904) 241-7708
E-mail: mburton@burtonandassociates.com
Page 1
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AGENDA ITEM #8B
JUNE 28, 2004
revenues (to be determined by the City) for FY 2005. The Worksheet is attached to this
letter. Figure 2 at the end of this letter shows rates calculated using this Worksheet to
generate $6,000,000 in rate revenue, or an additional $496,000 in rate revenue over FY
2003 rate revenue, and assumes a reduction in water usage of 1.50% from FY 2033 to FY
2005. It should be noted that this Figure is shown as an example only. In accordance
with our scope of work, Burton & Associates has not determined the FY 2005 water and
sewer revenue requirements. However, when the City determines the FY 2005 water and
sewer revenue requirements, the attached Worksheet can be used to calculated rates for
implementation.
Customer Impact
The calculated rates were developed to have as little impact upon the City's customers,
compared to the current raters, as possible, with the exception of the inclining block rates,
which will impact high volume water users. Customer impact graphs are presented in
Figures 3 and 4 for the calculated rates in Figure 1 that would generate approximately
$380,000 of additional rate revenue than was generated in FY 2003 with the same billing
determinants as FY 2003 for inside and outside City 34/ inch meter single family
residential customers respectively.
Commercial customers will only be affected minimally by the calculated rates by the
~* spreading of the Wastewater State Revenue Generation Charge over all inside and outside
City customers. This change will slightly lower inside City commercial sewer bills and
will slightly raise outside City commercial sewer bills.
Bill Freguency Distribution
Figures 5 and 6 present a Bill Frequency Distribution and Percent Bills Issued
respectively. Figure 5 shows graphically the clustering of bills issued with monthly
usage in the range of 0 -about 8,000 with the tailing off of bills issued at levels higher
than 8,000 gallons per month. Figure 6 shows the percent of bills issued up to each 1,000
gallon increment of monthly usage. This figure shows that approximately 75% of all
bills are issued for usage of less than 10,000 gallons per month. This figure also shows
that approximately 90% of all bills issued are for usage less than 14,000 gallons per
month, which means that only 10% of the residential customers will experience the
higher bills due to the inclining block water rates as shown for usage above 14,000
gallons per month in Figures 3 and 4.
It has been a pleasure working with you on this project. We appreciate all of the
"~ assistance provided by you, the City Manager and others on City staff who participated in
the project. If you have any comments or suggested revisions to this letter report, please
let me know and I will make the appropriate changes and re-issue the letter.
Burton & Associates
~ 2902 Isabella Blvd, Suite 20 • Jacksonville Beach, Florida 32250 • Phone (904) 247-0787 • Fax (904) 241-7708
E-mail: mburton@burtonandassociates.com
Page 2
AGENDA ITEM #8B
JUNE 28, 2004
If you have no suggested adjustments, you can consider this our final report. Also, if you
~"" have any questions, please do not hesitate to call me or Andy Burnham at (904). 247-
0787.
Very truly yours,
?KicG~ael .~. Bu rtvvi
Michael E. Burton
President
MEB/cs
Burton & Associates
2902 Isabella Blvd, Suite 20 • Jacksonville Beach, Florida 32250 • Phone (904) 247-0787 • Fax (904) 241-7708
~- E-mail: mburton®burtonandassoctates.com
Page 3
AGENDA ITEM #8B
JUNE 28, 2004
Figure 1 Calculated Water and Sewer Rates that would Generate $5,883,000 in Rate
~" Revenue, or $388,000 more Rate Revenue than was Generated in FY 2003,
with the same Billing Determinants as FY 2003.
CAtCULA TED WATER RATES PRAM MQDEL
Customer charge 50.00
Base facility charge 56.35
IFiow charge
Upper Limit
Block (CvallonslMo} Residential Mutts-family Commercial - Commercial - Hotels
Single Unit Muki-Unit
1 3 5021 8021 X21 5021 50.21
2 8 =1.74 51.74 11.74 51.74 51.74
3 13 52.04 51.74 51.74 51.74 57.74
4 18 53.06 51.74 51.74 51.74 51.74
5 91 54.E 51.74 51.74 51.74 51.74
Customer charge 50.00
Bas facility charge . 513.29
Flow charge.
Upper Limit
Block {(iallonsi7No} .Residential Multi-family Commercial - Commercial -
-
Hotels
.Single Unit Multl-Unit
1 3 50.45 50.45 50.45 50.46 50.45
2 8> 53.89 53.89 53.89 ' S3.~ S;i.~
3 13 53.69 53.69 53.69 53.89 53.69
4 18 =OAO 53.E 53.88, 53.69 53.69
6 91 x.00 53.69 53..69 53.69 53.69'
6 50.00 50.00 50.00 50.00 50.00
~„ Figure 2 Water and Sewer Rates that would Generate $6,000,000 in Rate Revenue or
$496,000 more Rate Revenue than was Generated in FY 2003, with water
usage Proiected at 1.50% less than in FY 2003.
Customer charge 50.00
Base facility charge 56.48
Flow charge
Upper Limk
Block (t3allonslMo} Residential Multl-family Commercial - Commercial - Hotels
Single Unit Multi-Unit
1 3 50.22 50.22 50.22 5022 50.22
2 8 51.80 51.80 51.80 51.80 51.80
3 13 52.11 51.80 57.80 51.80 51.80
4 18 53.17 51.80 51.80 51.80 51.80
5 91 54.78 51.80 51.80 57.80 51.80
8 50.00 50.00 50.00 50.00 50.00
Base facility charge 513.56
Flow charge
UPPer Llmk
Block ([iallonstMo} Residential Mull-family Commercial - Commercial - Hotels
Single Unit Muttl-Unk
1 3 10.47 10.47 50.47 50.47 50.47
2 8 53.82 53.82 53.82 53.82 53.82
3 13 53.82 53.82 53.82 53.82 53'.82
4 18 50.00 53.82 53.82 53.82 13.82
5 91 SO.QO 53.82 53.82 53.82 53.82
6: - 50.00 50.00 50.00 50.00 50.04
Burton & Associates
2902 Isabella Blvd, Suite 20 • Jacksonville Beach, Florida 32250 • Phone (904) 247-0787 • Fax (904) 241-7708
E-mail: mburton@burtonandctssociates.com
Page 4
AGENDA ITEM #8B
JUNE 28, 2004
Figure 4 Impact of Calculated Water and Sewer Rates upon Inside City Residential
3/4 Inch Meter Customers
so°~
m ao°i°
0
~ 30°~6
C
.~
~ 20%
eU
t
V 10%
r+
C
d
i 0%
d
a
-~ o%
Figure 5 Impact of Calculated Water and Sewer Rates upon Outside City
Residential 3/4 Inch Meter Customers
Outside Citv Residential 3/4" Water and Sewer Customer
so°~
m 40°~
ev
r.°
O
~' 30%
C
.~
~ 20°k
R
t
V 10°k
r
C
L 0%
d
a
-t 0°~
0 1 2 S 4 8 6 7 8 9 10 11 12 13 14 15 18 17 19 19 20
Usage
1 2 3 4 5 8 7 8 9 10 11 12 13 14 15 18 17 18 19
Usage
Burton & Associates
2902 Isabella Blvd, Suite 20 • Jacksonville Beach, Florida 32250 • Phone (904) 247-0787 • Fax (904) 241-7708
E-mail: mburton@burtonandcrssociates.com
Page 5
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AGENDA ITEM #8B
JUNE 28, 2004
Figure 5 Bill Frequency Distribution
Atlantic Beach -Bill Frequency Distribution
8,000
7,000
a
N 6,000
N
y 5,000
m 4,000
O
~ 3,000
~ 2,000
z
1,000
0
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 yu
Gallons per Month Billed
^ Number of Bills Issued
Figure 6 Percent Bills Issued
Atlantic: Beach -Percentage of Bills Issued
100%
90%
-a 80%
m
H 70%
N
y 60% -
m 50%
0 40%
.r
a=i 30%
`m 20%
a
10%
0%
O h ~O ~y ~O ~~ „~O 3~ DO p4s h0 h~ ro0 ram ,~O .~h ~O ~h ~O
Gallons per M onth Billed
-Percerrt Bills Issued
Burton & Associates
~ 2902 Isabella Blvd, Suite 20 • Jacksonville Beach, Florida 32250 • Phone (904) 247-0787 • Fax (904) 241-7708
E-mail: mburton@burtonandassociates.com
Page 6