Departments of Finance & Utilities
Reference: Utility Rates & Construction GMP Presentation
To: Mayor Gregory Mills and Members of City Council
Through: Michael P. Martinez, City Manager
Prepared By: Catrina Asher, Director of Finance
Scott Olsen, Director of Utilities
Date Prepared: February 6, 2024
PURPOSE
To provide Council with proposals for water and wastewater rate and fee changes.
BACKGROUND
At a City Council Study Session on Tuesday, January 23rd, staff presented information to City Council that included proposed residential water tier structure updates, and proposed water and wastewater rate changes for fixed, volume-based and impact fees.
The proposal and included ordinance reflect the changes presented at that study session. Those changes are summarized below. For further details on the proposed changes and discussion, refer to the January 23rd Study Session packet and meeting.
Water Rate Proposals
Residential Tier Structure Proposal
Staff is proposing the following changes to the residential tier structure, which increases Tier 1 and compresses the other tiers:
Water Rate Adjustment Proposal
Staff is proposing the following increases, which would be applied to the volume-based water fee and the fixed water fee. These increases would not be applied to the Contract Water Surcharge or Water Treatment Plant Fee.
Effective for billing cycles after April 1, 2024 7%
Effective for billing cycles after January 1, 2025 6%
Wastewater Rate Proposals
Staff is proposing indexing wastewater rates to changes approved by underlying processors. The effect of this proposal, effective April 1, 2024, would be as follows:
Customers serviced by the Town of Lochbuie 3.0%
Customers serviced by Metro Water Recovery
2024 increase 7.0%
Catch up increase 3.5%
Total increase 10.5%
Sample Bills
Staff presented Council with the following sample utility bills which represent winter and summer usage for a single family residential customer. This demonstrates which billing line items are impacted by the rate changes and shows the Effective Impact of rate changes on the bill as a whole.
Winter Usage (4,000 Gallons/Month) Summer Usage (15,000 Gallons/Month)
Council requested further data on summer usage levels to verify that 15,000 gallons per month was a reasonable representation of single family residential summer usage. The following tables show average cosumption levels for 2020-2023. The first table shows the average over the irrigation season and the second shows the average for August of each year which is typically a very dry and hot month. The highest level we saw for both sets of data was 15,634 which was for August 2021. Based on this information, we feel that 15,000 gallons is a fair representation of single family summer water consumption.
Impact Fee Proposals
Staff is proposing that impact fees for water be increased as noted below. This reflects increases to construction costs and the incorporation of 15 years of planned projects.
For wastewater, staff is proposing that the impact fee of $837 per single family residential connection be renamed to be a connection fee with no change in the amount. Note that wastewater connections are also subject to impact fees assessed by the processors of the wastewater (Metro Water Recovery and the Town of Lochbuie). Those fees are set by the processors and passed through to permit holders.
CRITERIA BY WHICH COUNCIL MUST CONSIDER THE ITEM
As discussed in depth on January 23, 2024, rates are the primary revenue source for utility funds and TABOR significantly limits the City’s options to subsidize a utility with tax or other general revenues. Therefore, rates must be set at levels that will fund ongoing expenses and capital projects. Staff on the Utilities, Finance, and Budget teams worked closely together and with consultants to ensure the rates proposed have been thoroughly vetted and are in the best interests of the utilities and the customers.
FINANCIAL IMPACT
The rate changes proposed support the utility funds’ ongoing financial stability.
StaFF recommendation
Approve the ordinances as presented.
Attachments:
- Ordinance - Utility Rates
- Utility Rate Sheet - January 1, 2024 (Current)
- Utility Rate Sheet - April 1, 2024 (Proposed)
- Presentation