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2014 BudgetDepartment Presentations
Infrastructure Funding Options
Utility Infrastructure
210/29/2013
2012 Utility Operations
From latest audited financial statements (2012) WATER WASTEWATER STORMWATER
OPERATING REVENUES
4,340,926
9,048,780
4,264,734
OPERATING EXPENSES
4,768,287
8,347,668
4,430,730
Operating income (loss)
(427,361) 701,112
(165,996)
OTHER NET EXPENSES
(41,034)
(392,111)
(39,559)
Income before contributions and transfers*
(468,395) 309,001
(205,555)
Two of our utilities are operating at a loss.*Capital contributions are investments in the system and not operating income.
310/29/2013
Increasing Construction Costs
Infrastructure maintenance needs based on HDR study.• Study was based on original cost, and adjusting for inflation per Engineering News Record
Construction Cost Index
Year Start ENR-CCI Increase Adjusted
2010 6,250,000
2011 6,250,000 2.8% 175,000 6,425,000
2012 6,425,000 2.6% 167,000 6,592,000
2013 6,592,000 2.7% 178,000 6,770,000
Indexing ordinance was intended to keep the utilities from falling further behind
410/29/2013
Previous Proposals Increases recommended by consultants
• Water + 4% - 6% annually for 29% over six years• Sewer + 4% - 7% annually for 34% over six years• Storm + 5% - 7.5% annually for 40% over six years
Current indexing ordinance helps the utility keep from falling further behind
Engineering News Record Construction Cost Index increase of 2.7% applies Feb 2014 absent other Council action
Debt to cash policy helps in the long term – but not enough
510/29/2013
Utility Repair and Replacement Needsvs. Funding Provided by RatesYear 2021 Analysis (in today’s dollars)
Estimate of revenue needs after debt is paid off
Other considerations:1. Projected total utility shortfalls 2013-2028
• Water $17.5 M Sewer $10.5 M Storm $ 1.2 M
2. This only considers existing infrastructure – does not provide for capacity growth
3. Water never reaches full funding without increases above inflation
WATER SEWER STORM TOTAL Annual Project Needs 2,050,000 2,930,000 1,250,000 6,230,000Provided by rates now 650,000 1,000,000 960,000 2,610,000Additional after debt payoff 462,000 1,960,000 335,000 2,757,000Total Funding Provided 1,112,000 2,960,000 1,295,000 5,367,000(Shortfall) / Catchup (938,000) 30,000 45,000 (863,000)
Utility rates and SDC revenues 5,257,000 10,168,000 4,570,000 19,995,000
Percent of increase needed 17.8%
610/29/2013
Water rate changes vs. total utility revenues
Effect of each 1% increase in water rates on total utility revenues
1. Each additional 1% increase in water rates, increases total utility revenues by about ¼ of 1%.
WATER SEWER STORM TOTAL
Utility rates and SDC revenues 5,257,000 10,168,000 4,570,000 19,995,000
Percent of water rate increase 1% 2% 3% 4%
Additional Water Revenue 52,570 105,140 157,710 210,280Total Base Revenue 19,995,000 19,995,000 19,995,000 19,995,000
Percent to total revenue 0.26% 0.53% 0.79% 1.05%
710/29/2013
Rate Recommendation Objectives
Move the City in the direction of fully funding utility infrastructure repair and replacement
Avoid emergency double or triple digit rate increases
Strategy depends on making the system last long enough
Avoid excessive rates – increase no more than is needed
810/29/2013
Utility Rate Recommendation
At minimum, continue to index Water, Sewer and Storm rates based on the Engineering News Record Construction Cost Index.
It is necessary to keep up with increasing costs
Add a catch-up increment for Water rates of 4% each year for four years.
Have external consultants update the rate studies in 2018
910/29/2013
Street Infrastructure
1010/29/2013
Local Street ReconstructionFunding StrategiesTax options available• Property tax – “banked capacity”
• Unused tax authority is $3,260,000• Requires supermajority vote of Council
• Utility tax – current rates are 2.2% on private utilities
• Transportation Benefit District – separate entity• More appropriate for a permanent adjustment• Local license fee• Sales tax option
1110/29/2013
Local Street ReconstructionA Possible Approach
Increase taxes on private utilities in 1% rate increments per year for three years
• Sunset each increment after six years• Designate revenues for street fund• Each 1% generates about $800,000 / year
• Monthly cost on a $500 utility bill = $5
• Current rates of 2.2% are relatively low• Apply to privately owned utilities
• Telephone, electricity, gas, cable
1210/29/2013
Potential Revenues Generated by Utility tax Option
Effective Rate Increase 1.0% 2.0% 3.0% 3.0% 3.0% 3.0% 2.0% 1.0%Year 2014 2015 2016 2017 2018 2019 2020 2021
Revenues generated 808,000 1,617,000 2,425,000 2,425,000 2,425,000 2,425,000 1,617,000 808,000
Projected shortfall 4,950,000 4,950,000 4,950,000 4,950,000 4,173,000 3,534,000 2,747,000 2,747,000
After tax increase 4,142,000 3,333,000 2,525,000 2,525,000 1,748,000 1,109,000 1,130,000 1,939,000
A significant shortfall remains even after a short term utility tax rate increaseThis may be mitigated somewhat by additional funding coming from• Real estate excise taxes – recently at historic lows, beginning to improve• Traffic Impact fees as development activity increases• Tier 3 funds available in good years after full funding of Tier 2 maintenance• Lift Grant when streets are located within the revenue development area
1310/29/2013
Council Direction Requested
Does Council wish to enact a dedicated funding source for transportation projects at this time?
1410/29/2013
End of Presentation
1510/29/2013
Held in Reserve
Use if necessary to answer questions
1610/29/2013
Local Street Reconstruction
This pertains to rebuilding of local streets beyond annual maintenance efforts.
Past emphasis on major arterials has spent traffic impact fees prior to receipt.
Bonds were issued and local street work deferred to pay for these projects.
1710/29/2013
Local Street ReconstructionAnnual Requirements
Estimated Annual Need Based On• Current inventory of infrastructure• Total expected life before rebuilding• Adequate funding of annual maintenance• Today’s prices
1810/29/2013
Local Street ReconstructionCurrent Inventory
150.8 lane miles of arterials/collectors• Average life 30 years if well maintained• 150.8 / 30 = 5.0 miles per year average to rebuild
194.9 lane miles of residential streets• Average life 50 years if well maintained• 194.9 / 50 = 3.9 miles per year average to rebuild
Total annual rebuilding needed = 8.9 miles
1910/29/2013
Local Street ReconstructionToday’s Costs of Rebuilding
Converting lane miles to square yards:• 1,760 yards per mile X 4 yards per lane = 7,040
Estimated cost per lane mile• Estimated cost per square yard = $80.00• 7,040 X $80 = $563,200 per lane mile
8.9 miles per year X $563,200 = $5,012,480
So approximately $5 million / per year
2010/29/2013