Body
Department of Utilities
To: Mayor Richard N. McLean and Members of City Council
Through: Manuel Esquibel, City Manager
Prepared By: Curtis Bauers, Utilities Director
Date Prepared: May 14, 2015
PURPOSE
To consider the implementation of a water surcharge for the purpose of recouping costs associated with significant rate increases by the City of Thornton in the potable water supply under contract with the City of Westminster.
BACKGROUND
The City of Thornton has a perpetual lease agreement with the City of Westminster to lease Westminster two million gallons of potable water per day (plus or minus ten percent), in perpetuity. In order to supplement its existing supply and to assure that Brighton had a sufficient supply to meet peak demands, the City of Brighton entered into an agreement in 2009, leasing that water supply contract from the City of Westminster. Westminster charges Brighton the same fee that Thornton charges, which is at the lowest available rate on Thornton's rate schedule. Therefore, Brighton pays for the potable water supply at the lowest rate in Thornton's rate schedule.
In addition to paying for the volume of water leased daily, Brighton is also charged a carriage charge by Thornton which allows Brighton to use Thornton's water distribution system to carry the water from Westminster to Brighton. This fee is currently $0.20 per thousand gallons and varies based on any rate increases, calculated as the average percentage increase across all rate categories.
Thornton has recently adopted an Ordinance significantly increasing its water rates in all categories over the next three years. Across their entire rate structure there was a 13% increase in rates beginning May 1, 2015 and then an additional 13% percent increase will occur on January 1, 2016 and again on January 1, 2017.
The rates that Brighton pays for volumetric usage are being impacted more heavily than the average increase. The rates Brighton is charged increased by 16.6% beginning May 1, 2015, and will increase by 14.3% on January 1, 2016, and another 12.5% on January 1, 2017.
The impact of the rate increases to the City's Water Enterprise budget is a $2,090,684 cumulative additional cost over the next three years, pending no further rate changes by Thornton during that time. This additional cost was not budgeted, nor contemplated in the rate model used to establish the City of Brighton's 2015 rates and fees. The Water Enterprise does not have sufficient revenue to absorb a cost of this magnitude, and is therefore requesting City Council approve an additional Thornton Contract Surcharge in the amount of $4.60 per SFRE per billing cycle, which will be sufficient to balance the cumulative cost increases over the next three year period.
CRITERIA BY WHICH COUNCIL MUST CONSIDER THE ITEM
FINANCIAL IMPACT
The Utilities staff, in consultation with Willdan Financial Services, the City's water rate consultant, has analyzed the increased rate structure from Thornton, in light of the City's current rate structure, and has determined that the proposed surcharge will be sufficient to cover the increased costs incurred as a result of Thornton's increased rates, pending no further rate changes. Resulting cash balances in the Water Enterprise Fund should, cumulatively over the three year period, remain essentially unchanged as a result of the increased costs associated with the Thornton rate increases and a proposed fee revenue schedule as follows:
Meter Size |
Monthly Charge |
Three-quarter Inch Meter |
$ 4.60 |
One Inch Meter |
$ 7.68 |
One-and-one-half Inch Meter |
$ 15.32 |
Two Inch Meter |
$ 24.52 |
Three Inch Meter |
$ 46.00 |
Four Inch Meter |
$ 76.68 |
Six Inch Meter |
$ 153.32 |
STAFF RECOMMENDATION
Because the Water Enterprise Fund cannot support the additional costs associated with the Thornton rate increases, staff recommends the approval of a Thornton Water Contract Surcharge in the amounts listed above that will be applied to all water accounts on a monthly basis beginning June 1, 2015
OPTIONS FOR COUNCIL CONSIDERATION
· Approve the Resolution as presented
· Reject the Resolution as presented
· Postpone consideration of the Resolution
ATTACHMENTS
· Resolution