Body
Department of Finance
Reference: 2019 Utilities Fees
To: Mayor Kenneth J. Kreutzer and Members of City Council
Through: Philip A. Rodriguez, City Manager
Prepared By: JD McCune, Utility Billing Supervisor
Ryan Johnson, Director of Urban & Public Policy
Date Prepared: November 12, 2018
PURPOSE:
To present the proposed 2019 Utilities Fee changes
STRATEGIC FOCUS AREA:
Financially Responsible
Supportive, Sustainable Infrastructure
BACKGROUND/HISTORY:
Typically, late in the fourth quarter of each year, the City Council is asked to adopt by resolution any amendments to the fees for water and wastewater services for the upcoming fiscal year. In October 2018, the City Manager launched the 75 Day Work Plan which is primarily focused on analysis of nearly all aspects of the budget, financial management, capital projects and service delivery within the Utilities Department. Some of the primary work efforts that are part of this plan are listed below:
- Propose to City Council that all utility rates be frozen at current rates until a new rate model can be developed.
- Immediately conduct an outside review of the most recent rate model to understand the utility rate progression from 2014-2018 and its impact on residents and businesses from a third party perspective.
- Identify, purchase and begin implementing a “Smart Reader System” that will focus billing cycles to a range of no more than 28-31 days each month, which allows for more consistent billing.
- Identify and hire a new utilities rate consultant to make sure we at the City know the right rates to charge that are fair, reasonable and equitable - for everyone.
- Review and propose new shut-off processes to ensure that our systems serve our residents and businesses well.
- Immediately issue a Request for Proposal (RFP) for new City Auditors to include a specific review of the Utilities Fund.
Because of the abovementioned work efforts, staff is requesting that all the utility rates and fees remain at their current 2018 amount going into 2019. That being said, staff has conducted extensive review of the current $25 late fee, and is now recommending modification to this specific fee.
This late fee is assessed after the newly implemented five-day grace period and is a flat fee added on to the previously billed amount. While most communities charge a late fee, the completed analysis indicates that Brighton’s is by far the highest. The table below shows the late fees assessed across several communities in the metro area.
|
Community |
Late Fee |
|
City and County of Broomfield |
$5 |
|
City of Arvada |
$10 |
|
City of Aurora |
5% of past due amt. |
|
City of Commerce City* |
$10 |
|
City of Fort Lupton |
$15 |
|
City of Golden |
$10 |
|
City of Northglenn |
$10 |
|
City of Thornton |
$10 |
|
City of Westminster |
$5 |
|
Town of Erie |
1% of past due amt. |
|
Town of Lochbuie |
$15 |
|
City of Brighton |
$25 |
|
* Utility services provided via special district |
|
Ordinarily, fees such as the late fee are used to modify behavior and discourage rate payers from being late, as well as to provide some level of cost recovery for the City. Prior to the most recent shut-off process, staff placed door hangers at service addresses that had a late bill. The $25 late fee was easier to justify as a mechanism for recovering the cost of staff time going out to the property and leaving the door hanger. Since 2017, this door hanger step has been eliminated and there is currently very little if any staff time involved in the assessment of the late fee. Thus, the necessity to have a late fee of $25 no longer exists.
One of the overarching goals of having Supportive, Sustainable Infrastructure, as a strategic focus area is that we need to always be mindful of making sure our fees support the costs associated of doing business and providing services to residents. Conversely, part of having supportive infrastructure involves making sure that the utility system is supportive to residents and their needs as well. As of the first part of November, the City has collected $254,450 in late fees alone this year.
Staff is recommending that the $25 late fee be reduced to $10 beginning in 2019. The point in time when the fee is assessed would remain the same, and all other fees associated with the shut-off process would remain unchanged at this time. Staff believes this is a more equitable approach to working with residents and brings our late fee in line with what many other communities are collecting.
Ideally, the City should not be depending on these funds for operations since the goal is that all residents pay their bill on time. Based on the fees collected thus far in 2018, staff anticipates that the 2019 collection amount would be $111,032. This assumes the same quantity of late fees are assessed, just at the lower rate of $10 versus $25.
Staff anticipates bringing more in-depth analyses back for discussion in 2019, and prior to the peak water usage season. This will allow for substantial completion of the key employee recruitments as well as the technical studies to be concluded that are listed in the 75 Day Work Plan. At that time, Staff would want to have a more in-depth conversation with City Council on the balance of the utility rates and fees, ensuring that these are set to appropriate levels going forward.
CRITERIA BY WHICH COUNCIL MUST CONSIDER THE ITEM:
The 2019 Utilities Fees are adopted by resolution on an annual basis.
BUDGET IMPACT:
There will be a corresponding decrease in the fees collected if the late fee is reduced to $10 from the current $25. The 2019 collection amount is estimated to be $111,032.
OPTIONS FOR COUNCIL’S CONSIDERATION:
Approve the 2019 proposed changes as presented, amend or deny.
STAFF RECOMMENDATIONS:
Approve the proposed 2019 Utilities Fee changes.
ATTACHMENTS:
Resolution