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HomeMy WebLinkAboutWater Board - Minutes - 11/15/1985MINUTES Water Board November 15, 1985 Members Present Norm Evans, Chairman, Henry Caulfield, Vice Chairman, Tom Moore, Jim O'Brien, Marylou Smith, Neil Grigg, Dave Stewart, Stan Ponce (alt.) Staff Present i e mit , Dennis Bode, Webb Jones, Andy Pineda, Ben Alexander, Paul Eckman, Assistant City Attorney Media MarlFRadtke, KCOL Members Absent Tom Sanders, Bill Elliott, John Scott (alt.) Chairman Norm Evans opened the meeting. The following items were discussed: Minutes TFe minutes from October 18, 1985 and the minutes from the special meeting on November 1, 1985 were approved. Further Discussion of Report: "Evaluation of Water Demand Management Options" Mike mi related tha en m s Bode and Webbones had prepared some o ow -up work relative to two questions from the last meeting. Webb Jones said that there was a question last time about the monthly charges that would be necessary to accumulate enough funds to pay for the metering of those homes left without meters after 10 years. The current costs for meter installation in homes wihout yokes for inside settings is $196 and outside settings is $450. If the costs increase 4% per year, after 10 years, those costs will be: inside settings - $423 and outside settings - $971. If a program similar to Alternative 2 were implemented, after 10 years there would be approximately 5,600 homes that would not have been metered with the change of ownership. If we estimated that 1/2 of those homes needed an outside meter and 1/2 could accommodate an inside meter, the estimated costs for metering those 5,600 homes is $3,900,000. That is the amount that would be needed in ten years to pay for the installation of meters in all 5,600 homes. When you begin looking at what you would need to charge each flat rate customer each month, you need to take into account what is happening under the proposed policy. Each year there will be fewer flat rate customers, so the number decreases until you arrive at the 5,600 that is shown at the end of the tenth year. Mr. Jones displayed a chart in which they did some maneuvering with the Water Board Minutes November 15, 1985 Page 3 meet those demands at the year 2015. Mr. Jones overlaid the two graphs to demonstrate how they compared visually. You could see that the string of expansions looks different between the two alternatives. Of course there are costs associated with each expansion and as you bring those back to today, you can compare the difference in cost. Mr. Jones pointed out that the expansion in 1988 will occur regardless. The next 10 MGD expansion to 74 MGD would be delayed by about 3 years with alterntive 2. The expansion to 84 MGD would occur in 1997 with no metering alternative, but could be delayed until 2004 with alternative 2. Tom Moore asked what kind of percentage of growth these assumptions are based on. Dennis Bode explained that population growth starts out at roughly 4% and declines in later years, partly because, as the City grows, more customers will be served by the two water districts. Henry Caulfield asked what is the percentage of the change in water use between the metered and unmetered that is being used. Mr. Jones responded that it is assumed that the total use in a single family home with a meter would be 22.7% less than in a flat rate home. On a peak day basis, the metered customer would use 19.5% less than the flat rate customer. Mr. Caulfield was comfortable with the 22% figure since it is close enough to the "Denver controlled experiment study," to make the figure credible. Mr. Jones continued his presentation by displaying a table which showed what the present worth of the treatment plant expansions are and what time they would occur with each of the 4 alternatives. These numbers are the present worth of 1985 costs for those expansions. Neil Grigg asked what interest rate was used. It was 8%. Alternative 1 would have a present worth savings today of $2.3 million, Alternative 2 is $4 million, Alternatives 3 is $4.4 million and Alternative 4 is $4.7 million. The staff looked at the present worth of the reduction in raw water that would result from the metering alternatives. The report indicates that each metered single family residence uses 47,100 gallons less per year than the flat rate single family. The present worth savings of raw water for each alternative was calculated. These were added to get a total present worth of the benefits/savings in raw water plus treatment plant expansion savings. Next, they determined the present worth of the metering costs under each alternative based on the cost for inside and outside metering figures which were discussed earlier. Then they determined what the net present worth savings should be. Finally, they took a simple ratio of the present worth of the benefits and the present worth of the costs to get a benefit/cost ratio for each of the alternatives. Dennis Bode added that these numbers are based on 1985 cost figures. The present worth analysis is an attempt to evaluate these costs on the same basis. He pointed out that there isn't much difference between the net present savings. Alternatives 2,3, and 4 all come out to about $4.4 million which indicates that with all three alternatives, you basically meter everybody eventually, whereas, with alternative 1 you only meter the new customers and Water Board Minutes November 15, 1985 Page 4 those with yokes. The net savings for Alternative 1 is lower than the rest at $3.2 million; although, in terms of B/C ratios it is higher, because there isn't as much cost associated with metering new customers and those with yokes. It seems to Henry Caulfield that the Board and the Council need to know more clearly than the report indicates, whether the metering program under alternative 2 will pay for itself out of plant investment fees and the O&M budget without increases. If we could say, for example, that the present PIFs and the O&M budget, reflecting the 9% increase that has been approved for Jan 1, would pay for those publically borne costs of metering, then this would be a very important statement to be able to make to the public. Mr. Bode related that at some point, there may be a specific need identified which would result in an increase in the PIFs. Mr. Caulfield thinks it is very important, if we decide on Alternative 2, to be able to make some statement to the public as he has suggested, so they are not looking towards a big change in the PIFs and the O&M costs. This goes back to the question of what is to be done about the rates for the flat rate customers. Were you able to do any analysis of this.? Mr. Jones responded, "not in the detail it deserves." Mr. Caulfield stressed that it is very important to be able to say to the public what he has suggested regarding the PIFs and the O&M costs. Mr. Jones agreed that it makes things more acceptable. Neil Grigg likes the analysis that the staff presented because it gives the Board something to work with. As he interprets the figures, and based on the assumptions used for Alternative 2, we would be realizing about $4 1/2 million worth of savings brought back to present worth. It appears to him that there are three rather sensitive areas of the assumptions: one is the growth rate of the City; the second one is the 19% decrease in demand based on metering. He said Tom Sanders questions that in his memo when he says, "Countless studies have shown that the effect of metering on water demand can't be seen in 3 years." Dr. Grigg thinks we need to examine that. The third assumption is the interest rate together with inflation. He doesn't think that is a big factor in the conclusions. However, the growth rate of the City and how much metering cuts consumption are both very critical. One thing he suggests is to look at doing some sensitivity studies on this to see what the effect on the $4 million would be if we assumed lower growth rates, and differences in that 19% figure. Those are questions we might have to answer in the future, he said. He pointed out that the next expansion will occur in 1987 or 1988, regardless of what decision is made. Under the high growth and demand scenario, the following expansion would be in 1991. If we were to implement Alternative 2, we could delay that expansion for 3 years. Dr. Grigg asked how long we could delay the decision of metering without taking the risk of incurring the high growth and demand scenario depicted by the blue line on the chart. He added that once we commit to metering, "we have played our metering card." How long could we defer the decision and study the growth rate of the City and the change in demand under other policies? Mr. Bode responded that it probably could be delayed almost up to the year before, if you wanted to wait and implement a crash program of metering. Dr. Water Board Minutes November 15, 1985 Page 5 Grigg believes that we need to look at that because the public will ask that one way or the other. Jim O'Brien asked why our actual usage, shown by the treated water production summaries, is some 20% greater than projected for this year based on our projected population and projected per capita consumption? How can we be sure about 10 to 15 years down the road when we have missed by about 2,000 acre-feet this year? Mr. Bode answered that water use this year was above average primarily because of the amount of rain and the way the rains came. In terms of the peak demand, the staff's numbers reflect the kinds of peaks that were seen this year. Mr. Caulfield raised the issue of Anheuser-Busch which has now committed to build the plant. A-B, he said, would use about 4,000 acre-feet in a City that uses only 19,000 acre-feet; a fairly large increment just associated with one enterprise. The question is not one of the availability of water, but one of finances. In relation to the next expansion of A-B, which, according to some sources, may involve two expansions of approximately equal size in terms of water, how will this affect our costs? Is this in any way built into our plans and projections? That is treated water. Is there any way of including that in the picture? Mr. Bode responded that the staff considered it to be uncertain at this point, plus, in terms of the economics and financial consideration, A-B would bascially pay their proportion, so it wouldn't impact us. Furthermore, their PIF is negotiated and doesn't relate to the basic raw water policy. Mr. Caulfield considers the answer to be that the existing commitment of A-B is in those numbers, but not any expansions; but for any future expansion they are obligated to pay PIFs associated with the costs that they create. Dr. Evans reiterated that Neil Grigg made some observations that we should not pass over, one of them being that staff made some assumptions that they consider to be reasonable. A sensitivity analysis might be one way we could defend them. We need to talk about their implications, he said. He wonders how solidly we stand on those assumptions even without doing sensitivity analyses. He contends that a figure of 22%, the percentage of savings of metered over unmetered, doesn't make sense to him. MaryLou Smith agreed that the number appears to be high for what she feels, people would actually save. Mr. Bode clarified that the 22% is for the individual residential customer; looking at the systemwide effect, it is more like 10%. He pointed out, recognizing that other things like prices, rate structures, etc. impact it, that Loveland had a reduction of 30% systemwide compared with our estimated 10%. Mr. Caulfield stressed that the 30% was accompanied by a large price increase. He asked if we know what that increase was. Mr. Jones said he did not know what the immediate price increase was, but currently, their rates are about 60% greater than ours are. Mr. Caulfield is more inclined to use the Denver case, a three year study, which tends to make it more reliable because it is more of a long term saving idea. Water Board Minutes November 15, 1985 Page 6 Marylou Smith observed that in Fort Collins we have a far greater percentage of people who have little time to worry about watering their lawns and would prefer to pay a little extra money not to have to worry. She contends that here we would not see as great a savings with metering as Denver. Without large increases in the rates, significant savings would not occur. Dave Stewart countered that we would not do the metering program without an educational program. If people see what they are paying they have a tendency to cut down. He compared use of a water meter with electricl consumption. Stan Ponce said that the difference in savings between those two examples is probably not that much. Mr. Stewart cited the Brown & Caldwell study that was looked at a year ago which showed that the Denver areas studied were very comparable to Fort Collins, and there was a 20% difference between metered and unmetered. Ms. Smith stressed that in the Denver area, it is obvious that they are running out of water, whereas, in Fort Collins the message is that we have enough. "As a consumer," she said, "I am going to be a lot more concerned if I live in an area that is running low on water than if I live in a City where we are told that we have adequate supplies. I am not going to turn the water off for four or five dollars more a month," she added. Mr. Stewart argued that the bill in the summer would be $25 more not $4 or $5, and in the winter that much less. You are going to see that cost go up substantially in the summer months, he emphasized. Ms. Smith explained that she is talking about the cost difference between somebody who waters efficiently and someone who doesn't. That difference, she contends, would not be so great. Jim O'Brien interjected by saying that we are still talking about doubling the amount of water we would be treating here in 30 years, and he thinks that it is essential that 10 to 15 years down the road we need some kind of tool to implement these price structures. Mr. Caulfield stressed that, in his opinion, the only thing we have to rely on is the Denver study. All of the others around the country are faulted in some way, he claims. The ball park figure is 15 to 20%. Ms. Smith argued that it depends on the rates. Mr. Caulfield related that in the Denver study, rates were not involved. It was simply metered and unmetered without any rates maneuvering; so it was a pure response to metering versus non -metering. Furthermore, the socio-economic/classes were comparable and it had other good points attributed to good design of an experiment. Norm Evans asked if that study is in the rate study report. Mr. Stewart said no but it is cited. Mr. Bode said that copies of the study were distributed to the Board at the time of the rate study. Mr. O'Brien asked if the 9% increase that will go into effect shortly, is :. across the board or is it making up some of the equity difference between flat rate and metered users? Mike Smith said it is across the board. He added that it was approved by Council and will go into effect Jan. 1. Water Board Minutes November 15, 1985 Page 8 Norm Evans asked should the prospect of regionalization be a factor in our analysis? Mr. Bode responded that as far as an economic analysis, he doesn't see that it would have a large impact. If there were a regional facility, we would still be assessed our part of the cost for our service area. Henry Caulfield said, in terms of establishing a joint facility with the surrounding districts, it would be much better if we were on a common ground of metering. However, he also pointed out that any joint facility would be the result of a cooperative effort and would not be imposed on any of us. Henry Caulfield moved that the Water Board adopt the staff's recommendations as listed in Chapter 8 of the report including phased metering Alternative No. 2, the three recommendations regarding rate structures as listed on p. 8-3 of the report, the education program, and the use of raw water. Jim O'Brien seconded the motion. Mr. Caulfield went on to discuss some of his qualifications regarding each of the points of his motion. He said earlier in the discussion that the PIFs and the O&M monies are very important in carrying out Alternative 2 for the new customers and those with yokes particularly. He thinks that it is very important if it can be said that the existing PIFs and the monthly charge, which includes the recenity approved 9% increase in monthly rates, will not be increased and that costs for implementing the program can be met from the PIFs and the 08M money; along with the cost of the plant expansion which we are now undertaking. If it can't be truthfully said that way, then exactly what can be said (i.e.), at what point are the PIFs going to have to be increased? There has been an implication that with some possible exceptions, the program could be implemented this way. Of course inflation can be factored into the PIF. It is important to have this information prior to the meeting with the Council. With respect to the problem of financing for the people without yokes, Mr. Caulfield thinks it would be best to postpone ways to finance that until such time that the problem becomes clearer; if there is a problem. This is in contrast to Jim O'Brien's proposal of establishing a fund to meter those without yokes or meters after a 10 year period. Mr. Caulfield explained that with Mr. O'Brien's proposal, there would be a 25% increase over and above the Jan. 1, 9% increase in monthly charges. He thinks, on the other hand, that installing meters when a change of ownership occurs at a rate of 7 1/2% per year should be a fairly effective way of metering those homes without yokes or meters. He remains concerned about some of the older homes, nevertheless. With respect to the rate structures, Mr. Caulfield said the current metered rate structure is a flat rate in the sense that is is not an increasing block rate or a decreasing block rate -- the rate per 1,000 gallons stays the same no matter what the volume. It is said by some to be more progresssive than the previous rate for which there was a declining block rate. He is prepared to give his approval for this in spite of his concerns about green lawns because he thinks we need to keep that rate as it is to avoid confusion and complexity at this time. We should study the effects as we have more and more Water Board Minutes November 15, 1985 Page 7 Mr. O'Brien would like to see the Board take two directions on this: 1) We should make sure that with or without meters each group of customers is paying their fair share. 2) Essentially, the City has made a commitment to go to water metering. It is up to the Water Board to make a statement along those lines and then come up with some methodology for implementing the cost. Dr. Grigg asked how much of a directive was there from the Council to go into a phased metering program. Dave Stewart and Mike Smith referred to the Council resolution drafted in 1983 which directed the staff and Water Board to prepare a conservation program to include, but not limited to, a phased metering program. Mr. Caulfield suggested that, in order to come to a decision, that it might be useful to make a motion and go from there. Thus, anyone who wishes to deviate from the original motion, can offer amendments, and debate the amendments, etc, and have closure on this. MaryLou Smith asked if we have any statistics on delaying expansion by using the alternative of restricting water use on those few peak days in the summer months? Mr. Bode said that staff has done various exercises based on this in the past. Probably what is most noticable is that some summers we may have peak days that are at a high level and perhaps we could go to restrictions to knock those peaks down. However, the staff believes that for the long term, restrictions are not desirable and they are not liked very well by the customers. Mike Smith related that when the water rate study was being discussed by the Council and Water Board, the staff received the message, particularly from the Council, that restrictions were not an acceptable alternative to reducing the demand. Tom Moore asked what is the reduction in water use with restrictions? Mr. Stewart said about 10%. Mr. Moore observed that we could achieve half the savings from a metering program with restrictions. MaryLou Smith thinks that we haven't looked at restrictions because we assume that the PR would be adverse. She said she wonders if the PR about the cost of metering isn't just as contrary. Dave Stewart contends that we can decide today not to meter, but eventually we are going to be forced to implement a program. Jim O'Brien asked the staff, after preparing the information related to his comments last time, if they have wanted to deviate from any of their recommendations. Mr. Smith replied that they haven't. However, the recommendations certainly aren't complete on how to accomplish various things; finance schemes being one area. Staff thinks that Alternative 2 is a reasonable schedule to implement, he confirmed. Water Board Minutes November 15, 1985 Page 9 meters and less influence from those people who have wells, etc. on this question of green lawns, and perhaps later adopt one of the proposals from the rate study. He stressed that it is important not to get the public involved in rate questions at this point. He then commented on the third rate question which involves a possible 10% increase in the rates for the unmetered customers to meet their proper share of the cost of service. He has problems introducing this 10% along with a 19% increase at this juncture, although he recognizes the importance of charging according to the cost of service. This, in his opinion, will make it much more difficult to sell the program. Dennis Bode pointed out that the 10% increase for unmetered customers probably would not come in one year. Let's say you leave the metered customers at 0% increase, you would probably need about a 16% increase on the unmetered customers in order to average 9%. The 9% increase in January includes metered as well as unmetered customers. Mr. Caulfield thinks we would be better off if somehow we could delay that 10% increase in the cost of service for unmetered customers in terms of public acceptance, and take more looks at that later on. Mike Smith offered another option regarding the 9% increase Jan. 1. First, he said, we need X amount of dollars. That 9% could be restructured to give all the metered customers 0 increase and raise all the flat rate to 16% instead of 9%. That would give us the money we need plus address the equity issue. Marylou Smith commented that the 16% for the flat rate customers could be a problem too. Jim O'Brien countered that the flat rate customers have also been subsidized for the past 10 years to the tune of about $1,000 worth of water. Ms. Smith stressed that, nevertheless, the flat rate customers are the majority and we as a Board are trying to sell this idea in order for it to be accepted, so we need to look at how people are going to feel. Mr. Caulfield suggested taking the unmetered customers in steps instead of increasing their rates all at once. Neil Grigg said that, before Mr. Caulfield made his motion, he had given some thought to recommending Alternative 1. However, that leaves so many homes unmetered -- 11,400 of them. There wouldn't be any obvious way of metering all of those homes in the near future. The reason he was attracted to that alternative, is when you look at the present worth of these metering costs, Alt. 1 would only cost $945,000 compared with $2.2 million for Alt. 2. It is that low cost that gives us a 4.4 cost/benefit ratio for Alt. 1 and a 2.97 for Alt. 2. The disadvantage that doesn't show up in the B/C ratio is that we don't really achieve a metering objective. Water Board Minutes November 15, 1985 Page 11 prepared for a public outcry that metering is a result of having a brewery. We need to be prepared to react to that," she emphasized, "and to choose alternatives that will sooth that reaction as much as possible." Dr. Grigg suggested that one way to incorporate Ms. Smith's point is to tie the metering in with the next expansion in 1991 or '92. He said he didn't mean that we should wait that long to do it. Thus, it wouldn't be tied to A-B, he said. Jim O'Brien agreed that he is very sensitive to the need to sell this to the public. It has been through good planning of the Water Board and the City that we have an adequate water supply in a semi -arid community that has allowed us to debate this issue. In light of continuing this trend of good planning, Mr. O'Brien would not like to see the open-ended deadline for having meters in all homes. Thus, he proposed the following amendment to the motion: After 10 years the City will be 100% metered instead of 80%. He also offered a suggestion for a financing package to accomplish this. It seems to Mr. Caulfield that the City can delay the problem of figuring out how to finance the program for the customers without meters at the end of 10 years. Mike Smith is confident that putting a financing package together would not take a lot of time. We could offer something for a ten year period at a certain rate, he said. Mr. Caulfield asked if the staff thinks we ought to offer that now as opposed to waiting until we ascertain how much of a problem evolves after the program is implemented. Mr. Caulfield's main reason for suggesting that we wait is "the simpler we can keep this thing, the better it will be." Complicated financing schemes would only complicate the program at this time. MaryLou Smith agreed that we should keep it simple, but when we show alternative ways of financing, the public responds to that too, she claims. Mr. O'Brien clarified that his amendment states only that 100% of the homes be metered in 10 years instead of 80%. He makes no mention of how that would be financed. Henry Caufield seconded Mr. O'Brien's amendment for purposes of keeping it in order. Mr. Caulfield explained that the 10 years mentioned in the report is an analytical 10 years not a fixed 10 years. Therefore, it can go on for a longer period. The 7 1/2% could change through the years. Mr. Caulfield is not as bothered as Mr. O'Brien about converting a residual number of homes within a 10 year period. He suspects that the homes in the old part of town are the ones that are not going to be metered for a long time. He wonders if we want to "put the bite on them," at this juncture. Later, when we discover who these people are and where they are, and who converts to meters and who doesn't, we could develop some financing schemes, he concluded. Water Board Minutes November 15, 1985 Page 12 Mr. O'Brien argued that if you arrived at the point where you had only a few people left, why would you not go foward with it? Mr. Caulfield stated that, simply speaking, people who do not have yokes can say, "If I don't sell my house, I don't have to go on a meter." Dave Stewart commented that if the unmetered people are on a true cost of service, it shouldn't make any difference to us if they are metered or unmetered. MaryLou Smith asked for a clarification of the PIFs and O&M budget paying for the installation of meters in new homes and those with yokes. Mr. Smith said that the staff is reasonably certain the PIFs will cover the cost, but reserves the right to change its mind. Mr. Caulfield reminded Mr. Smith that in terms of selling this, we must have an answer. Mr. Smith assured the Board that the staff will analyze it further. Mr. Caulfield suggested a slight change in which the yokes in all new homes be paid for by the contractors. In this way, it may make it possible for the PIFs and the O&M budget to cover all the costs we are talking about with some degree of certainty. A vote was then taken on Jim O'Brien's amendment. The amendment failed by a vote of 7-1. Neil Grigg is concerned that the Board is at a point where they do not have a lot of substanative issues resolved, but that we need to move on. Could we support Alternative 2 in principle and have further meetings on the details? Chairman Evans reiterated that the Board's purpose is to send a recommendation to the Council but he doesn't believe that it must be complete with details at this point, because the Board and Council will be meeting jointly to discuss the report to decide what direction we want to take. Mr. Caulfield was willing to say that his motion is one in principle and that the Board adopt Alternative 2 subject to further consideration of the matters that will be recorded in the minutes. Dr. Grigg said he is willing to vote for that kind of a motion. No. 3 of the rate structure recommendations is one in which problems have been identified. Numbers 1 and 2 are straight forward and there has been no clear opposition to those points. Dave Stewart made the point that most members appear to agree that everyone should pay their share of the cost of service. Ms. Smith responded, not necessarily. Tom Moore added that it isn't your next door neighbor who is subsidizing you as an unmetered customer; it is the industries and commercial enterprises that use a lot of water that are. In a sense, by your patronage, you are helping to pay for that. Mr. Stewart disagrees. As a person who has a business that uses a lot of water, he feels he shouldn't have to pay for all the unmetered customers in town. The important point is that all customers should pay for what it costs to serve them, he emphasized. TO: MEMBERS OF WATER BOARD FROM: T. G. Sanders SUBJECT: Thoughts Concerning Semi Annual Water Petering Issue REMARKS: If metering is so good and will: 1) Save H2O 2) Reduce peak demands; and 3) Teach everyone how good it is to save water lets implement metering immediately, why waste time (gradualism may indicate idea isn't too good, but if you go slow enough no one will know real costs)? Assess each nonmetering water user $100.00 or whatever it takes and get them to pay in the January bill. It is such a good idea that I am sure the users would overwhelmingly approve it. Why not endorse metering: 1) If the council wants to do it, let them do it. Endorsement by Water Board takes them off the hook. 2) Get past articles out on Busch and read again that a 4,500 acre-feet increase per year has no effect on our supplies or our treatment capacity. (Otherwise Busch would have volun- teered to pay for more capacity.) 3) Storage capacity can help offset peak daily demand. 4) Countless studies have shown effect of metering on water demand can't be seen in three years. 5) For 2 million dollars we can buy over 2,000 shares of Horsetooth water. 6) In an appropriate rights doctrine state it makes no sense to save water particularly farmers. Institutionally there is no incentive to save water, hence use all allocated share even if crops don't need it or you'll lose it. I'd rather buy farmers trickle irrigation equipment and they hand over unneeded water to Fort Collins. 7) Residential management of water will not improve with metering - except when they go to xeroscape; that is the only source of savings either volumetrically on an annual basis or on a peak daily basis. 8) I think on peak demand days going to odd -even watering would be less costly, and solve the problem of peak daily demand and is acceptable by the population. p 'I L 9) If in fact unmetered water users are being subsidized by the City, then increase rates. By the way, what segment of society in this town is not subsidized by city one way or another. Industry moving in? Softball players? New golf 'course south of town? City bus users? Joggers? Hospital users? Reasons why to meter: 1) More industry can move in. We've got to make room for a bottling and canning plant. 2) The Feds will expect metering if we want to get future federal money. 3) Our planning has been so bad by the year 2020 we may exceed our present available amounts. 4) Conservation is an absolute good and metering conserves something, certainly not capital nor water. 5) More city employees and jobs. 6) Good business for the metering company. 7) Equity issues, Busch is metered so should every homeowner. 8) We can put the issue behind us as it has been crammed down our throats (Water Board) since I've been on it. It seems that every recent study, etc., no matter what the topic had to look at water metering. P.S.: I sincerely regret that I have been unable to atten4 and did not hear arguments for the gradualism metering program. After read- ing all the material and minutes concerning the metering issue, I am still opposed to endorsing metering by the Board and would like to go on record as such. Water Board Minutes November 15, 1985 Page 2 monthly charges that would have to be assessed each flat rate customer to try to come up with that fund of $3,900,000 at the end of 10 years. The conclusion was that $4.20 is necessary per month to accumulate the $3.9 million. That $4.20 would be about a 25% increase in present charges. Mr. Jones explained that when the ownership changed, the money that the customer had contributed would be refunded to him plus 8% annual interest. That is how the rebate was determined. The total rebate increases with time because of the accrual of interest. The rebate per customer increases as well. Jim O'Brien, who had posed the question, expressed his appreciation for the information that the staff generated from this exercise. Mr. Jones clarified further some of the figures for Marylou Smith and Jim O'Brien. Henry Caulfield pointed out that we may be placing too much emphasis on the residual 5,600 homes. He asked if the staff took into account the areas in Fort Collins that would be redeveloped within that 10 year period. There could be some demolition of those properties, at which time they would cease to exist. Probably a significant number of these would be the older houses in the older parts of town which would be less likely to convert, or does the 7 1/2% estimated for change of ownership take that into account? Mr. Jones answered that the 7 1/2% is what the realtors approximate being sold each year. Tom Moore commented that he doubted that the demolishing would be very significant. Mr. Jones verified that these numbers reflect those that would install meters due to change in ownership. They don't reflect those that would voluntarily install meters. There might be some incentives for that which we have discussed previously. Jim O'Brien commented that there is some potential to mix and match. If it were construed that there was some burden on the existing homeowners that are unmetered, then there is some opportunity to invest plant investment fees into a scheme of this nature. If we are going to reevaluate the rate structure, has any preliminary thought been given as to an increase in this monthly bill in order to bring the flat rate users up to a metered rate? Dennis Bode said he had examined this question briefly. There would probably be at least a 10% increase for the flat rate customers relative to the metered customers. Henry Caulfield said that recently, the City instituted a 9% increase. He is concerned that adding a 25%, 10% and 9% in a short period of time, assuming the City went this route, would not be very acceptable. Mr. Jones went on to discuss some comments which Neil Grigg expressed at the last meeting on treatment plant expansions and what the present worths of those are. He showed some graphs which provide an example of what Dr. Grigg was alluding to. He indicated that the plant expansions basically follow a stair step pattern. He pointed to a graph which showed what plant expansions would look like if there were no metering policy implemented. The staff also charted, using alternative 2, what the plant expansions would be like to meet the demands of the year 2015. The chart indicated that there were fewer expansions, and this last 10 MGD would be more in the neighborhood 9 MGD to Water Board Minutes November 15, 1985 Page 10 Dennis Bode pointed out that the advantage of Alt. 2 over Alt. 1 shows up in the net present worth savings of $1.3 million more. Dr. Grigg said the difference in those costs is the difference in metering homes as they change ownership. The cost sharing recommendation for that is part PIFs and part from the homeowner. If we look at the distribution of those costs, we assume they would fall on the person buying the house, or the seller and on the PIF structure in general. We need to look and see who is paying to realize what that impact is. "If we need to increase that rate for those of us who have been subsidized for so long (and Dr. Grigg said he doesn't feel very subsidized), would there not be some alternative where we could offer those on a flat rate without a yoke, some financial incentive to convert by raising the rate but, at the same time, telling them if they go with a meter they can amortize the cost over some period of time. If they can save water they can save money in the long run." Dr. Grigg suggests we think about that. Mr. Caulfield stated, as a way of getting this accepted or regarding the PR aspect, having the costs covered by the PIF and the O&M budget, the staff came up with a good idea in terms of helping to ease the program in. Therefore, he doesn't think we should try to change that aspect of it. Dr. Grigg said what he is suggesting is that existing homes with yokes would be metered. We would leave all homes without yokes unmetered. It is like Alternative 1 but a part of Alt. 2 is moved in there. With it have an incentive program where people could perceive that they could come out ahead with a meter. Norm Evans reiterated what Henry Caulfield was suggesting. Leave the metered customers at 0% increase and increase the unmetered customers by 16% but in staged increments for a specified time period instead of all at once. Dr. Grigg said that is part of what he was trying to suggest for his incentive idea in that the unmetered customer would avoid the 16% increase as well as through conservation he could save money on his bill if he chose to be metered. Marylou Smith pointed out that this is already mid November and is only 6 weeks until Jan. 1 when the 9% increase goes into effect. Mike Smith said the Council needs only two meetings to amend the ordinance. Mr. Caulfield emphasized that the Board needs only to be concerned about what it should do. "We need to come up with something that we think will work smoothly with as little fuss as possible and without a lot of anger within the community," he added. MaryLou Smith thinks that Mr. Caulfield's concern about "what will fly" is very important and very easy for us to forget. "We can sit here and look at all the options and make decisions about what makes the most sense, but it is so important to think about what the public will accept because they will not study all the information as we do. They will make rash assumptions and react emotionally," she said. Ms. Smith thinks strongly that the public is going to say that the City has "fooled" them about A-B. "We should be Water Board Minutes November 15, 10,85 Page 13 Tom Moore replied that he doesn't deny that people should pay for what they use, but he felt he should mention the subsidy issue in the way that he interprets it. Mr. Caulfield moved the question. Because the vote was not unanimous, the secretary polled the members. They voted as follows: Yes: Neil Grigg, Norm Evans, Henry Caulfield, Stan Ponce, Jim O'Brien, Dave Stewart. No: Tom Moore, MaryLou Smith. The motion passed 6 to 2. (It should be noted that Board Member Tom Sanders was unable to attend the meeting and submitted a memo stating his reasons for opposing the staff's recommendation for Alternative No. 2. That memo will be attached to the minutes, so his viewpoint will be incorporated in the discussion. He also requested that his vote be recorded as negative for any kind of metering program.) Mike Smith announced that the Council is anxious to meet with the Board on the report. They have two work sessions coming up on November 26 and December 10. Would the Board be prepared to meet with them on one of those days.? It was decided that they would prefer to meet on the loth. Since that date falls prior to the regular Water Board meeting, the Board decided to meet on Monday, December 2, at 3:00 p.m. to discuss further some of the details in terms of fleshing out some of the recommendations. This meeting will take the place of the regular meeting on the third Friday of December. Mike Smith asked what other issues the Board would like the staff to research besides the the issue of whether we can keep the PIFs and the rates the same with a metering program? Dave Stewart raised the question, if we don't raise rates of the metered customers, how much would we have to raise the flat rate? Mr. Caulfield added that more information needs to be developed on the question of staging flat rate increases. Jim O'Brien thinks that this phased metering program is a step the City can take to avoid what might be a "sledgehammer" approach in the future. In his opinion, 10 to 15 years from now, we are going to realize that this was a very good decision. It will make a big difference in our water planning processes and the implementation of rate structures and a lot of community workability in terms of a regional concept. Tom Moore wanted the Board and staff to know that although he voted against the program, he plans to do his best to work with the majority decision. Since there was no further discussion, the meeting was adjourned at 5:15 p.m. water Boaod Secretary