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11/13/1997FISCAL REVIEW COMMITTEE CITY OF CLEARWATER November 13, 1997 Present: Daniel Fleck Member Janet MacNutt Member (arrived 8:44 a.m.) Daniel Moran Member Richard Lynch Member Tina Wilson Budget Director Margie Simmons Finance Director Bob Brumback Solid Waste Director Paul Nystrum Solid Waste Controller John Scott Assistant Finance Director Jim Maglio Superintendent, Solid Waste Robert Lockridge Burton & Associates Brenda Moses Board Reporter Absent: Carol Warren Member Budget Director Tina Wilson called the meeting to order at 8:09 a.m. at the Solid Waste Services Building. In order to provide continuity for research, the items listed were not necessarily discussed in that order. Burton & Associates representative Robert Lockridge said the study reviewed the sufficiency of the City’s Solid Waste collection rates and other revenues to provide funding for operations, maintenance expenses, capital expenditures, transfers, and reserve requirements for FY (fiscal year) 1998 through 2001. It has been 5 years since the last rate study. Finance Director Margie Simmons said the rate study begun last year covers the current year and next 3 years. The goal is to maintain a 3-month operating reserve. Expenses include: 1) normal budget; 2) Solid Waste’s share of the utility billing system; and 3) a new dumpster screening program. The study model increased most costs 3% annually. Salary increases are estimated at 4% a year, and health insurance increases at 8% annually. A new utility billing system is needed due to year 2000 computer problems. Conservative earnings estimates on investments are 5.5% in 1998, 4.5% in 1999, and 3.5% in 2000. Debt financing to lease purchase large vehicles currently is budgeted to increase by 6%. Mr. Lockridge noted the study assumes no growth and no new customers. Growth would spread fixed costs over a larger base and help offset future rate increases. Solid Waste Director Bob Brumback said the Burton & Associates rate study recommends 4 consecutive annual rate increases of 6.1% to cover future operating costs and special requirements. Rates were last increased in September 1992. Rates were reduced 4.4%, or $.075 a month, in 1994 when recycling was implemented. Recommended increases are necessitated by: 1) anticipated CPI (Consumer Price Index) increases over the next 5 years; 2) the need for a new computer billing system for Utility Customer Service; and 3) a need to screen dumpsters from City-wide view. An incentive program has been developed to pay customers $400 for large screened enclosures and $250 for small ones. An estimated 2,000 dumpsters, at a cost of $400,000 in incentives and operating costs, are necessary for the proposed dumpster screening program to be a success. The Solid Waste Department competes with BFI, Waste Management, Kimmons and other companies. Rates must remain competitive. Competitive improvements have included expansion of some routes, elimination of others, increased, staff reduction, 10% growth in residential customers over 5 years, negotiation of reduced disposal rates for large yard waste items and construction material, and a State grant. The importance of providing special services for cleanups after major tropical storms and special events was discussed. It was remarked that Clearwater cannot be “sparkling” unless waste disposal services are maintained efficiently. Mr. Lockridge presented Burton & Associates’ rate study analysis. The rate setting process compares future system costs to revenue required. The study determined rate increases are generally necessary: 1) to meet debt service coverage on existing long-term debt; 2) to meet cash requirements; and 3) to maintain reserves. Inflation raises operating costs. Mr. Lockridge suggested after 5 years, to base rate increases on the CPI to cover the costs of inflation. Ms. Wilson said during the next 3 years, $400,000 a year in CIP (Capital Improvement Program) funds will be used to acquire commercial containers. The 1998 CIP budget includes another $80,000 to $100,000 over 3 years for facility renewal and replacement, the dumpster screening project, and the utility billing system. It was noted the rate increase includes costs associated with implementing the computer system and dumpster screening projects. Discussion ensued regarding other cities’ rates and services, and how to implement the proposed rate increases. Member Moran moved to recommend a 6.1% annual rate increase in Solid Waste rates for each of the next 5 years. The motion was duly seconded and carried unanimously. The meeting adjourned at 10:03 a.m.