HomeMy WebLinkAboutMemo - Read Before Packet - 11/20/2018 - Memorandum From Carol Webb Re: Concerns From Water Utility Customers Re: Excess Water Use Surcharges: Additional Information And StatusPage 1 of 4
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222 Laporte Ave
PO Box 580
Fort Collins, CO 80522
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V/TDD 711
utilities@fcgov.com
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M E M O R A N D U M
DATE: November 19, 2018
TO: Mayor Troxell and Councilmembers
FROM: Carol Webb, Deputy Director, Water Resources and Treatment Operations
THROUGH: Darin Atteberry, City Manager
Jeff Mihelich, Deputy City Manager
Kevin R. Gertig, Utilities Executive Director
RE: Concerns from Water Utility Customers re: Excess Water Use Surcharges:
Additional Information and Status
______________________________________________________________________________
This memo addresses concerns raised by some commercial account Water Utility customers
(primarily home owner associations “HOAs”) regarding an increase in excess water use
surcharges (“surcharges”) that are billed when they exceed their annual water allotment
(“allotment”). The surcharge increases followed Ordinance No. 116, 2017, which increased the
surcharge rate.
This memo follows a previous memo on these issues: Memorandum, RE: Response and Next
Steps Related to Concerns from Water Utility Customers Regarding Change to Water Supply
Requirements and Resulting Increases in Excess Water Use Surcharges, November 1, 2018. This
memo provides additional information and a discussion of the status of work on possible
solutions.
BOTTOM LINE:
Surcharges are intended to ensure that the Water Utility recovers enough revenue to provide a
reliable water supply (e.g. costs for water rights or storage). Surcharges were increased on
January 1, 2018 when City Council made modifications to Water Supply Requirements.
Some commercial account Water Utility customers have been particularly impacted by the
increased surcharge rates. Utilities staff is working to help these customers in several ways,
including developing a program to allow for a temporary waiver of the surcharges for certain
impacted customers that are taking steps to address the underlying issues causing use in excess
of their allotments. The program will require changes to City Code.
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DISCUSSION:
Rationale for Surcharge Rate
In Ordinance No. 116, 2017 (which was effective January 1, 2018), City Council approved
various changes to the Water Supply Requirements (formerly Raw Water Requirements) and the
surcharge rate. The surcharge rate increased from $3.06 per 1,000 gallons over the allotment to
$8.14 per 1,000 gallons over the allotment.
A commercial customer’s allotment is determined at the time of application for a water service
permit. For tap sizes between ¾” and 2”, the allotment is indicated in City Code Section 26-
149(b). For taps larger than 2” and for customers requiring two or more meters, the allotment is
calculated based on considering an approved estimate of peak annual use. Surcharges are to be
billed to commercial and irrigation tap customers when they exceed their allotment in a given
year.
The surcharge rate is distinct from the user rate. The user rate is structured to recover costs for
operations and maintenance of the Water Utility system. The surcharge rate is structured to
ensure that the Water Utility recovers enough revenue to provide a reliable water supply (e.g.
costs for water rights or storage). The surcharge rate is based on the current cash-in-lieu rate
because that is the current cost for the provision of a reliable water supply. If this revenue is not
recovered through surcharges, the cost of service will be shifted to all customers through
increases in user rates.
Impacts to Certain Commercial Account Water Utility Customers with Allotments
Some commercial account Water Utility customers have been particularly impacted by the
increased surcharge rates. The circumstances of commercial account customers that have
regularly been exceeding their allotments generally fall into four categories:
• Category 1: Historically Paying Surcharges with Reduced Future Use. Some customers
have historically exceeded their allotments and paid surcharges but have appropriately
size taps and allotments. These customers have the opportunity to avoid future surcharges
by reducing their water use while still maintaining their current landscape.
• Category 2: Historically Paying Surcharges with Landscape Changes or Fee Payments.
Some customers that have historically exceeded their allotments and paid surcharges but
appear to have water taps and allotments that were undersized for their demand. These
customers will need to either make significant changes to their landscape to reduce their
use or pay a significant sum of money in additional Water Supply Requirement cash-in-
lieu fees to increase their allotment to their demand and avoid future surcharges.0F
1
1 Utilities Staff is working with staff from the Planning Department to address the issue of undersized taps going
forward (Categories 2 and 4), to help ensure that such irrigation taps are not undersized in future developments.
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• Category 3: Historically Not Paying Surcharges with Reduced Future Use. Some
customers appear to not have historically been billed for the surcharges they should have
incurred and thus are now subject to future surcharges. Most of these customers will be
able to reduce use to avoid surcharges, however may need time to make these changes.
• Category 4: Historically Not Paying Surcharges with Landscape Changes or Fee
Payments. Some customers that have not been historically billed and also have water
taps and allotments that are undersized for their demand. These customers will need to
make significant changes to their landscape to reduce their use or pay a significant sum of
money in additional Water Supply Requirement cash-in-lieu fees to increase their
allotment to their demand and avoid future surcharges.
Customer Outreach and Support
Utilities staff conducted outreach to potentially-impacted customers in the lead up to Ordinance
No. 116, 2017 to assist them in reducing their water use. However, a subset of existing Water
Utility commercial customer accounts that are expected to be impacted by the ordinance and the
associated increase in the surcharge rate were not notified of the changes through this pre-agenda
public outreach process in as timely a manner that Utilities staff would have preferred.
Several of these customers (particularly HOAs) have expressed concerns related to the impact
the changes in the Water Supply Requirements and the associated increase in surcharges will
have on their budgets.
Utilities staff are providing extensive support to these and other customers to help them
understand their watering needs and to consider landscape changes to reduce their use. As
discussed above, many customers may reduce their use and avoid surcharges by implementing
relatively small changes in their water use. Some customers, however, need to consider
significant changes (which may require significant investment) to reduce their water use.
The Utilities Executive Director has sought to delay the effective date of surcharge rate increase
for these customers until January 2019 to allow the customers an opportunity to reduce their
water use, however this may not be adequate time for some customers to implement the
necessary changes and to make strategic and budgeting decisions on these items. Staff is also
evaluating potential incentive programs (grants, rebates, on-bill financing, etc.) to help customers
make significant changes in their water use, with some options requiring additional funding.
Next Steps
Utilities staff is working to develop a program to provide certain customers with a temporary
exemption to surcharges provided that they meet certain criteria. The current draft criteria in
development and subject to change is as follows:
• The customer has historically never received excess water use fees but has been
identified as being eligible to receive excess water fees based on their original water
service permit(s).
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• The customer is expected to exceed their allotment based on their historical use.
• The customer submits a satisfactory plan to reduce their landscape water use (e.g. will not
overwater based on their landscape needs or will commit to converting to a lower water
use landscape).
• If applying for an extension to purchase more water, the customer must have an allotment
that is undersized for the property.
Under the draft program being developed, customers that meet the criteria could apply for a
temporary surcharge exemption by submitting a plan to address water use and/or plan to pay to
increase allotment. Staff would determine eligibility and the duration of the extension for each
customer based on the information submitted (not to exceed two years). Staff would provide
resources to participating customers and would perform a post-project assessment to confirm the
project has been completed. Customers would only receive exemption from surcharges if they
apply for the exemption. If a customer were to not complete any part of the application process,
surcharges incurred during the time of the extension would be back-billed to the customer.
Implementing the program above will facilitate water conservation as well as reduce the overall
cost of service to these customers.
In order to implement the proposed program outlines above, City Code would need to be
changed. Utilities staff is working with the City Attorney’s Office on the program and such
potential Code changes.
It should be noted that staff continues to provide significant support to all customers who are
receiving surcharges to help them reduce their water use.
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