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CITY OF CLEARWATER WATER & SEWER UTILITY SYSTEM - REVENUE SUFFICIENCY ANALYSIS AND FINANCIAL FORECAST FY 1998 THROUGH FY 2003 I I I I I I I I I I I I I I I I I I I 8.11'~Cj fu~l,'c f\I1ee+iV1cr (Y\ pMO~ 99 City of Clearwater Water & Sewer Utility System Revenue Sufficiency Analysis and Financial Forecast FY 1998 through FY 2003 Prepared by Burton & Associates, Inc. under subcontract witb Post, Buckley, Scbub & Jernigan, Inc. November 30, 1998 Burton & Associates - I I I I I I I I I I, I I I I I I I I I City of Clearwater Water & Sewer Utility Revenue Sufficiency Analysis Final Report City of Clearwater Water & Sewer Utility System Revenue Sufficiency Analysis and Financial Forecast FY 1998 through FY 2003 Table of Contents Introduction, System Overview, and Methodology........................................................... 2 Base year Data and Baseline Forecast Assumptions.......................................................... 4 The Rate-setting Process....................... .... ......................................................................... 6 Current Rates and Rate Revenues...................................................................................... 8 Other Revenues and Sources of Funds............................................................................... 8 Major System Costs. ........................... ............................................................................... 10 Financial Management Plan Scenarios.............................................................................. II Appendix I - Full Set of Schedules for Adopted Plan......................... following page 13 Appendix I is internally numbered pp. OJ -43, including the title page Appendix II - Rate Ordinance.............................................................. following page 14 Appendix II is internally numbered pp. 44-5 J, including the title page Appendix I - July 13, 1998 Workshop Presentation slides................. following page 15 Appendix III is internally numbered pp. 52-59, including the title page Burton & Associates I I I I I I I I I I I I I I I I I I I City of Clearwater Water & Sewer Utility Revenue Sufficiency Analysis Page 2 Final Report City of Clearwater Water & Sewer Utility System Revenue Sufficiency Analysis and Financial Forecast FY 1998 through FY 2003 Introduction This report presents the results of the Water & Sewer utility rate study conducted for the City of Clearwater Water & Sewer Utility System (the System) by Burton & Associates, Inc. as a subconsultant to Post, Buckley, Schuh and Jernigan, Inc. The study was conducted during Fiscal Year 1998 and consisted of a revenue sufficiency analysis for the period FY 1998 through FY 2003 (the "forecast period") to determine the adequacy of current rates to fund the System's projected costs during the forecast period and provide alternative fmancial management plans for consideration by the City. During the course of the study, the following process was followed: o Burton & Associates developed a preliminary revenue sufficiency analysis and a set of alternative fmancial management plans, documented in a preliminary report to City management in April, 1998. o In April and May, 1998, interactive work sessions were held with representatives of City management, Public Works Administration, Water & Sewer Utility management, and the Finance Department and Budget Office. During these sessions basic information was verified, forecast assumptions were agreed upon, the alternative fmancial management plans were refmed and narrowed to a relevant range for presentation to the City Commission, and a recommended plan was selected by City management. o Briefmgs on the alternative fmancial management plans were held for individual City Commissioners in May, 1998. o An ordinance based on City management's recommended fmancial management plan was prepared by City staff and the appropriate public hearings were scheduled on the City Commission agenda. o A presentation was made to the entire City Commission at a workshop session on July 13, 1998. o A presentation was made at the public hearing upon fIrst reading of the ordinance during the City Commission meeting on July 16, 1998. o The ordinance was adopted upon second and fmal reading at the City Commission meting on August 6, 1998. Burton & Associates I I I I I I I I I I I I I I I I I I I City of Clearwater Water & Sewer Utility Revenue Sufficiency Analysis Page 3 Final Report The ordinancel increased the water & sewer rates by 3% effective October 1, 1998. Because of uncertainty regarding the exact timing of the City's divestiture of it water resources facilities and consequent purchase of 100% of it potable water from Pinellas County, future rate increases were not adopted at that time but will be adopted on a year-by-year basis as better information becomes available. This report documents the methodology and [mdings of the revenue sufficiency analysis, reviews the alternative [mancial management plans considered, and discusses the adopted plan in detail. System Overview The City of Clearwater operates a water and wastewater utility which serves approximately 33,500 domestic water customer of which approximately 3,000 are outside the City limits and approximately 32,500 wastewater customers of which approximately 2,000 are outside the City limits. Water and wastewater revenues were approximately $30.5 million in Fiscal Year (FY) 1996, and are budgeted to be approximately $30.5 million in FY 1997. The FY 1997 budget includes approximately $34.5 million of projects in a five year Capital Improvements Program (CIP). The City currently purchases approximately 77 % of its approximately 14.5 million gallons per day (MGD) potable water requirements from Pinellas County under the terms of an inter local agreement. The City also operates a well field with which it produces the balance of its potable water requirements. The City currently treats approximately 14.5 MGD of wastewater at three wastewater treatment plants. Current wastewater effluent disposal is to surface waters, however the City is in the process of implementing the first phase of a reclaimed water program. MethodolollY The analysis was performed using an interactive computer model that simulates the [mancial dynamics of a Water & Sewer utility, customized for the specific [mancial policies, objectives, and economic environment of the City of Clearwater. The model uses assumptions regarding such variables as expected customer growth; automatic price index adjustments to rates; the effects of growth and economic inflation on operating and maintenance costs; the timing of any rate increases and bond issues; average earnings rate on invested cash balances in each year; debt issuance parameters such as costs of issuance, term, 1 See Appendix II for Ordinance No. 6310-98 amending the Water & Sewer Utility rates. Burton & Associates I I I I I I I I I I I I I I I I I I I ~ - City of Clearwater Water & Sewer Utility Revenue Sufficiency Analysis Page 4 Final Report and interest rate; desired levels of working capital reserves; and desired debt service coverage ratios. A five-year fmancial forecast is developed by applying these assumptions to beginning fund balances, revenues, and expenses; other uses of fund such as transfers and capital expenditures; and other sources offunds such as impact fees. In the course of the analysis, the model tests for the sufficiency of revenue to meet the following tests: · Covera1!e. Net revenues (revenues less expenses) must be sufficient to meet the debt service coverage requirements defmed in the bond covenants (plus any discretionary buffer set by City policy). · Total fundinJ!. Total sources of funds must be adequate to cover total uses of funds. · Reserves. Total sources of funds must be sufficient to maintain required reserves and any working capital reserve established by City policy. If revenues are insufficient to satisfy any of these criteria, the model solves for the increase in rate revenue required to cure the insufficiency of funds. In addition, if after meeting all of the above requirements funds are inadequate to fully fund the City's capital improvements program, the model calculates the amount of debt fmancing needed and solves for the related annual debt service requirements and any resulting rate increase. Through a series of computational iterations, the optimal solution is found and the model balances. To develop a fmancial management plan, the results of an initial analysis, designated the "baseline", are examined for consistency with the utility's objectives. Alternative analyses ("scenarios") are then developed using variations in assumptions that are within the control of management, such as the timing of capital projects, scheduled rate increases, and the timing and nature of debt fmancing. From these alternatives the most desirable fmancial management plan is selected, determining the revenue requirements for the forecast period. Base Year Data and Baseline Forecast Assumptions Data for the FY 1998 base year is primarily drawn from the City's budget. However, budget data has been updated to the extent possible based on actual experience. The schedule below provides the baseline forecast assumptions used to initialize the model. Assumptions were developed based on the City's specific needs and circumstances, our experience with other utilities, and general economic conditions. All were discussed with staff. General economic assumDtwns. In general, the assumptions are conservative. We assume no growth Burton & Associates I I I I I I I I I I I I I I I I I I I City of Clearwater Water & Sewer Utility Revenue SujJiciency Analysis OTY or CLlARW A n::a.. n..oRIDA WA11'Jl a SEWD SYSTtM REVENUE SUFFICIENCY ANAL YSIS FINAL III!POIIT 8Cl..IAC::E: Bl..RT'OH & .M8OC1ATEII C:\12J1DAT....cLWM&SlR~lFNI3_~ ~YkAI'II..........aer'I_aH:.IU. ,- ........ Page 5 Final Report SCHEDULa . 1... 2000 2'001 2D02 2003 PRO.II:CTID IIttO..R!CTD PRO.II:CTm ~_ PIIO.II!CTeD ,,- 5,~ 55lJ"% ..50% 3.50% 5 50% 5,~ 4.50% 3.50% S5(N. 5.50"'% 4.50% 3.50% 5.50% 5.50% 450% 3.50% 550% 5'50'% 450% 350% THEIlalGHIFlCAHT M~IO"': KING CN'tTAL MOVE REQURED RESERVES (PERCENT OF O&ME>rPENSE) .wnue ^,roo~"'Q11 rtleJudesop.watllg ....woenu. ."11.' tn...... ..mmgslllduded retlK1<<1 accwnlll. xpensu Iorcowf1I9I' IfIdlJdu ell cvrnnt op.,.bIlg UpMlSlflS, udUdn tr.ns_rs end ell"'.' outUy_ f r&e ~f'C..!"Iet r....nu.l. C8IIICUlUd by deducing pPel1a. andtra,....'W to R&R tom QfOi&. (fte""" ~ntyftt net flNe1'lUe IS C8k:uftlKl byde<iJdlng e'4)ereM from gross re""'~. bt .seMce for,.. cow""'.I$ aura", 'f'H(KlJaJ debtSlfYIce p.yments, ududlllg CIIp<<.tud 111""". bl _~ rorpenty.st IsmUJI"",m rull1a enneJel debt ulYice. QUIRED COVERAGE: PantyTftt Ra~ eo...n..f1I: ED DISCRETIONARY BUFF€_~ TOTAL CCNEF?AGE TARGET SIGNIFICANT FORECAST ASSUMPTION. 1 AlllNlI&L 1--=-_50. ~LI.D TO WATP ~l_" ""'TEA H..fTClM'TIC INCRE.ASE SEV-.ER,AUTClM6.TIC INCREASE. 'MTER CUSTClI.ER GROWTl-t 5 SE\o\ER CUSTOfwER GRQYoII"H 6 ANNUAL I~. APPUED TO ..CEL.LANEO'" lllEVatuea 7 ANNUAL INCIII!!:&A~. AHUI!D TD ~RI&nNG I!XI'I!''''~. a % \NATER GROM'H REC~IZEO IN E.>PENSES 9 /JNNlW.. GRONTH C~Q'.IENT . WAlER 10 ,oNNUAL INA..Al1ON CCf.PONENT 11 TOTAL UPLIIID TO WATER 12 % sao.ER ~0NfH RECc:x3MZEO IN OPENSES 13 NllNUAI... GRONTl-i Cc:u>GlENT . SEV\ER 104 .ANNUAlINA....Al1ON CCJ..P()l'I.IENT 15 TDTAL AP"...eD TO aald 16 ADDITIONAL INCREASES ABOvE INFLAnON" 17 ALl. PAY & PAY~LATED TO ItEF'LECT MERIT STaTE. 18 ADD fOR HEALTH .MUItAN<<=-' 19 ADD,Oft PENalON CONTRlMlTIOH UTI! INc:REASa 20 PERCENTAGE OF YEAR RATE INCREASE.. I!FfEcnVE 21 PERCENTAGE OF YI!.UlIaOND fUNDS AVAJL.AB&..E: 22 INTEREST EMNINGa UTEa: 23 REVENJEACCOtMI' 204 WATER I...ACT I"BB 25 8EWSI TN' fBB 26 NNEWAL~ FlIEP\..ACBENT ACCOlH1' 'Zl EICICD P\.tr05 (N3N 1S8I.8JJ 28 IEn ..auAHCl!:: 29 DEBT 8IRVlCE ASIERv'E 8LfETY (% Of' OBIT 8ERVlCEJ 30 DEBT SEfMCE RE8ERY'E P'lN) ("f"EAR8 CW CEBT SSMCE) 31 CAPlTAU2B) NT. TO 8OND8N<H:3.-.....D(YEAAB Of"INTD&IT) 32 l.HlERWNT&I:l!I OIBCCUfT(%P"",, 33 OllER COB'B Of' BSlJNCE ("lft PMq 34 COST Of' 8ON) INBURNCE I""'P~ 35 1BW 0#18alE {'\'8rR8J 36 AN<<.IAL.IHTERE8T RAl'1i " 38 39 bTI..TIUJ.....n M ~DiID1TU_ FItOM C&JtITAL FUNDS: 40 CAPfTAL MPROV!MENnt PUtCJ (AU.. 8OU'ICSJ, IN:l.LUNO tEW BOND,.,.... I 41 NOT lBB) .... N/A N/A N/A N/A N/A N/A N/A 3""" 3.00% 3.00% N/A 3""" 300" 300" N/A N/A N/A 3""" 3.""" 300% N/A 3""" 3.00% 300" N/A '50% ,"'" 2,50% N/A .""" .00" ".00% N/A "'00% 100 00% 10000'% 100.00-4 "''''''' tOO""" 100,00% 100.00'"4 N/A 1 1 100" 0.60".11. 0"''' 30 6.00% J33J" J3.33' 33.3n JJJJ" xtJJ" 3J.33" J3.33" JJ JJ" 3""" 100% 3.00% 3.00% 300% 3.00% 300" ~ 00.4 '50% ,"'" .""" ".00.4 1 00 00% 100 00% tOO""" 100 00% 3.50% 3.50.4 3.50% 3.50.4 3.50% 3.50% 3"''' 3.50% 350% 3"''' "''''''' 33331< J3JJ" 33,33" 1J JJ" during the forecast period, assume moderate interest earnings rates, and calculate debt service on new revenue bonds based upon a 6% interest rate, which is slightly higher than the current market rate. Debt financinJ! assumDtions. We have assumed that the City will issue 30-year revenue bonds to fmanced portions of the CIP that cannot be funded from current cash flow. Debt service requirements on this debt are assumed to commence one year after issue (one year's capitalized interest) and consist of level total annual payments of principal and interest, assuming that the principal amount includes a debt service reserve fund equal to one year's debt service and issuance costs equal to about 2% of par. LiQuiditv assumDtions. We determined through discussions with staff that unrestricted fund balances (working capital reserves) should be maintained at a level equivalent to three months' operations and maintenance expense. This would provide working capital to operate the system if as much as three month's revenue were to be lost through a natural Burton & Associates I I I I I I I I I I I I I I I I I I I City of Clearwater Water & Sewer Utility Revenue Sufficiency Analysis Page 6 Final Report disaster. This working capital reserve also provides resources to mitigate or avoid rate increases resulting from unanticipated increases in system costs (for example, unscheduled replacement of critical components due to an operational failure). Debt service coverage requirements. Debt service coverage requirements have been set at the level required by the City's bond covenants, without adding any discretionary buffer. "Debt service coverage" refers to the ratio between Net Revenues (NR) generated through system operations and the required Debt Service Requirement (DSR) on revenue bonds (calculated as NR/DSR, and expressed as a decimal fraction, e. g. 1.15). The debt service coverage requirements are part of the City's contract with purchasers of its water and sewer revenue bonds, and are included in the ordinances adopted by the City Council when revenue bonds are issued. The ordinance governing a particular bond issue is included in the Official Statement given to prospective purchasers of the bonds; they therefore are construed to purchase the bonds based on their reliance on the City's maintenance of sufficient revenue to meet the coverage tests. We emphasize that dEbt service coverage is measured according to dEfinitions includEd in the City's contractual agreement with its bondholders. It is an artifact of the measurement process, and its value as an objective economic indicator dEpends upon the perspective of the user. There may be other measures evaluated by the rating agencies and municipal bond insurance companies that will have importance for purposes of obtaining dEbt financing. There are two coverage tests required by the City's bond covenants: o Rate covenant (aDDlies in every vear) Net Revenue = 1.15 x [Debt Service Requirement] where Net Revenue = Gross Revenue - Operations and Maintenance Expense - Annual Deposit to Renewal and Replacement Fund and Operations and Maintenance Expense excludes any operating transfers-out and Gross Revenue = GAAP revenue 2, including interest earnings on all funds o Paritv Test (aDDlicable in vears when revenue bonds are issued) Net Revenue = 1.20 x [MaxllnUID Annual Future Debt Service Requirement] where Net Revenue = PRIOR FISCAL YEAR [Gross Revenue - Operations and Maintenance Expense], adjusted for any planned rate increases and expected growth in the current Fiscal Year and Gross Revenue = GAAP revenue, including interest earnings on allfunds The Rate-Settin~ Process 2 Revenue determined in accordance with generally accepted accounting principles. Burton & Associates I I I I I I I I I I I I I I I I I I I City of Clearwater Water & Sewer Utility Revenue SuJ]iciency Analysis Page 7 Final Report Rates for government-owned Water & Sewer utility utilities are set based upon the requirement of the utility for funds to pay the costs of the system. These costs fall into four major categories of expenditure: · Ooerations and maintenance exoenses - the annually recurring cost of labor, supplies, and minor capital items necessary for the day-to-day operation of the system and its maintenance in good working order · Transfer oavments to other funds - annually recurring payments made to other funds for services rendered, as a payment in lieu of taxes that would be required if the utility were investor-owned, or as compensation for the citizens' risk of ownership · Major cavital exvenditures - expenditures that (a) renew, replace or improve the existing facilities of the system or (b) add new facilities that expand the capacity of the system. These costs may be incurred either through current funding in cash or in payment of debt service on loans used to fmance the expenditures. In the latter case, the system must also generate sufficient revenue to meet the debt service coverage requirements in its bond covenants (see discussion above) · Reserves - maintenance of reserves funds established by the bond covenants at the required levels, and the establishment and maintenance of sufficient unrestricted and unreserved fund balances to meet working capital requirements and to reasonably provide for unforeseen costs To pay these costs, the utility has three major resources: · Rate revenue - receipts from charges to users for the provision of Water & Sewer Utility services · Miscellaneous revenue - receipts from special charges for specific services rendered, other ongoing services such, late payment charges, and interest on investments · Impact fees (system development charges) - fees charged to new customers to offset the cost of their impact on the system. Impact fees are restricted to the payment of capital costs incurred for the funding of facilities that increase the capacity of the system. The City of Clearwater has not established a Water & Sewer Utility impact fee. In its simplest form, rates for any given forecast year are set as follows: Less: Less: Equals: Divided bv: Total annual cost requirements Miscellaneous revenue Imvact fees used to DaV cavital costs Total revenue requirements from rates Current revenue Jlenerated from rates Prooortionate (,-.) increase reouired Equals: Burton & Associates I I I I I I I I I I I I I I I I I I I City of Clearwater Water & Sewer Utility Revenue Sufficiency Analysis Page 8 Final Report Current Rates and Rate Revenues Water & Sewer Rates. Prior to the implementation of the revised rates on October 1, 1998, the System's user rates produced approximately $31 million per year, as reflected in the FY 1998 budget. To summarize, the System's water rates include a fIxed minimum monthly charge which increases with the customer's meter size, plus a volume charge per 100 cubic feet of water used. The volume charge increases with water consumption in order to promote conservation of water resources. Sewer rates consist of a fIxed minimum monthly charge, also increasing by meter size, plus a uniform rate per 100 cubic feet of water used. Customers outside the City limits pay a surcharge equal to 25% of the monthly charges. Ordinance No. 6310-983 also provided for the increase of all rates by 3% on October 1, 1998. It also provided for an annual increase each October 1 based on the Price Index for Water and Wastewater Utilities established by the Florida Public Service Commission, not to exceed 3.5%. This increase will be recommended in each year by the City Manager for approval by the City Commission by Ordinance. Rates for a single family residential customer (effective October 1,1998) are: Water Service Minimum monthly charge with usage up to 400 cubic feet $7.08 Volume charge per 100 cubic feet: 401 to 1,200 cubic feet per month $2.15 over 1,201 cubic feet per month $2.55 Sewer Service Minimum monthly charge with water usage up to 400 cubic feet $9.72 Volume charge per 100 cubic feet of water usage above 400 per month $2.43 Revenues and Sources of Funds General. Other operating revenue sources for the System are less significant, totaling $1.7 million from such sources as service charges, wholesale service charges to Safety Harbor, and reclaimed water revenues. 3 Water rates shown in the ordinance for October 1, 1992 have subsequently been revised to pass-through rate' creases implemented by Pinellas County for water purchased by the System from that source. Rates on September 30,1998 were 3% lower than those shown for October 1,1998. Burton & Associates I I I I I I I I I I I I I I I I I I I City of Clearwater Water & Sewer Utility Revenue SujJiciency Analysis Page 9 Final Report Interest Income. The System generates significant annual interest income, primarily from construction funds accumulated in the Capital Improvements Fund of the City. FY 1998 interest is estimated at $2.5 million. This decreases to about $1.4 million in FY 2003 as existing balances are drawn down to fund capital projects. SCH~DUL~ A (3) City of Clearwater, Florida Waler and SeMr Utilitv Enterprise Fund Revenue Account Balance Available for Appropriation Septembe,30, 1996 (a) FINAL REPORT UNRESTRICTED CURRENT ASSETS: CASH ON HAND AND IN BANKS EQUITY IN POOLED CASH & INVESTMENTS TOTAL RECEIVABLES, NET DUE FROM OTHER FUNDS DUE FROM OTHER GOVERNMENTS INVENTORIES PREPAID EXPENSES AND OTHER TOTAL $125 11,992,671 3,048,748 10,318,075 133,165 403,681 5,283 $25,901,748 CURRENT LIABILITIeS PAYABLE FROM UNRESTRICTED CURRENT ASSETS: ACCOUNTS/CONTRACTS PAYABLE ACCRUED PAYROLL INTEREST PAYABLE CURRENT PORTION, LONG-TERM DEBT TOTAL UNRESTRI~D WORKING CAPITAL ADJUSTMENTS: INVENTORIES (b) INTEREST PAYABLE (e) CURRENT PORTION, LONG-TERM DEBT (e) AVAILABLE FOR APPROPRIATION $863,270 630,192 105,076 712,636 $2,311,174 $23,590,574 ($403,681) 105,076 712,636 $24,004,605 (a) (b) (c) kcountbalances from Preliminary 9130/96 CPFR Balance Sheets (draft) as of2/14/97 Does not meet liquidity standard for funds available for appropriation. Reduction in working capital related to these liabilities is reflected in the flow offunds. Deduction from beginning balance would result in double-counting and an understatement of funds available for appropriation. Source: Burton & Associates C:\1Zl\DAT AICLWW&SoREPORnRPTFAMS. WK4 11130/98 Fund Balances at the Be!!innin!! of the Period. Fund balances available for appropriation at the beginning of the Burton & Associates II II I I I I I I I I I I I I I I I I I City of Clearwater Water & Sewer Utility Revenue Sufficiency Analysis Page 10 Final Report period are defmed as the System's current assets, less current liabilities, on September 30, 1997 (beginning ofFY 1998), adjusted as shown on the preceding page. Major System Costs Durin/! the Forecast Period Operations and Maintenance (O&M> Exnenses. O&M expenses represent the annually recurring cost oflabor, materials and supplies, and minor capital items required to operate the system and maintain the level of service demanded. O&M expenses are expected to total approximately $24 million in FY 1998. During the forecast period after FY 1998, it was assumed that in general O&M expenses will grow at an inflation rate of 3% annually. In addition, it was assumed that pay and pay-related benefits would increase by an additional 2.5 % (total of 5.5 %) annually to reflect the City's merit pay system. health insurance costs were estimated to increase by an additional 4% (total of7%) per year, based on the City's past experience. In total, application of these rates of increase to the appropriate expenditure items results in an average annual compound rate increase in total O&M expenses of 4.11 % during the forecast period. Debt Service. Debt service on existing revenue bonds in FY 1998 was $7.2 million, and remains approximately level throughout the forecast period. In subsequent years, new debt fmancing is amortized through level payments over thirty years as described in the section above describing the economic assumptions used in the forecast. Assuming the issuance of bonds in FY 2000 and FY 2001, annual debt service on new issues increases from $123,000 in FY 1999 to $2.4 million in FY 2003. Transfers. Operating transfers to the General Fund are calculated, in accordance with City policy, as 4.5% of total revenue from two years prior. The transfer increases from $1.5 million annually at the beginning of the period to $2 million in FY 2003. Capital Exnenditures. The system's capital improvements program (CIP) for the forecast period, totaling $54 million, is shown on the following page. In the Water System, expansion of the reclaimed water distributions system is the most significant project, amounting to $13 million of the total $21 million. System expansion accounts for $1 million, with the remainder being expended on renewal and replacement items. Sewer system projects are dominated by extensive renewal and replacement of the sanitary collection and transmission system ($10 million) and improvements to the Northeast plant ($5.3 million) out of the total of $33 million. In addition, significant expenditures ($7.3 million) are expected to update the sewer Burton & Associates City of Clearwater Water & Sewer Utility Revenue SujJiciency Analysis Pagell Final Report 911 5.1'16 lXl 5.1'16 01 5.1'16 1X/ 5.0'16 03 4.9'16 T 011/ IT.9'16 9ll lXl 01 lX/ 03 Toll/ 99 3.0'16 lXl 6.3'16 01 6.3'16 1X/ 6.3'16 03 3.0'16 T 0loi IT.5'16 99 6.9% lXl 69'16 01 6.9'16 02 6.9% 03 6.9'16 Toll/ :!l.6% 3.0'16 9.7% 8.8'16 8.8'16 3.1'16 37.9'16 system master plan. Other expenditures are spread over a wide variety of renewal and replacement projects, with a relatively small amount ($0.4 million) allocated to extension of the system to new customers. Financial Manal!ement Plan Scenarios In consultation with City management and staff during the interactive sessions and through subsequent discussions with staff, three fmancial management plan scenarios were prepared for consideration by the City Commission (see graphic above). The basic assumptions underlying each scenario were those discussed previously. The scenarios differ only in the timing and magnitude of rate increases in each year. All provide sufficient revenue to meet all projected System cost requirements during the forecast period, including the $54 million CIP shown above. For comparative purposes, a "Baseline" scenario (#1) using a "natural" rate plan (one in which rate increases emerge when needed, and only when needed, without intervention by the City). In this scenario, rate increases from year to year are very volatile. This scenario assumes "business as usual" with regard to water supply - that is, the City will continue to provide about 25% of its water resources, purchasing the remainder from Pinellas County. Scenario 2 shows how the volatility of the natural increases can be smoothed at approximately 5% in each year; Scenario 3 shows a plan which begins with an inflationary-level increase in FY 1999, uses three "catch-up" increases in succeeding years to meet Burton & Associates I I I I I I I I I I I I I I I I I I I City of Clearwater Water & Sewer Utility Revenue Sufficiency Analysis Page 12 Final Report the funding requirements of additional debt service generated by the CIP, and ends with a return to inflationary-level increases in FY 2003. Scenarios #4, #5, and #6 represented viable decisions for the City Commission. In #4 the impact of moving to purchase of all water from Pinellas County is shown, using a "natural" rate plan. Scenario 5 levels the increases at 6.9%; Scenario 64 shows increases beginning with an inflationary-level increase in FY 1999, three successive annual "catch-up" increases at around the 9% level, and a return to inflationary-level increases in FY 2003. City management recommended Scenario #6, with current action limited to implementation of the FY 1999 increase of 3 %, for the following reasons: · The timing and extent of the transition to 100% purchased water is uncertain. Adoption of rates before all the facts are known could result in the need for subsequent revision. · The plan in Scenario 6 represents a commitment to evolve to an annual inflationary-level increase by providing "catch-up" increases in the middle of the forecast period. This represents a desirable goal for the system. Acting on management's recommendation, the City Commission on August 6, 1998 unanimously adopted an ordinance reflecting the FY 1999 rate increase in Scenario #. 40riginally the three "catch-up" increases were presented as 9.2%, 9.1 %, and 9.1 % in FY 2000 - FY 2002. Upon subsequent review, it was determined that increases of9.7%, 8.8% and 8.8% were necessary to meet rate covenant coverage requirements in FY 1999. The total increase at the end of the period remains unchanged at 37.9%. Burton & Associates - I I I I I I I I I I I I I I I I I I I City ofClecrwater Water & Sewer Utility Revenue Sufficiency Analysis Page 13 Final Report Appendix I Full Set of Schedules for Adopted Financial Management Plan Burton & Associates .... .. I I I I I I I I I I I I I I I I I I J .c III == Q ;~ i3 WI Iij ~ ~ ~ ~ ~ ~ s ~ ~ to. ~ ~ LI.. ~ 6 ~ ~ - ... 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I I I I I~ II 43 I I I I I I I I I I I I I I I I I I I City of Clearwater Water & Sewer Utility R2venue Sufficiency Analysis Page 14 Final Report Appendix II Ordinance no. 6310-98 Adopting increases in the Water & Sewer Rates Burton & Associates "44 I I~ ) I I I I I I I I ) --- I I I I I I I I~ I ORDINANCE NO. 6310-98 AN ORDINANCE OF THE CITY OF CLEARWATER, FLORIDA, RELATING TO THE SCHEDULE FOR DOMESTIC WATER, LAWN WATER AND WASTEWATER COLLECTION UTILITY RATES; AMENDING APPENDIX A, ARTICLE XYN PUBLIC WORK5- FEES, RATES AND CHARGES; SECTION (3)(a) WATER RATES AND SECTION (3)(b) WASTEWATER COLLECTION UTILITY RATES, CLEARWATER CODE OF ORDINANCES; PROVIDING AN EFFECTIVE DATE. BE IT ORDAINED BY THE.CITY COMMISSION OF THE CITY OF CLEARWATER, FLORIDA: Section 1. Appendix A, Article XYN, PUBLIC WORKS-FEES, RATES AND CJ-lARGES, Section (3)(a) Water Rates, Clearwater Code of Ordinances, is amended as follows: (3) Rates: (a) Water rates. Water rates for all water furnished by the city shall be as follows: 1. Domestic water rates shall be the following based on monthly consumption and will take effect on October 1. 1998 Fobruary 1, 1992, and October 1, 1992, as shown in the following table, and shall remain in effect thereafter unless amended: c'el3" raw ~ OctaD or 1, October 1 , , ,..... , Meter Size ~ ~ 1998 Under i-inch: Minimum charge with usage $ 5.88 $ 6.12 $ 7.08 up to 400 cubic feet Plus, from 401 to 1,200 cubic 4-:+3 ~ 2.15 feet, p~r 100 cubic feet Plus, from 1,201 cubic feet up, 2-M ~ 2.55 i-inch: Minimum charge with usage ~ ~ 15.93 up to 900 cubic feet Plus, from 901 to 5,400 cubic 4-:+3 ~ 2.15 feet, per 100 cubic feet~ 100 cubic foot Plus, from 5,041 cubic feet up, 2-A4 ~ 2.55 per 100 cubic feet 4 :::; Ordinance 6310-98 I I 1 %-inch: ~ I Minimum charge with usage 196.08 204.86 237.18 ! up to 13,400 cubic feet Plus, from 13,401 to 18,700 4;f8 .ye 2.15 I cubic feet, per 100 cubic feet Plus, from 18,701 cubic feet ~ ~ 2.55 I up, per 100 cubic feet 2-inch: Minimum charge with usage 457.17 475. 46 550.47 I usage up to 31,100 cubic feet Plus, from 31,101 to 45,800 4;f8 .ye 2.15 cubic feet, per 100 cubic feet . I Plus, from 45,801 cubic feet, ~ ~ 2.55 per 100 cubic feet 3-inch or 2-inch in manifold: I Minimum charge with usage 705.60 733.83 849.60 up to 48,000 cubic feet Plus, from 48,001 to 63,400 4-:-7i ~ 2.15 I cubic feet, per 100 cubic feet Plus, from 63,401 cubic feet ~ ~ 2.55 I up, per 100 cubic feet 4-inch: ~ Minimum charge with usage 1,358.28 1,412.62 1.635.48 I up to 92,400 cubic feet Plus, from 92,401 to 130,900 ~ ~ 2.15 cubic feet, per 100 cubic feet I Plus, from 130,901 cubic feet ~ ~ 2.55 up, per 100 cubic feet 6-inch: I Minimum charge for usage 3,488.31 3,627.85 4.200.21 up to 237,300 cubic feet I Plus, from 237,301 to 270,700 4-:-7i ~ 2.15 cubic feet, per 100 cubic feet Plus, from 270,701 cubic feet ~ ~ 2.55 I up, per 100 cubic feet 8-inch: Minimum charge with usage 6,880.00 6,115.20 7.080.00 I up to 400,000 cubic feet Plus, from 400,001 to 456,300 -1-:+8 ~ 2.15 I cubic feet, per 100 cubic feet Plus, from 456,301 cubic feet ~ ~ 2.55 up, per 100 cubic feet I --' I 2 Ordinance 6310-98 1 I. 2. Lawn water meters. Lawn water rates shall be as follows: ) I Lawn meter size. I Under 1-inch: Base charge, with no water allowance $ 2-:43 2.52 Plus, up to 200 cubic feet, per 100 cubic feet 4-:-Q3 2.30 I Plus, from 201 cubic feet up, per 100 cubic feet ~ 3.16 1-inch: Base charge, with no water allowance ~ 7.57 I Plus, up to 900 cubic feet, per 100 cubic feet 4-:-Q3 2.30 Plus, from 901 cubic feet up, per 100 cubic feet ~ 3.16 1 Y.-inch: I Base charge, with no water allowance ~ 37.85 Plus, up to 1,200 cubic feet, per 100 cubic feet ~ 2.30 1 Plus, from 1,201 cubic feet up, per 100 cubic feet ~ 3.16 2-inch: Base charge, with no water allowance ~ 105.99 I Plus, up to 5,400 cubic feet, per 100 cubic feet ~ 2.30 Plus, from 5,401 cubic feet up, per 100 cubic feet ~ 3.16 3-inch or two 2-inch manifold: I) Base charge, with no water allowance 180.94 209.45 Plus, up to 13,400 cubic feet, per 100 cubic feet 4-:W 2.30 Plus, from 13,401 cubic feet up, per 100 cubic feet ~ 3.16 I 4-inch: Base charge, with no water allowance 318.80 403.76 I Plus, up to 31,100 cubic feet, per 100 cubic feet 4-:W 2.30 Plus, from 31,101 cubic feet up, per 100 cubic feet ~ 3.16 6-inch: 1 Base charge, with no water allowance 1,052.94 1,218.85 Plus, up to 48,000 cubic feet, per 100 cubic feet 4-:W 2.30 Plus, from 48,001 cubic feet up, per 100 cubic feet ~ 3.16 I 3. Standby and other charges for fire protection systems. For fire hydrants and fire protection systems on private property connected to the city water system, the I customer shall pay a monthly standby charge as set forth in the following table: I Monthly Facility Charge I Fire hydrants, per hydrant $ 5.00 Fire protection systems, based on fire line size, per building I~ 6 inches or less 5.00 8 inches 9.00 I 3 Ordinance 6310-98 A- - I I- ) I I I I I I I Ij 1 I I I I I 1 I I 10 inches 12 inches or larger 14.00 20.00 "'later drawn from a fire line and used for purposes other than firefighting will be charged at the lawn meter rate if the water does not enter the sewer system, or the domestic rate if the water enters the sewer system. Such charges shall be in addition to the monthly standby charges. 4. Service out of municipal limits. Accounts outside of the corporate limits of the city shall be subject to a surcharge equal to 25 percent of the monthly charges. 5. A charge of the monthly minimum for a 1 1/2-inch water meter is required for a deduct meter for air conditioning cooling water and similar purposes, but not for lawn irrigation purposes. This charge shall be required only where a separate irrigation meter cannot be set in the right-of-way or easement and the meter reader must physically read and deduct consumption for billing purposes. 6. The water rates shall be adjusted periodically to recover any increased cost to supply water due to changes in the wholesale rate the city pays for water. Any such adjustment shall be a proportionate increase based upon the ratio of water the city buys wholesale to total system water. Such rate adjustment shall be recommended by the public works diroctor administrator and approved by the city manager, and a copy shall be filed with the city clerk following approval. 7. Annual indexing of water rates and lawn water rates. Water and lawn water rates mav be adiusted annually on October 1 based on the Price Index for Water and Wastewater Utilities established each year by the Florida Public Service Commission (FPSC). The maximum rate adiustment based on the Price Index for Water and Wastewater Utilities is 3.5 per cent. Such rate adiustment shall be recommended bY the city manaQer for acproval bv the city commission by ordinance. The initial adiustment pursuant to this subsection shall be effective October 1. 1999 based upon the 1999 Price Index for Waster and Wastewater Utilities to be established by the FPSC in 1999. 8. +: Dormant accounts. The monthly charge for a dormant lawn water account shall be at the applicable water lawn base charge for the size of meter at the premises. Section 2. Appendix A, Article XXV, PUBLIC WORKS-FEES, RATES AND CHARGES, Section (3)(b) Wastewater Collection Utility Rates, Clearwater Code of Ordinances, is amended as follows: (b) Wastewater collection utility rates. 1. There is hereby established a uniform schedule of rates and charges for the use or availability of use of the wastewater collection system. The wastewater collection utility rate shall be a monthly fee consisting of a minimum charge for an assigned volume of 4 Ordinance 6310-98 . ~ I I I I I I I I I I. ) 1 I I 1 I I 1 I. ' I domestic water associated with each water meter size, shown as the basic allowance in the following table, plus a charge per 100 cubic feet for water consumed above the assigned volume. Such rates shall take effect on October 1. 1998 Fcbru:uy 1, 1992, :md O~obor 1, 1992, as shown in the following table, and shall remain in effect thereafter unless amended: Base Monthly Charge With or Without Consumption Size of Meter Fcbru:u)' 1, ~ October ~ , ~ October 1. 1998 Basic Allowance (cubic feet) Under 1-inch $ 8.88 $ 9.~~ $ 9.72 400 or less 1-inch 19.98 21.24 21.87 900 or less 1 ~-lnch 297,48 J16.24 325.62 13,400 or less 2-inch 690.42 7JJ.96 755.73 31 ,100 or less 3-inch or 2 2- 1,065.60 1,1J2.80 1.166.40 48,000 or less inch manifold 4-inch 2,051.28 2,180.64 2.245.32 92,400 or less 6-inch 5,268.06 5,600.28 5.766.39 237,300 or less 8-inch 8,880.00 9, ~~O.OO 9.720.00 400,000 or less Charge per 100 2.22 2.J6 2.43 cubic feet of water used over the basic allowance 2. Service outside of the municipal limits. Accounts outside the corporate limits of the city shall be subject to a surcharge equal to 25 percent of the monthly wastewater collection utility charges. 3. The wastewater collection utility rate schedule shall be reviewed by the city commission as a part of the annual fiscal budget preparation to ensure that adequate revenues are s Ordinance 6310-98 I I) I I I I I I I I~ I I I I I I I 1---) I generated to pay the costs of operation, maintenance and outstanding bond service requirements. 4. The wastewater collection charges provided in this section shall not apply to sprinkler irrigation systems separately metered or deduct meters. 5. Basis where water is unmetered. For accounts existing as of the effective date of this article, at premises which have a source of water other than city water system, where the spent or used water from which goes into the wastewater collection system, the customer shall pay a charge according to the schedule provided in this section, based upon an estimate of the amount of water going into the wastewater collection system. In the event of a disagreement as to the amount of such water reaching the wastewater collection system, then a metering device or devices shall be installed at the customer's expense to determine that amount. For accounts established after the effective date of this article, the customer shall install at the customer's expense a water meter on the water service line, which meter shall be accessible to city employees for the purpose of reading the meter. Water consumption measured by such meter shall be the basis for the wastewater collection charges for the premises. 6. Annual indexino of wastewater collection utility rates. Wastewater collection utilitv rates may be adiusted annually on October 1 based on the Price Index for Water and Wastewater Utilities established each year by the Florida Public Service Commission (FPSC). The maximum rate adiustment based on the Price Index for Water and Wastewater Utilities is 3.5 per cent. Such rate adiustment shall be recommended by the city manaoer for approval by the city commission by ordinance. The initial adiustment pursuant to this subsection shall be effective October 1. 1999 based upon the 1999 Price Index for Waster and Wastewater Utilities to be established by the FPSC in 1999. 7. &: Dormant accounts. The monthly charge for a dormant account shall be at the applicable sanitary sewer base monthly charge for the size of meter at that premises. 6 Ordinance 6310-98 I I I I I I I I I I I I I I I I I L I Section 3. This ordinance shall take effect immediately upon adoption. PASSED ON FIRST READING PASSED ON SECOND AND FINAL READING AND ADOPTED Approved as t? form: ~~~ John Carassas Assistant City Attorney July 16. 1998 1998 R ta arvey Mayor-Commissioner Attest: h, %:~.~~~ ~y~ E. 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