Loading...
HomeMy WebLinkAboutWater Board - Minutes - 09/25/2008Fort Collins Utilities Water Board Minutes Thursday, September 25, 2008 Water Board Chairperson City Council Liaison Doug Yadon, 484-3611 David Roy, 217-5506 Water Board Vice Chairperson Staff Liaison Gina Janett, 493-4677 Robin Pierce, 221-6702 Roll Call Board Present Chairperson Doug Yadon, Vice Chairperson Gina Janett, Board Members Steve Balderson, John Barthalow, Mike Connor, Phil Phelan, David Pillard and Gary Wockner Board Absent Board Members Eileen Dornfest, Johannes Gessler and Reagan Waskom Staff Present Brian Janonis, Kevin Gertig, Terri Bryant, Judy Billica, Dennis Bode, Susan Smolnik, Laurie D'Audney, Carrie Daggett, Robin Pierce, Meagan Peil and City Finance Director Chuck Seest Guests None Meeting Convened Chairperson Doug Yadon called the meeting to order at 5:17 p.m. Public Comment There was no public comment. Minutes of August 28, 2008, Meeting Board Member Connor moved to approve the minutes from the August 28, 2008, meeting. Board Member Balderson seconded the motion, and it passed unanimously. 2009 Budget Update Utilities Finance and Budget Manager Terri Bryant presented the 2009 proposed Utilities budget and requested approval of the 2009 water, wastewater and stormwater budgets from the Board, as well as approvals for refunding water revenue refunding bonds, Series 2008, and a reimbursement resolution to go before Council on October 7. The 2009 budget was approved in fall 2007 during the 2008-2009 Budgeting for Outcomes cycle. Expenses are expected to remain fairly constant next year with increases for inflation budgeted at 3 percent and salary increases budgeted at 3-4 percent. Staff will ask Council to approve exceptions for fuel costs and security improvements. A security assessment conducted this year identified security improvements for the Utility Service Center and the Customer Service Division at 330 S. College Avenue. Stormwater Budget Highlights: • Total 2009 budget is $16.6 million, a decrease of 5 percent from last year's budget. Funds for capital projects of $6.9 million are primarily for the Canal Importation Basin and the Dry Creek Basin projects. • There were no rate increases for this fund in 2008-2009. • Exceptions will be requested for fuel costs ($47,000) and a proportionate share of the security improvements ($28,000). • Debt service, or principal and interest on bonds, runs about $5 million annually. • Stormwater revenues remain steady at $13-14 million annually. Plant investment fees in all water funds have declined with the decrease in development projects. • The Stormwater Program goes before Council for re-evaluation of purpose on October 14. Water Budget Highlights: • Total 2009 budget is $40 million, an increase of 31 percent over last year's budget. Capital projects are $12.6 million, and $8.9 million of those dollars are related to the Halligan Reservoir project, all "cash in lieu" of water rights revenues, so there is no current debt associated with the Halligan project. Given the magnitude of the project, identification of funding sources needs to occur prior to implementation. • Exceptions will be requested for fuel costs ($89,000) and a proportionate share of the security improvements ($58,400). • Water operating revenues are projected at $25.4 million. An adjustment from 180 gallons to 156 gallons per capita per day was made, a difference of $1 million. Revenues are staying more stable at this level. As conservation programs are implemented, consumer use will decrease, impacting revenues downward. • Increases for rising chemical costs were budgeted accordingly. Ouestions from the Board: What are the Halligan project funds for (since the project is in the draft EIS stage)? The funds represent a proactive approach to infrastructure planning. Wastewater Budget Highlights: • Total 2009 budget is $50.6 million, an increase of 60 percent over last year's budget. Of the $28.7 million set aside for capital projects, $26 million is dedicated to the Mulberry plant improvements. • Exceptions will be requested for fuel expenses ($105,736) and a proportionate share of building security improvements ($26,200). • Wastewater rates are proposed to increase 11 percent in 2009. This will build up reserves and be used to pay the debt service for the Mulberry plant improvements. Revenues in the wastewater fund do not increase proportionately with rate increases. • Plant investment fees in wastewater are stable this year due to several large development projects. • When compared with other Front Range cities and the proposed 2009 increase, Fort Collins will have the second highest wastewater rate. 2 Questions from the Board: Is water conservation one of the reasons why revenues do not increase proportionately with rate increases? Yes. The winter quarter average is used to bill our wastewater customers. When customers use less water, the meter figure is used to capitalize wastewater billing for the rest of the year. Several Board members expressed disappointment the Utility's water conservation program did not receive the significant increase in funding discussed in previous Board and conservation committee meetings. Why is residential water use decreasing? Wastewater is based upon the winter quarter average, and is reflective of indoor use water reductions, conservation programs, economic conditions and energy efficient appliances. Wastewater rates are being driven up by the Mulberry plant upgrade. How many years will the high rate increases occur? There were increases of 12 percent in 2007 and 11 percent in 2008 with increases planned at 10 percent in 2009 and 9 percent in 2010. Projections indicate rate increases will decrease at some point, but not end entirely. Significant infrastructure repairs and maintenance projects are ahead, so as the Mulberry plant project is completed, other major infrastructure issues will need to be addressed. The new asset management program is essential to address this type of long-term planning. Why does the water budget appear to have significant funds and the wastewater budget does not? The wastewater fund covers a different territory and brings in a different revenue. There also were impacts from the meter conversion program, changes in plant investment fees and the Mulberry plant failure. When it was realized a large increase was necessary, Council directed Utilities to phase it in over three years. The change from a flat rate fee to winter quarter average increases indoor water conservation. Wastewater costs do not decline as water costs decrease. The perception about the water fund is not accurate. A good share of the water budget reserve is cash in lieu of water rights revenues. Additionally, a special fund was paid by Development in anticipation of building the Halligan reservoir. Staff also did a much better job of water projections. What happens to the net savings between more revenue and less expense than anticipated? Does it go into the contingency fund and apply against the need for rate increases? The net savings go into reserves. For example, $6 million from reserves is being used in 2008 for the Mulberry plant. The goal is to have enough revenue to replenish the reserves for capital projects, because plant investment fees are not going to support capital projects. The contingency fund is small and used for unforeseen, unanticipated expenses. Wouldn't the additional fuel costs come from contingency funds? An appropriation will be requested for the additional fuel costs. These are an operational cost, and continuing to fund operations from reserves does not send the right message. Refunding Water Revenue Refunding Bonds: City Finance Director Chuck Seest spoke to the Board about refunding of the 1998 water revenue refunding bonds, representing $19 million in debt. The 1998 water improvement 20-year bonds are now 10 years old and have been in the process of evaluation for the past 18 months. Water utility bonds are projected to do well in the market, given the rate environment and grade performance reception in the market for other utility bonds in the area. This will be brought before Council October 7 for approval. Cash flow savings of $1-1.2 million over the remaining 10 years in anticipated. If Council approves an ordinance, staff will have a 90-day window to act. The City will not pursue refinancing if the current financial market does not improve in that time frame. A water utility is seen as a stable investment, and the bond rating will be AA-. Ouestions from the Board: Why not pay off the bonds? Our investment portfolio gives us a return equal to or better than the rates at borrowing. This affords us flexibility and additional earnings. Our future infrastructure needs will require us to be in the market at some point in time. How much will the total cost be? Mr. Seest estimated a cost of around $150,000. Our average coupon is 4.7 percent. Is there an objective on the City's part to diminish the use of municipal bonds? The City saw significantly higher interest rates on a more significant amount of debt load in the 1980s. At that time, Council asked a long-term debt policy be put in place, stating no more than 15 percent of the City's expenditures in the General Fund would go to debt service. We are spending less than 10 percent currently. Reimbursement Resolution: A reimbursement resolution will be requested on October 7 to allow us to spend our own reserve funds for 2008 on the Mulberry plant and reimburse reserves from bond proceeds. Engineering, architectural and consulting services already underway can be reimbursed. Pricing also can be locked in before additional increases occur. Future Challenges: Future challenges for the Utilities include succession planning, rate stability and aging infrastructure. Conservation efforts, asset management and sustainability are all a part of our vision for the future. Ouestions from the Board: In the larger scheme of a recession, what trends are we seeing from customers not able to pay their utility bills? The number of customers seeking assistance and accounts with active delinquencies has not significantly increased. Proactive steps are being taken by Credit and Collections staff to identify potential issues earlier on in the billing cycle. Have funds been budgeted for the conservation programs? No funds have been budgeted at this time. The Water Conservation Plan and associated programs will be reviewed for approval in the coming months. Do rates have to increase proportionate to the amount of conservation? Some benefits are realized from reduced chemical and pumping costs. The majority of our costs are fixed, meaning rate increases are not exactly proportionate to conservation. 0 Recommendation for Motion: Vice Chairperson Janett moved to approve the wastewater reimbursement resolution for Mulberry Reclamation Facility improvement bonds. Board Member Phelan seconded the motion. Discussion on the Motion: • It makes sense to order equipment early to avert additional cost increases. • Money is currently being spent from reserves. • Some Board members would like to see more emphasis on debt reduction and question 10 percent of the budget devoted to debt service. Ms. Bryant noted the advantage of selling debt when conditions are most favorable. Utilities Executive Director Brian Janonis stated hiring an asset manager will move us in the right direction, and provide the opportunity to project expenses for the next 40-50 years and plan for level rate increases. Annual rates from wastewater funds are about $14 million. If rates were doubled to fund repairs to the wastewater treatment plant and remain debt -free, it would take approximately 2.5 years, assuming no cost increases, to raise enough cash to fund a wastewater plant. Deputy City Attorney Carrie Daggett noted Treasury regulations are very strict about how bond proceeds can be used. This resolution will have no effect if the bonds are not issued, but if issued, the resolution allows bond proceeds to be used to reimburse expenses. Vote on the Motion: A vote was taken, and it passed with one abstention by Board Member Connor (7 for, 1 abstention, 0 against). Recommendation for Motion: Vice Chairperson Janett moved to approve refunding of all of the Water fund's outstanding revenue and improvement bonds, Series 1998, to create cash flow savings estimated at $1.2 million. Board Member Bartholow seconded the motion. Discussion on the Motion: There was no discussion on the motion. Vote on the Motion: A vote was taken, and it passed with one abstention by Board Member Connor (7 for, abstention, 0 against). Recommendation for Motion: Board Member Pillard moved to approve the 2009 water, wastewater and stormwater recommended budgets. Board Member Balderson seconded the motion. Discussion on the Motion: Board Member Wockner shared his feedback in a document (attached to this record) sent to members prior to the meeting. Other Board members remarked about a desire to see more funds for conservation in the budget. Vote on the Motion: A vote was taken, and it passed (6 for, 2 against). Dissenting votes were recorded as follows: 1) Board Member Connor would like to see movement toward a more fiscally conservative position of retiring debt over time and addressed in more detail in a budget proposal, and 2) Board Member Wockner's remarks were outlined in the attached document. Upper Cache La Poudre (CLP) Watershed Water Ouality Monitoring Program Senior Process Engineer Judy Billica presented information on a collaborative program with the City of Greeley and the Tri-Districts to study common water quality issues. Dr. Jim Loftis with Colorado State University was hired in 2006 to study historical data generated by the Cities of Fort Collins and Greeley, used as the basis for the monitoring program design. Dr. Billica reviewed dominant characteristics of Upper CLP water quality. The program was designed to address the following objectives: • Current and future water treatment process needs; • Time and space patterns in water quality; • Mass loads calculation; • Standards compliance; and • Watershed protection activities prioritization. Sampling events occur throughout the year across a variety of watershed sites. Laboratory analysis takes place at the Fort Collins Utilities Water Quality Lab. Each entity contributes about $41,000, and a portion of Fort Collins' share is in the form of in -kind contribution for data and program management services. Other Upper CLP projects include TOC characterization, installation and maintenance of flow gauging stations by USGS and low-level mercury sampling analysis every three to five years for background data. Another project with USGS would provide updates on the existence of personal care products in the watershed every five years. The 2007 program budget was $187,000, and the 2008 adopted budget is $324,000, an increase of $135,000, used for hiring a Watershed Specialist, implementing the program and supporting special projects, such as the TOC Characterization Study. The 2009 budget should be slightly less at $310,000. Questions from the Board: Will this study look at new threats to water quality, such as new mining projects in the area? Hopefully, the monitoring program captures impacts. Mining sites also were studied in the State's Source Water Assessment, and field verification by staff is needed. Utilities is paying attention and taking action on the prevention side. From a watershed protection basis, would Utilities ever participate in Larimer County land use decisions? Utilities would participate for any areas above our intake. Potential impacts from grazing allotments, the pine beetle kill crossing over the Continental Divide and forest fires also are studied by staff. Whenever there is a sampling at any site, is an instantaneous flow measurement made? For some of the sites, integrated flow measurements are taken. Flow gauging stations are desired for other sites. Board Member Balderson praised Utilities for the collaboration and cost -sharing approach with the other entities. Source Water TOC Prolects (Total Organic Carbon) Dr. Billica asked for a recommendation from the Board on a proposed two-year project with the University of Colorado to develop focused management tools for processing data from a current UCLA project. This project would provide the opportunity to work with Dr. Scott Summers, an international expert on disinfection byproducts (DBP) potential, and Dr. Diane McKnight, an expert on the occurrence of dissolved organic matter (DOM) in natural systems, both with the University of Colorado at Boulder. Matching funds are available from the American Water Works Association Research Foundation (AwwaRF). This project would focus strategically on the Fort Collins Water Treatment Facility and use fluorescence to investigate the relationship between dissolved organic carbon (DOC) in watershed and DBP at the treatment plant. The City of Fort Collins paid the total cost of the UCLA project and invoiced the other participant entities. Dr. Billica asked for approval to use the reimbursements of $80,000-90,000 for the new project. In order to access the matching dollars from AwwaRF, a Joint Funding Agreement must be signed, requiring Council approval. Questions from the Board: Is more effective treatment behind the desire to better characterize TOC? Through Dr. Billica's work of the last 10 years on the Poudre River, we know 'Y' amount of TOC removal can be achieved. There is the opportunity to control and minimize DBPs for the Fort Collins public, a Water Quality Policy goal. Operations staff need inputs and tools to make this model work, based on real time data, to maintain cost efficiency and high quality water during a time when costs continue to increase. Is there data to indicate the source of TOC makes a difference in terms of how to treat it? Source is definitely related to characteristic. For example, there is evidence in literature indicating it is easier to remove humic substances. Are there any outstanding commitments to pay off from these funds (from other entities) or any need to use the reimbursements for funding new proposed projects? None have been identified. This study focuses strictly on our treatment plant. Board Member Wockner encouraged staff to consider and quantify the question of public health when presenting this to Council. It would also be important to note the business and economy sectors built upon the high quality water in Fort Collins. Recommendation for Motion: Board Member Bartholow moved the Board endorse the study as outlined with all clarifications outlined. There is a known and potentially serious problem with obvious changes to the watershed, and answers to serious questions are lacking. This is a forward -looking approach. Vice Chairperson Janett seconded the motion. Discussion on the Motion: There was no discussion on the motion. Vote on the Motion: A vote was taken on the motion, and it passed unanimously (8 for, 0 against). Committee Reports Engineering Committee (Board Member Balderson): No report. Water Conservation Committee (Board Member Phelan): The City and Poudre R 1 School District have agreed to allow tours of the Water Treatment Facility. The committee has been working on the commercial landscape standards plan to encourage efficiency in water conservation and seeks an update on the status of the Water Conservation Plan from staff. Legislative, Finance and Legal Committee (Board Member Pillard): No report. Instream Flow Committee (Board Member Wockner): The group is working to create a goals statement and has asked staff for a timeline for the instream flow topic. Water Supply Committee (Board Member Waskom): No report. Staff Reports Water Supply Manager Dennis Bode submitted the Treated Water Production Summary & Water Supply Outlook for the Board's review. There was low use in August due to rains, and September use has also been fairly low. Other Business 2009 Work Plan: Chairs of each committee were asked to review this year's work plan and submit a draft of their 2009 work plan by e-mail to the entire Board. Committee chairs were asked to mark completed items "done" on the draft. Year End Meeting Schedule: Potential agenda items warranting November and December meetings will be finalized soon. Adjournment The meeting was adjourned at 7:52 p.m. Submitted by Robin Pierce, Executive Administrative Assistant Fort Collins Utilities Approved by the Board on Oeivbe& 23 2008 Signed 1,�Q8 Robin Pierce at Attachment: Wockner Document ATTACHMENT Comments on City's 2009 Water and Stormwater Budget Gary Wockner (Water Board Member. These comments are solely Gary Wockner's, and do not reflect any group or organization.) I am voting against the Utility Dept's 2009 recommended Stormwater and Water budgets for the following reasons: I. Stormwater Budget - The Stormwater Master Plan needs to be put on hold and undergo a rigorous cost/benefit and prioritization analysis. The Stormwater Utility capital expenditure budget needs to be frozen until this analysis is complete. a. The City's Stormwater Master Plan was created during a period of extreme fear that followed the extraordinarily rare 500-year flood of 1997. As such, the Plan overreacts to the actual threat of stormwater problems in our community. Ironically, the Plan (after full implementation) only protects the community up to a 100-year flood, and may not have changed the consequences of the devastating 500-year flood of 1997. b. The Stormwater Master Plan identifies over $200 million in projects. This is an exorbitant amount of money compared to the actual threat that stormwater poses to the community. Money could be used far more effectively to protect citizens' health and welfare in other areas of public health. c. Fort Collins' stormwater fees were the highest in Colorado and one of the highest in the nation - this in a semi -arid part of the country where it rains only -15 inches per year. These fees are wildly disproportionate to the other fees/taxes paid by citizens, and may be forcing other community needs to go unfunded or underfunded. At the same time that Stormwater is heavily funded, transportation, children's services, and environmental programs are heavily underfunded. d. Spending this amount of money has caused Fort Collins to achieve very high rankings by the flood insurance industry (we are ranked 41h nationally, out of 1600 cities). While we are ranked 4`h by the flood insurance industry, we have many other problems that are more deserving of expenditures, but are not addressed by our funding priorities, and on which we are ranked very poorly. e. Better alternatives exist to manage stormwater than that offered by the Stormwater Master Plan. More ecologically effective solutions are available but are often dismissed in favor of a heavy handed and expensive "divert and drain" methodology used in the Plan and promoted by the Stormwater Utility. f. The Plan and Utility seem to operate under a "must spend the money" mindset, rather than a cost/benefit prioritization appropriate for public expenditures. Because the fees are collected every month, the City seems determined to spend the money perhaps even if it is not warranted. If may be that the projects are following the money, rather than the money following the projects. II. Water Budget - the Water Budget for 2009 contains $8.9 million for the Halligan Reservoir project. This is a first installation of an approximate $15 million to $20 million expenditure for Halligan. This expenditure needs to be put on hold until a cost/benefit analysis and an EIS is complete - such a process will determine if a cheaper and less environmentally damaging "nonstructural alternative" can 0 meet the City's needs. Water supply security is integral to Fort Collins' future, but it must be done in the least environmentally damaging and most practicable way. a. Halligan Reservoir will flood two miles of pristine canyon of the North Fork of the Poudre River b. Halligan Reservoir — like all dam and reservoir projects — will force the City to invest in 191h Century water supply solutions at the expense of 2l't Century opportunities. $20 million spent here will mean that other water supply and drought protection alternatives and opportunities may go unfunded and unaddressed. c. The Halligan Reservoir expansion is being proposed at the same time that the City's water use rates are at a historic low and falling. Fort Collins citizens have shown a remarkable desire to reduce water use, and the Water Board is considering changing the Water Supply Demand Policy from 185 gpcd to 140 gpcd, a 25 percent decrease. While this 25 percent decrease is being considered, the City is not reconsidering its water supply needs, and is still moving forward with the expensive and environmentally destructive Halligan project that may be unnecessary. d. Conservation and efficiency need to be maximized before other structural alternatives (dams/reservoirs) are considered and paid for. Other western American cities have achieved conservation savings above that of Fort Collins. Water use levels are lower in some Western American cities where conservation is more heavily funded. A plethora of wasteful landscape irrigation practices exist around Fort Collins (including on City property at the Utility building and many other City properties). We should maximize conservation, efficiency, and xeriscaping — especially in urban landscaping which uses nearly 50 % of the City's water supply — before funding projects that are even more environmentally destructive. Does it make sense to spend $20 million, build a new dam, and drown a pristine canyon so we can waste even more water? e. Conservation, efficiency, and other demand management techniques can also be cheaper methods for yielding new water and for drought protection. The City needs to do an analysis of all of the possible ways to yield new water and drought protection, including large investments in conservation and efficiency, to see which is more cost effective and least environmentally damaging. f. Fort Collins has an opportunity to be a leader in water conservation, in river restoration, and in 2l't Century sustainability outcomes. Building a large reservoir like Halligan will not reflect that opportunity to lead if there is a better, cheaper, more sustainable solution. In order to be sustainable, a project must be able to be repeated endlessly into the future — a dam and reservoir is not a sustainable solution to increasing water demands. g. By transferring money into the construction account now, it is way more likely that the project will follow this money, rather than the money following the need for the project. h. In the same way conservation and efficiency are the easiest and cheapest ways to enhance energy supplies and decrease our climate -change footprint, they are also the best ways to enhance our water supplies and decrease our water -usage footprint. The City has invested heavily in lowering our energy usage; a similar approach needs to occur with water, and it will likely yield a similar and necessary result. 10