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HomeMy WebLinkAboutWater Board - Minutes - 01/21/1994WATER BOARD MINUTES January 21, 1994 3:00 - 5:10 P.M. Water and Wastewater Utility Conference Room 700 Wood Street Council Liaison Gerry Horak Members Present Neil Grigg, President, MaryLou Smith, Vice President, Ray Herrmann, John Bartholow, Tim Dow, Tom Brown, Dave Stewart, Dave Frick, Howard Goldman Sxaff Rich Shannon, Mike Smith, Wendy Williams, Ben Alexander, Jim Hibbard, Scott Harder, Roger Buffington, Beth Voelkel, Molly Nortier Guests George Reed, Citizen Observer Sue Ellen Charlton, League of Women Voters Observer Members Absent Terry Podmore, Paul Clopper President Neil Grigg opened the meeting. The following items were discussed: Minutes Ray Herrmann moved that the minutes be approved as distributed. After a second from MaryLou Smith the Board passed the motion unanimously. Update: Northern Colorado Water Conservancy District No representative from the District was present, so there was no report. However, President Grigg noted that the District has a new director, Eric Wilkinson. Mr. Wilkinson is a Colorado native and has been a water resources engineer for the district for several years. He previously held similar positions with the City of Greeley and the Colorado division of Water Resources. A former employee of the District described him as a person who is "very well liked." President Grigg would like to invite Mr. Wilkinson to visit the Water Board sometime in the near future. "I think there are enough issues that involve the District and regional water that we really need to work closely with the District, and the change of the director is a good time to forge new relationships," he said. Water Board Minutes January 21, 1994 Page 2 Proposed Development/Plan Review Fees Background information on the proposed development fees was sent to Board members in their packets. The proposed ordinance is in response to Resolution 93-179 adopted by Council on November 16, 1993, which required that 100 percent of the cost of development -related activities be recovered through City development review fees. The fees contained in the proposed ordinance recover 100% of the costs associated with Utility review of development plans and administration of permits, water rights and reimbursement agreement programs. These costs include direct labor costs and benefits for the equivalent of 3.22 full-time employees. The fees are based on 3 years of historical cost information, which is assumed to be a reasonable time to revise staffing plans based on significant changes in the level of development activity. The fees for plan review and inspection are based on a sliding scale, from $76 for single family dwellings to $500 for commercial meters 1-1/2 inches and larger. A $96 permit fee would be charged to cover the administrative cost associated with the permit application process. The proposed fee for multi -family development is the lesser of $596 and $96 plus $42 per dwelling unit. The ordinance authorizes the City Manager to adjust fees each year based on costs. Based on 3 years of historical permit data, the proposed development fees would recover an estimated $150,000 in administrative costs associated with new development currently financed through user rates. This represents 1.2% of the 1994 operations and maintenance budget of the combined Water and Sewer Funds. Rich Shannon discussed how the Council came to pass the resolution. A few months ago Water Board members were given copies of a document called the "Cost of Development Study, " which the Council had requested. Council thought it was time to look at direct costs associated with new development and development review, plant investment fees, etc. Other departments associated with the development process were going through a similar process. An evaluation of some of the fees associated with development review indicated that revenues were considerably lower than expenses for some of the general fund fees. That raised the question of what percentage of those expenses should be recovered directly from development review fees. About two months ago, a resolution mandating 100 percent recovery of development -related costs was passed by Council to give guidance to staff and various organizations. Rich Shannon provided Board members with some background information. Council discussion suggested that fees generate somewhat less than 100%; the argument being that these services also benefit the community in general. The P&Z Board recommended that fees should be based on recovery of 20% of the cost incurred in providing development review services by all City Departments; City staff recommended 50% recovery. E Water Board Minutes January 21, 1994 Page 3 Mr. Shannon went on to say that this was an awkward issue to bring forward because many folks approached it from a little different perspective. "I think in the heat of the moment the resolution was passed with 100%, so that's what staff put together. I'm not sure that's how it will end up," he conjectured, "especially since one of the Council members who voted in favor of that is no longer on the Council." This will probably be addressed again by the Council in February before the seventh Council member is appointed. Marylou Smith asked if this is part of the bigger issue of recovering costs for all City development review processes, or just water and wastewater. "All areas," Mr. Shannon replied. The parkland fee is one that is not covering itself and is up for discussion, and most planning fees are up for consideration. Tim Dow asked if other fees such as fire and police are being considered. "No," Mr. Shannon replied. Secondary impacts including libraries, etc., are not on the table for discussion. It is limited to the costs of processing an annexation, a PUD, etc. In the case of the Utilities, it is the cost to review development in one form or another. What is in front of the Board today is a first step in the process. Staff debated various economic theories to try to determine the best way to approach this. The numbers presented today are an attempt to move towards 100% recovery. Mr. Shannon asked for reactions, particularly to the approach. The criteria staff used in selecting an approach involved balancing equity with a workable cost recovery system. "We tried to keep it simple," he said. If making it as equitable as possible meant adding to overhead costs to develop a different collection mechanism, we opted to use an existing mechanism through which we could recover more or less the same amount of money in a reasonable manner, without additional overhead costs. he explained. Marylou Smith said this reminds her of some aspects of the studies that the Utility has done in the past and the whole issue of charging developers more to pay for growth. We need to think about what limitations would be made on growth in Fort Collins if we make some of these decisions. "This approach seems so disjointed," she asserted. She would like to see something far more planned in terms of the big picture, instead of taking one segment at a time in a patchwork approach. "If we do decide that we want to increase development fees to limit growth, what do we know about what other communities have tried, and if it has worked elsewhere? I would like to know if City Council is looking into these things before I'm asked to vote on this issue," she stated. "Unlike Marylou Smith I'm comfortable taking Council's direction on the larger issue of whether growth should be expected to pay the full cost," Tom Brown began. "It doesn't bother me to be asked to deal with the fee, if in fact that is the policy that has been set by our elected officials." He will, however have some questions as we get into the details of staff's proposal. Water Board Minutes January 21, 1994 Page 4 Tim Dow agrees with both Ms. Smith and Mr. Brown. If the Board's charge is to make a recommendation as to what the formula should be, given that the policy has already been determined, he has no problem with the way staff has approached this. He noticed that long- term fixed costs have been excluded from the staff's approach. "Is that because those items will be picked up in other fees?" Scott Harder replied, "that's partly it." Staff made a distinction between long and short-term utility planning. Labor costs are easier to adjust in the short-term, whereas capital costs may only vary in the long-term. Mr. Dow said if the Board is directed to do this, he doesn't have a problem with the method, but philosophically he has a number of concerns. The cost of growth has become a "political hot potato." Moreover, he thinks this is a political agenda of certain people. He contends that if we are going to look at the cost of growth in a negative sense, we also ought to measure the benefits of growth. For example, in section 2 of the resolution it looks like at least some people are looking at defraying the cost for affordable housing, "whatever that is." Some people say affordable housing is anything less than $120,000. "I think if we believe this is going to pay the cost of growth, we're kidding ourselves," he asserted. Dave Stewart wanted to know how the issue of affordable housing is handled. In section 2 of the resolution it states that they just want to explore options, Mr. Dow replied. Mr. Stewart continued by saying that the Utility has a cost associated with staff time. Staff time is supposed to be recovered by user fees, and if developers are not being charged directly "it means that somebody else is paying for that growth." Rich Shannon explained that section 2 would not impact the utilities. The general fund would choose to collect the revenues from higher income houses, put that money in a separate general fund account, and use it to pay a portion of the fees associated with affordable housing. Tim Dow asked if the $96 would go into the general fund or the utility fund. "The Utility fund," Mr. Shannon replied. The fees that are associated with this schedule would be shown as a separate charge on the building permit along with the Plant Investment Fee (PIF). Mr. Dow observed that the net effect of that is to increase the general fund --bottom line. "If that's what we really want to do as a policy, perhaps we ought to subsidize houses over $200,000, and not charge them because they're going to spend a lot more in Fort Collins in City sales and use taxes and everything else," he asserted. "That's just as equitable as the other way around." Ray Herrmann thinks the concept of growth paying its own way is intrinsically a good one. He agreed that this is a small step, but at least it is an attempt to identify the real costs. "The whole concept that we ought to pay 20% of the real cost of growth is stupid," he insisted, "because that just means that you and I are going to pay." From that standpoint he thinks this is a step forward. Once we get to the tangibles like fire and police, the enormous amount we are paying for growth will become obvious. "We're not gaining, we're paying," he contends. Ms. Smith Water Board Minutes January 21, 1994 Page 5 remarked that those who want growth are willing to pay for it. Mr. Herrmann concluded that basically he thinks staff's approach is a good first step. President Grigg asked what kind of response staff is looking for on this issue. Mr. Shannon said that for a first step, given that the policy already exists, the Board needs to decide if the mechanics are reasonable. If the Board thinks it would be appropriate to communicate anything else to the Council, perhaps what they think of the policy (at a philosophical level), that would be a second step. Dr. Grigg said that there appears to be little dissent on the mechanics. John Bartholow thought it would have been helpful to have 2 or 3 different options from which to choose. "It seems that staff has taken a conservative approach by just including salary and benefits. " Tom Brown referred the Board to the table on distribution and collection of fees, listing single family up to a 4" commercial meter. He noticed that the larger of the two fees is the plan review fee. The permit application fee is assumed to be identical whatever the size. It seems that the plan review fee increases with ERCs (Equivalent SF Residential Connections) per account. If you follow the ERC rule all the way to the 4" line, with 70.7 ERCs, you would have a fee of $5,600, yet it's kept at $500. "I'm not saying it should be $5,600, but why the $500 cap?" Roger Buffington began by saying that the plan review fee is a little misleading. It's really more of a development -related fee which includes plan review, initial conceptual review of the development, and review of preliminary and final submittals, which includes construction plans. After construction, field crews televise the sewer lines and water crews inventory valves and fire hydrants, so there is some field time involved. It does not include inspection from the City Engineering Dept. Mr. Buffington said that Mr. Brown was correct in ascertaining how staff arrived at the first four fees. When looking at the plan review in those larger sizes, it was no longer proportional to the time spent. Therefore, staff looked at what is a reasonable level for those larger connections, and arrived at the $500 cap. Mr. Brown still thought the $500 seemed low. Jim Hibbard pointed out that the City sees very few 4" connections. Usually with the larger type taps, you are looking at a particular site and not a sub -division with mixed use. Our review time on something like that can actually be a lot less than an 80 lot sub -division, he explained. "In general I think we are in the ball park for what our costs actually are as they relate to average reviews," he concluded. Mr. Brown asked the meaning of the equivalent SF residential connection. Mr. Harder explained that it's a calculation that normalizes average monthly water use for different classes of customers to single family residential usage. If we arbitrarily set average monthly single- family residential usage equal to 1.0, then, based on our historical usage records, a typical 1- Water Board Minutes January 21, 1994 Page 6 1/2" commercial customer would represent 10.6 ERCs (or 10.6 Iim s the monthly usage of a typical SF residential customer). This is a way to normalize water use. It's just volume of water used. Dr. Grigg asked about the permit application fee. What are we collecting now? Right now those are being covered by monthly service rates, Mike Smith replied. Dr. Grigg recalled that Tim Dow said directly charging developers for related costs would benefit the general fund, but in the Utility's case the benefit would be to the rate -payers. Mr. Dow remarked, "Only if there is a commensurate reduction in the rates. " Mr. Smith explained that if this is implemented when the Utility prepares the 1995 budget, our O&M costs will be less than they would have been because some of the costs will be allocated to development. The amount is very small --less than 2 cents on the monthly bill. President Grigg asked for a motion. Dave Stewart moved that the Water Board recommend approval of the method proposed by staff for development fees. Tim Dow seconded the motion with a clarification that the Board doesn't necessarily endorse, one way or the other, the underlying philosophy. John Bartholow repeated that he assumes that staff thought of other ways to approach this. He asked for someone to sketch out what those alternatives were. Mr. Harder said staff had "brainstormed" extensively on this. One idea was to actually record on time sheets time spent on permit tasks. They weighed some of the additional administrative tasks associated with this approach. They also looked at ways through which the plan review fee could be structured to penalize contractors for a poor submittal. "We felt the approach taken was the most defensible as well as the easiest to administer. " It is defensible in that in an average year, we are collecting costs based on staff time. "Were any other overhead costs considered?" Mr. Bartholow asked. We asked ourselves what costs would be reduced if development stopped tomorrow. A three year time frame would allow time to redistribute labor to reflect changes in development activity. Mr. Shannon added that water Utility staff also assumed that fees would be collected when the developer comes in for a building permit. The amount of review by water and wastewater staff is much more straight forward than what is required of Stormwater staff. The Storm Drainage Board and staff decided to collect fees on a per submittal basis. That's also a reflection of an existing concern in the stormwater area that the quality of plan submittals vary significantly. Sometimes it requires 10 submittals. Those are the kinds of trade-offs. Tim Dow asked if this is the same approach that the Planning Dept. is going to use to determine their costs. Mr. Shannon said that his guess is that each department will be slightly different. For example, Stormwater includes overhead because they lease their facility. For the first run through with the Council we don't expect that each department's development fees will take the same format. • Water Board Minutes January 21, 1994 Page 7 Ray Herrmann thinks the rider with the motion is not necessary. He thinks we would be better off without it. Dr. Grigg asked if the people who made the motion wanted to change it. Dave Stewart and Tim Dow did not offer to change the motion. Dr. Grigg than asked to move to the next level, discussion of the philosophy of the policy. Since the Board is going to discuss that next, why are we attaching it to the first motion? Tom Brown asked. Tim Dow explained that the reason he placed that amendment along with the second to the motion, was because he feels that without the amendment, simply adopting this would inherently support the underlying policy. There was a question about the outlying districts. Mike Smith pointed out that it is the outlying districts' determination as to how they want to collect their fees. This is just for people who get water and wastewater service from the City of Fort Collins. President Grigg called for the question. The motion carried 8-1. Ray Herrmann was opposed because he thinks that the Council needs to deal with the issue of costs separately from the philosophy, and in this case he supports what staff has presented. "Council has given us a 100% cost recovery, and I agree with that, and I believe that the rider that is put on the motion basically leaves the impression that most of the Board members are opposed to that. Dr. Grigg opened up the discussion for specific comments on the policy. Rich Shannon pointed out that the Water Board minutes are fairly complete, and that when this goes to the Council the minutes are attached. Individual comments will, already be reflected in one form or another. However, anyone who desires to be more precise is welcome to comment at this time. Tom Brown stated that he agrees with Ray Herrmann that growth should pay its own way. It is fair to have growth by the Utility paid for by those people who are creating those costs. "That said, from what I've heard from staff, the approach they suggest is good." Neil Grigg said he has always been an advocate of rational impact fees, especially for capital facilities. He also favors growth paying its own way for the most part, rather than heavy subsidies to draw the growth. He thinks that we need to be giving special consideration anytime it affects the cost of housing. According to the executive summary distributed to Water Board members, the City and South Fort Collins Sanitation District in 1985 entered into an intergovernmental agreement for a 5-year period. The agreement provided for the establishment of service area boundaries, sharing of master plans, and cooperation in providing service to the customers of the City and the District. It has worked well in providing an orderly process for discussing and resolving service issues between the City and the District. Water Board Minutes January 21, 1994 Page 8 Since the expiration of the 1985 agreement, District and City representatives have expressed interest in extending the agreement. In response to that interest, City and District representatives have drafted a new document which was included in Water Board packets. The proposed agreement is very similar to the previous agreement, and includes provisions which establish service area boundaries, a steering committee, the updating and sharing of master plans, and continuing the cooperative exchange of information, operational assistance and emergency aid. The Board of Directors of the District have reviewed and approved the proposed agreement. Mike Smith pointed out that when Fort Collins -Loveland Water District renewed their agreement in 1990, the Sanitation District, at that time, didn't feel the need to renew their part of the agreement. They recently decided it was time to do that. There are only a few small changes in the original service areas. The Board reviewed the boundary areas indicated on the map attached to the agreement. In the planning for Wastewater Treatment Plant No. 3, considering the topography, it appears the District would have to pump anything beyond Fossil Creek Reservoir, Dave Stewart observed. They could potentially get back to their plant if they don't get too close to the reservoir, Mike Smith said. Currently they have a lift station on the other side of I-25. At the intersection of Harmony and I-25, the City would have to pump too. Does the District serve everyone south of the service area boundary and west of I-25 or does that boundary shift as there is more development? Tim Dow asked. That area is fixed at this time, Mr. Smith replied. "They currently serve a lot of folks that are right against the boundary, and they also serve Ptarmigan; that effluent is pumped back. " Mr. Smith asked if there were existing customers near Harmony Rd. and College. Jim Hibbard pointed out that most notably would be Imperial Estates which is at the comer of Horsetooth and Taft Hill; there are other scattered customers as well. Mr. Smith went on to say that there aren't any large overriding issues with this new agreement. It is primarily related to what was agreed on previously. The City's relationship with the District has been very good, he added. Tim Dow moved that the Water Board recommend approval to the City Council, the proposed agreement with the South Fort Collins Sanitation District. Ray Herrmann seconded the motion. Mr. Dow noted that he particularly likes the language on the top of p. 3 of the agreement. It says that the benefits of regionalization are going to be studied. Mr. Smith added that the sanitation district seems to be very interested in the regional facility. Dr. Grigg called for the question, and the motion carried unanimously. 0 Water Board Minutes January 21, 1994 Page 9 Endorsement of Proposed Action of Cost of Service Committee Scott Harder related that the Ad Hoc Cost of Service Committee has spent several months reviewing the water cost of service water rate study recently completed by Utility staff, and the associated ratemaking analyses. Staff provided Board members with a memorandum which included seven conclusions reached by the Committee and four recommendations. The Committee discussed numerous open-ended policy issues that have the potential of impacting the Utility's approach to ratemaking, Mr. Harder explained. The Committee recommended further clarification of key policies, as well as the role water and wastewater ratemaking should play in following them. They agreed to refer to the Water Planning Committee four policy issues, listed in the memo, which Dr. Grigg will discuss later. Neil Grigg, Chair of the Ad Hoc Committee, began by saying that staff basically used the methods of the American Water Works Assn. (AWWA) to prepare the cost of service analysis that the Committee reviewed. Towards the end of the meetings the Committee members began asking, "what does this mean, and what should we bring back to the Water Board?" They also wondered what issues would surface from this, and how quickly they needed to act. They found that there was not a great urgency on the rates because the Utility did not need a water rate increase in 1994. For the most part, the Utility's rates are based on the cost of service approach, with the exception of the outside city rates which are indexed 50% higher than inside city rates. That policy was set a number of years ago and might bear some re-examination. The policy has implications on issues like regional cooperation. Dr. Grigg summarized the conclusions the Committee reached: (1) The cost of service analysis does not support a 50% rate differential for outside city customers. (2) The single possible exception to that is an ownership issue. City customers may be assuming some risk that entitles them to a "risk" premium; outside customers do not have the liability of having to pay off government bonds should the Utility default on payments. (3) The Committee thinks this is a policy issue that needs the attention of the Council. If we remain with the 50% premium which isn't supported by the cost of service approach, it may "fly in the face" of regional cooperation. In other words, a premium charge to outside city customers might be considered in the context of a Council policy on regional cooperation. Water Board Minutes January 21, 1994 Page 10 (4) They concluded that cost of service rates do not address the water conservation goals set forth in the Demand Management Policy adopted by City Council. Cost of service generally supports the downward decline of rates, i.e. the more water you furnish, the less it costs on a per unit basis. (5) The Committee also felt that cost of service principles, strictly applied, may not be consistent with the spirit of many large users and wholesale water contracts, e.g. CSU, and the Fort Collins -Loveland and West Fort Collins Water Districts. (6) Another conclusion was that cost of service analyses rely on data that is costly and difficult to collect. Some of the conclusions could have been changed somewhat on the basis of how the data was collected. The absence of data requires staff to rely on AW WA recommended parameters which, while defensible and universally accepted, may not reflect local conditions. While it may be prudent to apply such parameters to large customer classes, applying them to single large users may lead to erroneous results. (7) Their final conclusion was that while a cost of service approach to rates provides economic equity to customers, it may make it more difficult to pursue other perhaps equally desirable policies. Dr. Grigg said that the Committee hoped their recommendations could serve as a starting place for a policy discussion with Council. They felt that these recommendations could be referred to the Water Planning Committee as a next step: 1. Regional Cooperation and Land Use The Committee didn't think they were ready to make a recommendation on the continuation of the 50% premium charged outside -city water and wastewater customers. 2. Water Conservation The Committee believes that water conservation policies in general need to be re -visited in the light of the cost of service approach. If cost of service is a tool, how do we apply that consistently with our Demand Management Policy? 3. Economic Equity and Cost of Service According to the memo, cost of service remains the single most economically defensible water ratemaking strategy. However, the issue of equity may need to be balanced with other objectives such as water conservation, social welfare, and contractual arrangements which, while not directly associated with the water utility function, provide benefits to the community at large. 4. Special Large User Contracts What should we do about them? Should we look at those on a one -by -one basis in terms of modifying them and bringing them in line with cost of service? The Committee spent considerable time discussing this. According to the Water Board Minutes January 21, 1994 Page 11 memo, a large user under special contract with the City for water and/or sewer service can provide significant benefits to the community as a whole, benefits that are not measured within a typical utility cost of service framework. In such cases, deviation from strict cost of service ratemaking may be advantageous. "Now we need to decide what to do as a Board," Dr. Grigg said. Ray Herrmann moved that the Board forward these policy issues to the Council/Water Board Water Planning Committee, and ultimately the City Council with recommendations from the Committee. Dave Stewart seconded the motion. Tom Brown asked for clarifications on conclusion #2, 50 % premium on outside -city customers. How are PIFs or the costs of expanding plants handled by the outside -city folks? Mike Smith replied that PIFs apply anywhere. Mr. Brown also wanted to know what kinds of risks City customers may be incurring that wouldn't be applied to people outside. Mike Smith replied that the water bonds that we have issued in the past (won't be in the future) have been GO revenue bonds. The repayment is based on revenues from the City, but has a GO backup. If the Utility goes broke and doesn't have enough money, they would impose a tax to pay off the bonds. However, with the enterprise fund status, we probably won't issue anymore GO revenue bonds, Mr. Smith explained. They will be based solely on revenue of the Utility, not from the Utility's ability to impose a tax. Dave Frick asked if the Utility is planning to look into the distribution of PIFs and the effects on the cost of housing, etc. Mike Smith said that the Utility has made some adjustments in the PIFs within the last few years. We want to concentrate on the rates first with a review of the cost of service for both water and wastewater rates. After that we hope to focus on the PIFs. Mr. Frick said he has read about the turmoil surrounding the increase in water rates in the Denver area. Was there any cause and effect from that on what our policy is here? "We didn't know about that when we were doing the study," Dr. Grigg replied. Scott Harder explained that the percentage of our total revenues for outside -city customers is a significantly smaller percentage than Denver. Essentially, Denver is land -locked and surrounded by customers that are growing faster than they are, which makes it a much different issue from ours. Mr. Frick wondered if the City's 50% surcharge is an arbitrary decision. Dave Stewart commented that it isn't an arbitrary decision. It would be, for example, if we had an increase in the rate structure for water conservation. According to a Denver Post article Neil Grigg read, a suit was brought by the suburban customers which Denver won. He said there is a bill that would try to put Denver water rate hikes under the Public Utility Commission. Mr. Harder read that the Court found in favor of Denver, arguing that the City and County of Denver are due a reasonable return on the system investment and on debt. Water Board Minutes January 21, 1994 Page 12 MaryLou Smith recalled that when the Board talked about rates and how they relate to water conservation, it has been said that we want to wait to do anything about structuring rates as a tool for conservation until we have more people metered. "It is my understanding that the Cost of Service Committee is looking towards some changes in our policies either by code or municipal resolution as kind of a housekeeping measure." Dr. Grigg responded that it's more than a housekeeping item. The way he understands it, the existing ratemaking ordinance specifies that rates shall be based on actual cost. We find that most of the rates are based on cost of service, but these policy issues which we have discussed haven't been considered, and need to be considered before we proceed with that. Ms. Smith is concerned that when these issues are referred to the Water Planning Committee that the new Council members who don't know much of the history of the Demand Management Policy, may want to jump into looking at rates as a water conservation tool. "That may be fine, but I think we need to be aware of that when we say we want the Water Planning Committee to look at these policies." Dave Stewart remarked that "we have not discussed conservation as a rate structure." Ms. Smith stressed that it is important that we continue to make wise and fully informed decisions on water conservation, instead of jumping into something that may or may not be the right decision at this point. Mike Smith stated that staff thinks the strategies the Council has developed relative to the metering and conservation programs will meet the goals they have established. If there were some concern that the goals couldn't be met, then one of the things that could be done is to look at the rate structure. Until we have some proof or concern that we aren't going to get the per capita consumption down in the time frame set by Council, it would be premature to consider a conservation measure that isn't necessary. Neil Grigg cautioned that we move ahead carefully in our decisions because what we do has ramifications in other areas and on other entities. For example, raising CSU's rate will have a major impact because of Amendment 1. Is this the right paper to send to the Water Planning Committee? he asked. MaryLou Smith continued to be concerned if this is the right time to forward this paper to the Committee, particularly in terms of conservation. Tom Brown said it might not be the "right" paper, but it's close. Ms. Smith's concern could easily be added to Recommendation No. 2. There should be some discussion in there about the timing of a possible rate structure that favored water conservation, and how it depends on the number of people on meters. Dr. Grigg said that could be ope of the options, to modify recommendation No. 2. to reflect our position on the water conservation rates. Mike Smith stressed that there are some major policy issues that the Cost of Service Committee has identified, and it is important that these be addressed prior to a change in the rates. He agrees with MaryLou Smith that we are not yet ready to discuss a conservation rate, because we Water Board Minutes January 21, 1994 Page 13 need to know what the impact of that would be, so staff could advise the Board on it. He also mentioned that the outside -city customer policy issue has considerable ramifications and needs to be discussed from a variety of aspects. Another issue relates to the Districts. As we exchange customers, we need to make some adjustments. The major problem is that our outside -city rates are much higher than the Districts' and it doesn't work. "We actually have customers that we serve that the Districts are billing. We exchange water bills, so the customer still gets the district's rate. As a result, the District ends up paying us more, and the reason they pay more is that we are using our capital to serve them. We would all like to get this complicated process resolved," he said. Dr. Grigg asked if backing off the 50% differential would have a big impact on existing customers. Mr. Harder responded that the actual impact on City customers would be pretty small. Dr.Grigg said the COS Committee had questions about the large customers which he assumed could be handled by negotiating with them. "Whatever you do with one customer impacts other customers," Mr. Smith pointed out. The bottom line is you have a revenue requirement, and "if you take a little piece from this pie, you have to put it back in another pie." Ray Herrmann contends that the dialogue with the Council needs to begin as soon as possible so they can learn all of the possible ramifications. Mike Smith stressed that you definitely don't want to wait until the last minute to present these issues. Scott Harder remarked that with the current approach we are moving logically in a direction. "We don't want to pull our customers in different directions." Mr. Smith added that if we first implement pure cost of service we will be able to assess the impact it will have on each of the customer classes. After that some of the four policies can be integrated. Mike Smith presented another option if the Board isn't comfortable with forwarding these policies to the Water Planning Committee. When the budget cycle begins in May, June or July, staff can come to the Board with a proposed increase for 1995 based on a cost of service analysis and the impact on each customer class. Probably none of the policy issues would come to the Board in that case, but the Council will probably ask about them. MaryLou Smith asked how long it would be until we are ready to look at using the rates for water conservation. Mr. Smith said that is hard to say, since so few people are metered, and the ones that are metered tend to be conscientious about their water use. As more customers are metered, we may find that water use increases, but it is uncertain how far it will swing the other way. The weather and precipitation also have to be taken into account. It could be years before we look at a conservation rate. Scott Harder pointed out that you can employ a water wasting Water Board Minutes January 21, 1994 Page 14 rate to penalize irresponsible irrigation, but with our existing metered customer base, we probably wouldn't collect any revenue with a water wasting rate because we have such conscientious users. Tom Brown suggested that we emphasize to the Council that meters are a conservation measure in themselves. People tend to use less water when they are on meters. One other thing that can be done is to base the wastewater rate for all those metered on winter quarter water use. That will bring an additional conservation incentive. Mr. Smith agreed that the Utility needs to implement that as soon as possible. "We have the mechanism to do it," he said. Mr. Brown said that would also be a positive step that we can go to Council with now. Neil Grigg called for the question. The motion was to forward these policy issues to the Water Planning Committee and modify Recommendation 2 (the conservation issue) to reflect the Water Board's concern about delaying consideration of conservation rates until substantially more people are on meters, and we have the data to justify a conservation rate structure. The memo will be modified. Ultimately the Committee's recommendations will be forwarded to the Council. The motion passed unanimously. Dr. Grigg suggested that Marylou Smith review the language as chair of the Conservation and Public Education Committee. It was pointed out that she is also a member of the Water Planning Committee. Treated Water Production Summary Beth Voelkel reported that the City actually used less water in 1993 than in 1992. It was a relatively cool year, and we finished at 85 % of what was projected. Financial Status Report Scott Harder indicated that at the last Water Board meeting, a number of questions were raised concerning the financial status of the Utility. Furthermore, City Council has requested that the Water Board make a specific recommendation on the Utility's annual operating budget. Finally, Water Board members had previously requested greater access to financial information throughout the year. As a result, staff believes that regular financial status reports may help keep the Board better informed. Either a graphical or verbal report may be prepared, whatever is the Board's preference. Several approaches will be tried over the coming months to let the Board decide. Marylou Smith asked for something concise and easily understood like the treated water summary. Mr. Harder continued with a prepared verbal report. The actual water revenues of $13.1 million were over the $13 millon budgeted revenues. Adjusted for the 5% rate increase and growth, revenues are just under 1992 revenues. As Beth Voelkel said, total usage was down. F Water Board Minutes January 21, 1994 Page 15 1993 actual sewer revenues of $8.5 million were about 5% below budgeted revenues of $8.97 million. This is 8% above 1992 revenues, primarily due to growth and a 6% rate increase. 1993 actual water plant investment fees of $2.2 million exceeded budgeted fees of $1.4 million by over 50 percent. The Utility processed almost 920 permits--29% above 1992. 1993 actual sewer plant investment fees of $1.6 million exceeded budget by 8% and exceeded 1992 fees by 37.5%. It was a booming year for new connections. Update: Status of Letter Regarding Front Range Water Forum Mayor Azari has collaborated with the mayors of Greeley and Loveland to send a letter to the Governor asking for representation on the Front Range Water Forum. Mr. Smith thinks the letter is ready to be sent. The letter was initially drafted by Water Utility staff, then modified by the other two mayors. Essentially they are asking for an elected official from at least one of the cities to represent northern Colorado on the policy group of the Forum. The Water Forum also has a technical committee; Fort Collins, Loveland and Greeley will be informed when those meetings are scheduled so they can send representatives. Forest Service Permit Mr. Smith announced that the Forest Service has extended our permit at Joe Wright Reservoir for six months. The comment period for the draft EIS was extended until the end of January. There hasn't been any new information on the biological opinion or the RPAs. The motions that the Water Board and Natural Resources Board agreed to have not been forwarded yet, because the other entities first wanted to submit something on behalf of the entire group to the Fish & Wildlife Service. What was submitted was something less than what Fort Collins had discussed. The other entities didn't want to be preempted by Fort Collins, so we agreed to wait. Mr. Smith was invited to a meeting recently which Secretary Babbitt attended. Mr. Babbitt showed concern about the endangered species issue in central Nebraska, and plans to do something to try to encourage a cooperative effort among the three states involved. Water Supply The Committee will meet at 2:00 prior to the Board meeting on Friday, February 18th to discuss Sheep Creek Reservoir. Legislative and Finance There will be a report next month. Conservation and Public Education MaryLou Smith announced that the Council/Water Board Water Planning Committee will meet on Wednesday, January 26th to review the recommendations on Measures 8 and 9 (related to landscape and irrigation) of the Demand Management Resolution. The Water Board reviewed and accepted these a few of months ago. Water Board Minutes January 21, 1994 Page 16 Engineering No report Regional Water Supply Strategy Update Mike Smith related that the Water Congress met yesterday and today, and it seems that most of the issues there were related to people concerned about "the federal government stealing their water." There was some discussion about the grazing issues and there were people from California, Arizona and Nevada who were talking about lower basin issues. Adjourn The meeting was adjourned at 5:10 P.M. Water Board Secretary