HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 03/02/2004 - FIRST READING OF ORDINANCE NO. 045, 2004, AMENDINGAGENDA ITEM SUMMARY
FORT COLLINS CITY COUNCIL
ITEM NUMBER: 31
DATE: March 2, 2004
STAFF: Michael B. Smith
SUBJECT
First Reading of Ordinance No. 045, 2004, Amending Chapter 26, Article III, Division 4 of the
City Code Relating to User Rates and Charges for Water.
RECOMMENDATION
Staff recommends adoption of the Ordinance on First Reading.
EXECUTIVE SUMMARY
The current water rate for single family and duplex customers is the 5-tiered rate implemented in
January 2003 during the drought. The rate sent a very strong price signal to customers to
conserve water since the more a customer used, the higher the cost per gallon. Since it was
implemented customers have had many concerns about the high price per gallon in the upper
tiers. In response to these concerns Council reviewed alternative rate structures at its December
9, 2003 study session. Rate options considered included modifications to the tiered rate and the
water budget rate.
Council continued to address water rate options at the February 3, 2004 Council meeting and
after lengthy discussion adopted Resolution 2004-018. It directed the City Manager to prepare a
modified tiered water rate ordinance for single family and duplex customers for consideration on
March 2, 2004. The Resolution further directed that the new rate ordinance retain the current
fixed charge and first tier price and that it eliminate the fifth tier pricing level. The proposed rate
complies with that Council direction and is shown below.
Single
Family
Existing 5-Tier Water Rate Proposed 4-Tier Water Rate
Fixed Charge $12.72 $12.72 Fixed Charge
Charge per
1,000
gallons
Charge per
1,000
gallons
Tier 1 0-7,000 gallons $1.78 $1.78 0-7,000 gallons
Tier 2 7,001-13,000 gallons $2.37 $2.14 7,001-13,000 gallons
Tier 3 13,001-20,000 gallons $2.97 $2.56 13,001-20,000 gallons
Tier 4 20,001-33,000 gallons $3.56 $3.08 Over 20,000 gallons
Tier 5 Over 33,000 gallons $4.45
Note: All rates include the 6% PILOT
March 2, 2004 -2- Item No. 31
The single family rate proposed in this Ordinance is the same rate as Option B presented at the
February 3, 2004 Council meeting but with the fifth step deleted. Staff originally believed that
the elimination of the fifth tier would require a small increase in the second, third and/or fourth
tiers. It has since been determined that dropping the fifth step will create no material impact on
water revenues so that the fifth tier can be eliminated without an increase to any of the remaining
tiers.
Despite the proposed reduction in rates, the recommended change is anticipated to be revenue
neutral. This is because staff does not anticipate a water supply shortage for 2004, so water
restrictions will not be imposed. Without water restrictions, it is projected that customer water
use will increase in 2004 (but not return to 2001 levels).
As shown in the table below, the proposed 4-tier rate continues to send a strong price signal to
reduce water use, does not increase monthly rates for any customer, and provides a reduction in
costs for customers using more than 7,000 gallons.
Comparison of Existing 5-Tier Rate and Proposed 4-Tier Rate
(Single Family)
Water
Use
(Gallons)
Monthly
Bill
Current
5 - Tier
Monthly
Bill
Proposed
4 - Tier
$
Reduction
in Monthly
Bill
%
Reduction
in Monthly
Bill
7,000 $25.18 $25.18 $0.00 0.0%
10,000 $32.29 $31.68 $0.61 1.9%
20,000 $60.19 $55.94 $4.25 7.1%
30,000 $95.79 $86.74 $9.05 9.4%
40,000 $137.62 $117.54 $20.08 14.6%
50,000 $182.12 $148.34 $33.78 18.5%
60,000 $226.62 $179.14 $47.48 21.0%
70,000 $271.12 $209.94 $61.18 22.6%
80,000 $315.62 $240.74 $74.88 23.7%
90,000 $360.12 $271.54 $88.58 24.6%
100,000 $404.62 $302.34 $102.28 25.3%
March 2, 2004 -3- Item No. 31
The proposed ordinance also changes the duplex rate. The duplex rate is similar to the single
family rate but with a larger fixed fee and an additional 2,000 gallons in the first tier. The
proposed duplex water rate is shown below.
Duplex
Existing 5-Tier Water Rate Proposed 4-Tier Water Rate
Fixed Charge $15.51 $15.51 Fixed Charge
Charge per
1,000
gallons
Charge per
1,000
gallons
Tier 1 0-9,000 gallons $1.78 $1.78 0-9,000 gallons
Tier 2 9,001-13,000 gallons $2.37 $2.14 9,001-13,000 gallons
Tier 3 13,001-20,000 gallons $2.97 $2.56 13,001-20,000 gallons
Tier 4 20,001-33,000 gallons $3.56 $3.08 Over 20,000 gallons
Tier 5 Over 33,000 gallons $4.45
Note: All rates include the 6% PILOT
If approved, the proposed rate changes will be effective for billings with meter readings on or
after May 1, 2004.
ATTACHMENTS
Agenda Item Summary #34, February 3, 2004
ORDINANCE NO. 045, 2004
OF THE COUNCIL OF THE CITY OF FORT COLLINS
AMENDING CHAPTER 26, ARTICLE III, DIVISION 4
OF THE CODE OF THE CITY OF FORT COLLINS
RELATING TO USER RATES AND CHARGES FOR WATER
WHEREAS, the City Council is empowered and directed by Article XII, Section 6, of the
Charter of the City of Fort Collins, Colorado, to by ordinance from time to time fix, establish,
maintain and provide for the collection of such rates, fees or charges for utility services
furnished by the City as will produce revenues sufficient to pay the costs, expenses and other
obligations of the water utility, as set forth therein; and
WHEREAS, the City Council studied alternative rate options for residential and duplex
customers at their December 9, 2003 study session; and
WHEREAS, on February 3, 2004 the City Council adopted Resolution 2004-018 which
directed the City Manager to develop a rate ordinance for Council consideration at its meeting on
March 2; and
WHEREAS, Resolution 2004-018 further directed that a modified tiered rate be
proposed; and
WHEREAS, the City Manager has recommended the following rate modifications for
single family and duplex customers to go into effect for billings based on meter readings taken
on or after May 1, 2004.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
FORT COLLINS as follows:
Section 1. That Subsections (a) (1) and (a) (2) of Section 26-127 of the Code of the
City of Fort Collins are hereby amended to read as follows:
Sec. 26-127. Schedule B, meter rates.
(a) Residential Rates.
(1) Residential customers with one (1) dwelling unit.
a. Base Charge. Residential customers with one (1) dwelling unit
shall pay a base monthly charge of twelve dollars ($12.).
b. Quantity Charge. Residential customers with one (1) dwelling unit
shall pay a monthly quantity charge as follows:
For the first seven thousand (7,000) gallons used per month, a
charge of one dollar and sixty-eight cents ($1.68) per one thousand
(1,000) gallons.
For the next six thousand (6,000) gallons used per month, a charge
of two dollars and twenty-four two cents ($2.24 $2.02) per one
thousand (1,000) gallons.
For the next seven thousand (7,000) gallons used per month, a
charge of two dollars and eighty forty-two cents ($2.80 $2.42) per
one thousand (1,000) gallons.
For the next thirteen thousand (13,000) gallons used per month, a
charge of three dollars and thirty-six cents ($3.36) per one
thousand (1,000) gallons.
For all additional gallons used per month, a charge of four two
dollars and twenty ninety cents ($4.20$ $2.90) per one thousand
(1,000) gallons.
(2) Residential customers with two (2) dwelling units.
a. Base Charge. Residential customers with two (2) dwelling units
shall pay a base monthly charge of fourteen dollars and sixty-three
cents ($14.63).
b. Quantity Charge. Residential customers with two (2) dwelling
units shall pay a monthly quantity charge as follows:
For the first nine thousand (9,000) gallons used per month, a
charge of one dollar and sixty-eight cents ($1.68) per one thousand
(1,000) gallons.
For the next four thousand (4,000) gallons used per month, a
charge of two dollars and twenty-four two cents ($2.24 $2.02) per
one thousand (1,000) gallons.
For the next seven thousand (7,000) gallons used per month, a
charge of two dollars and eighty forty-two cents ($2.80 $2.42) per
one thousand (1,000) gallons.
For the next thirteen thousand (13,000) gallons used per month, a
charge of three dollars and thirty-six cents ($3.36) per one
thousand (1,000) gallons.
For all additional gallons used per month, a charge of four two
dollars and twenty ninety cents ($4.20 $2.90) per one thousand
(1,000) gallons.
Section 2. That the amendments to Chapter 26 of the City Code contained herein
shall go into effect on May 1, 2004 and will be effective on all utility bills where the meter
reading is made on or after May 1, 2004.
Introduced and considered favorably on first reading, and ordered published this 2nd day
of March, A.D. 2004, and to be presented for final passage on the 16th day of March, A.D. 2004.
_________________________________
Mayor
ATTEST:
_____________________________
City Clerk
Passed and adopted on final reading this 16th day of March, A.D. 2004.
_________________________________
Mayor
ATTEST:
_____________________________
City Clerk
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AGENDA ITEM SUMMARY
FORT COLLINS CITY COUNCIL
ITEM NUMBER: 34
DATE: February 3, 2004
STAFF: Michael B. Smith
Wendy Williams
SUBJECT
Items Relating to 2004 Water Rates for Single Family and Duplex Water Customers.
RECOMMENDATION
Staff recommends adoption of the Ordinance (Option C) on First Reading.
EXECUTIVE SUMMARY
A. Resolution 2004-018 Expressing the Council’s Intent to Continue in Effect for 2004 the
Existing User Rates and Charges for Water (Option A).
OR
B. Resolution 2004-018 Directing the City Manager to Develop a Modified 5-Tiered Rate
Structure for Residential Water Customers (Option B).
OR
C. Resolution 2004-018 Directing the City Manager to Develop a Water Budget-Based Rate
Structure for Residential Water Customers (Option C).
At the December 9, 2003 Study Session, Utilities staff presented City Council with four water rate
options for single family and duplex customers. During the study session there were various levels
of support expressed for two options: (1) retaining the current tiered rate structure (with or without
modifications); and (2) the water budget rate structure.
Based on input from Council, this item presents three options for water rates in 2004.
Option A – Existing 5-Tiered Rate
Option A is a resolution to retain the current 5-tiered water rate for 2004.
Option B – Modified 5-Tiered Rate
Option B is a resolution directing staff to bring back to Council an Ordinance implementing a
modified 5-tiered rate for residential single family and duplex customers.
Option C – Water Budget Rate Structure
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February 3, 2004 -2- Item No. 34
Option C is a resolution directing staff to bring back to Council an ordinance implementing a water
budget rate structure for residential single family and duplex customers.
If Option A is favored, the current rate ordinance would remain in effect for 2004 and no additional
action would be required by Council.
If either Option B or C is approved, a rate ordinance implementing such would be scheduled for first
reading at the March 2, 2004 Council meeting and second reading at the March 16, 2004 Council
meeting, and would be effective for billings with meter readings on or after May 1, 2004.
BACKGROUND
At the December 9, 2003 Study Session, Utilities staff presented City Council with four water rate
options for single family and duplex customers:
• Retain existing 2003 5-tiered rate
• Modified 3-tier rate
• Seasonal rate
• Water budget rate
Staff requested Council feedback and direction as to whether the current 5-tiered rate should be
retained for 2004, and if not, which rate option would be preferred. The Council expressed interest
in two of the options:
• Retaining the current 5 tiered rate with possible modifications of increasing the number of
tiers to seven and/or reducing the impact of the upper tiers. (Note: The staff examined the
idea of adding additional tiers to the 5-tier structure (expanding it to a 7-tier rate structure)
but it is not recommended for two reasons. First, the addition of two tiers adds to the
complexities of administering the rate and makes it more difficult to present tiered usage
data on the customer’s bill. Secondly, the additional tiers do not provide a significant
advantage over the 5-tiered rate in mitigating the impacts to larger users.)
• The Water Budget rate with the possible modifications of lowering the fixed charge and
dividing the excess water charge into a couple of tiers to spread out the impact.
Based on the input from Council, this item presents three options for Council consideration:
(A) a resolution retaining the current 5-tiered water rates for single family and duplex
customers.
(B) a resolution directing staff to bring back to the Council an ordinance implementing
a modified 5-tiered rate to mitigate the current rate impacts for larger users.
(C) a resolution directing staff to bring back to the Council an ordinance implementing
a Water Budget rate structure.
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February 3, 2004 -3- Item No. 34
The three options are explained below in more detail.
Option A - Retain the Existing 5-Tiered Rate
The option retains the existing 5-tiered rate without any changes.
Existing 5-Tiered Rate Structure
Fixed charge $12.72
0-7,000 gallons $1.78 per 1000 gal
7,001-13,000 gallons $2.37 per 1000 gal
13,001-20,000 gallons $2.97 per 1000 gal
20,001-33,000 gallons $3.56 per 1000 gal
Greater than 33,000 gallons $4.45 per 1000 gal
Pros:
• Continues to send a very strong price signal to all large water users.
Cons:
• Provides no relief to large users who currently pay 2.5 times more per gallon at the top tier
of the rate than in the first tier.
• Revenue recovered through this rate may exceed revenue projections. This rate was part
of the City's drought response in addition to the water restrictions that were in place in 2003.
The rate was designed to recover adequate revenues with a 15% reduction in water use.
Without mandated water restrictions in 2004, it is expected that customers may use more
water than in 2003. The increase in water use may result in revenue in excess of projected
revenue requirements.
Option B – Modify the Existing 5-Tiered Rate
This option modifies the existing 5-tiered rate by reducing the percentage increase between the tiers.
Existing 5-Tier Rate
Structure
(Option A)
Option B
Fixed charge $12.72 $12.72
0-7,000 gallons $1.78 per 1000 gal $ 1.78 per 1,000 gal.
7,001-13,000 gallons $2.37 per 1000 gal $ 2.14 per 1,000 gal.
13,001-20,000 gallons $2.97 per 1000 gal $ 2.56 per 1,000 gal.
20,001-33,000 gallons $3.56 per 1000 gal $ 3.08 per 1,000 gal.
Greater than 33,000 gallons $4.45 per 1000 gal $ 3.69 per 1,000 gal.
Pros:
• Meets, but does not exceed, projected revenue targets based on estimated customer water
use.
• Provides some relief to larger users while continuing to send a strong price signal to
encourage conservation. (Top tier is 2.07 times greater than first tier.)
• Does not increase rates for small users.
Cons:
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February 3, 2004 -4- Item No. 34
• Lower “penalty” price signal for larger users.
Comparison of Option A and Option B
Water Use
(gallons)
Monthly Bill
Option A
Monthly Bill
Option B
% Reduction in
Monthly Bill
7,000 $25.18 $25.18 0%
10,000 $32.29 $31.68 2.18%
20,000 $60.19 $55.94 7.60%
30,000 $95.79 $86.74 10.43%
40,000 $137.62 $121.81 12.98%
50,000 $182.12 $158.71 14.75%
60,000 $226.62 $195.61 15.85%
70,000 $271.12 $232.51 16.61%
80,000 $315.62 $269.41 17.15%
90,000 $360.12 $306.31 17.57%
100,000 $404.62 $343.21 17.89%
Option C - Develop new Water Budget Rate Structure
This option develops a new rate structure based on the water budget concept. More specifically,
each residential single family and duplex customer would have a predetermined monthly water
budget consisting of an indoor allotment and outdoor allotment. The indoor allotment would be
based on the customer's average winter quarter (Dec-Feb) water consumption times a factor of 1.2
to allow for monthly fluctuations. The outdoor allotment would be based on 70% of the lot size and
a predetermined irrigation component for each month of the year. The typical water budget would
vary month to month with it being larger during the summer months and smaller during the winter
months. Monthly water consumption in excess of the water budget would be billed at a higher
variable rate to discourage excessive water use.
Pros:
• Promotes the perception of fairness by using an individualized water budget based
on the customers estimated indoor water use (winter quarter water consumption) and
estimated outdoor water use based on lot size.
• Maintains a high price penalty for excessive water use
• Could be easily adapted for drought conditions by proportionally reducing the
outdoor water allotment.
Cons:
• Very complex to administer, explain and understand
• Monthly water bills for low water users will increase slightly as compared to both
the existing and modified 5-tiered rate.
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February 3, 2004 -5- Item No. 34
The rates for the water budget presented at the December 9, 2003 Council study session are as
follows:
• Fixed Charge - $16.50
• Water Budget Rate - $1.65 per 1,000 gallons
• Excessive Water Use Rate - $4.90 per 1,000 gallons
There was a suggestion by Council that the fixed charge be lowered to match the fixed charge of the
present 5-tiered rate ($12.76). Lowering the fixed charge will raise the water budget rate in order
to compensate for the decrease. The water budget rate with the lowered fixed charge will increase
to $2.02 per 1,000 gallons.
Also, it was suggested that the excessive water use rate be separated into a couple of steps or tiers.
Staff is recommending the following:
1. Water consumption which exceeds the water budget up to 20% would be charged at the rate of
$3.00 per 1,000 gallons.
2. Water consumption which exceeds the water budget by more than 20% would be charged at the
rate of $4.00 per 1,000 gallons.
The following is a summary of the proposed water budget rate with the changes suggested by
Council:
Fixed Charge $12.72
Water consumption within the water
budget allotment
$2.02 per 1,000 gallons
Water consumption which exceeds the
water budget allotment up to 20%
$3.00 per 1,000 gallons
Water consumption which exceeds the
water budget allotment by more than 20%.
$4.00 per 1,000 gallons
Water Rates
Fort Collins City Council Meeting
March 2, 2004
City Council direction from
February 3, 2004 meeting:
Option B – Modified 4-Tier Rate Structure
(eliminate 5th
tier)
Note: All rates include the 6% PILOT
Tier 5 Over 33,000 gallons $4.45
Tier 4 20,001-33,000 gallons $3.56 $3.08 Over 20,000 gallons
Tier 3 13,001-20,000 gallons $2.97 $2.56 13,001-20,000 gallons
Tier 2 7,001-13,000 gallons $2.37 $2.14 7,001-13,000 gallons
Tier 1 0-7,000 gallons $1.78 $1.78 0-7,000 gallons
Charge per
1,000 gallons
Charge per
1,000 gallons
Fixed Charge $12.72 $12.72 Fixed Charge
Existing 5-Tier Water Rate Proposed 4-Tier Water Rate
Single
Family
Single Family
Note: All rates include the 6% PILOT
Tier 5 Over 33,000 gallons $4.45
Tier 4 20,001-33,000 gallons $3.56 $3.08 Over 20,000 gallons
Tier 3 13,001-20,000 gallons $2.97 $2.56 13,001-20,000 gallons
Tier 2 9,001-13,000 gallons $2.37 $2.14 9,001-13,000 gallons
Tier 1 0-9,000 gallons $1.78 $1.78 0-9,000 gallons
Charge per
1,000 gallons
Charge per
1,000 gallons
Fixed Charge $15.51 $15.51 Fixed Charge
Existing 5-Tier Water Rate Proposed 4-Tier Water Rate
Duplex
Duplex
Comparison of Existing and Proposed
$0.00
$100.00
$200.00
$300.00
$400.00
$500.00
0
6
12
18
24
30
36
42
48
54
60
66
72
78
84
90
96
Thousand Gallons
Monthly Bill
Existing Proposed
100,000 $404.62 $302.34 $102.28 25.3%
90,000 $360.12 $271.54 $88.58 24.6%
80,000 $315.62 $240.74 $74.88 23.7%
70,000 $271.12 $209.94 $61.18 22.6%
60,000 $226.62 $179.14 $47.48 21.0%
50,000 $182.12 $148.34 $33.78 18.5%
40,000 $137.62 $117.54 $20.08 14.6%
30,000 $95.79 $86.74 $9.05 9.4%
20,000 $60.19 $55.94 $4.25 7.1%
10,000 $32.29 $31.68 $0.61 1.9%
7,000 $25.18 $25.18 $0.00 0.0%
% Reduction
in Monthly Bill
$ Reduction in
Monthly Bill
Monthly Bill
Proposed
4 - Tier
Monthly Bill
Current
5 - Tier
Water Use
(Gallons)
Comparison of Existing 5-Tier Rate and Proposed 4-Tier Rate
(Single Family)
Questions