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R5C-Amend Ch 110 Increase Water And Sanitary Sewer Rates -Wolfson-COMMISSION ITEM SUMMARY Condensed Title: An Ordinance Of The MayorAnd City Commission Of The City Of Miami Beach, Florida, Amending AppendixA, Entitled "Fee Schedule", To Chapter 110 Of The Miami Beach City Code, "Utilities," Article lV, Entitled "Fees, Charges, Rates And Billing Procedure;" Division 2, Entitled "Rates, Fees And Charges," Section 1 10-166, Entitled "Schedule Of Water Rates And Tapping Charges," And Section 110-168, Entitled "Sanitary Sewer Service Charge," To lncrease The WaterAnd Sanitary Sewer Rates By The Same Percentage Enacted By Miami-Dade Water And Sewer Department (WASD); Pursuant To Sections 110-166 And 110-168; Providing For Severabilitv, And An Effective Date. Maintain the infrastructure. Supporting Data (Surveys, Environmental Scan, etc.): lssue: Shall the Mayor and City Commission approve the amendment to the Ordinance on first reading and schedule a second readino public hearinq? Item Summary/Recommendation: FIRST READING The City's utility rates are structured to collect the necessary revenues to meet operating and maintenance costs of the water and sewer infrastructure, to cover debt service for water and sewer bonds, to maintain adequate operating fund reserves, and to pay Miami-Dade County for wholesale water purchased, the treatment of the City's sewage and other fees. The Miami-Dade Water and Sewer Department (WASD) has proposed water and sewer rate modifications to all wholesale customers. The proposed water rate of $1 .7341 per 1,000 gallons is a decrease of $0.0475 from the current rate of $1 .7816. This reduction reflects a decrease in operation maintenance and capital costs. Since operations and maintenance costs increased last year and are projected to increase again, that increase is being more than offset by a lack of capital expenditures. This could be related to a significant amount of capital improvements being performed on their sewer infrastructure. However, an increase in the City's debt service payments for new bonds is the driver for the potential FY16 deficit. The current rate of $4.43 per thousand gallons is insufficient to cover the cost of providing water service. Based upon the proposed FY16 budget, the water rate would need to be increased by 5o/o to $4.65 per thousand gallons in FY16. The proposed WASD sewer rate of $2.7879 for FY16 is an increase of $0.2279 above the current rate of $2.56 per 1 ,000 gallons. The current Miami Beach rate of $7.55 per thousand gallons is insufficient to cover the cost of providing sewer service. Based on the FY16 budget proposed by the Administration, sewer rates have to be increased by 8.9% to $8.23 per thousand gallons in FY16. A significant portion of the deficit is due to the additional operating expenses related to waste water treatment as well as additional debt service to cover the City's capital improvement costs. The proposed sewer rate increase for FY16 is $0.68 per 1 ,000 gallons, and the proposed water rate increase is $0.22 per 1,000 gallons. Forthe average 11,000 gallons per month customer, the combined water and sewer rates result in a monthly increase of $9.90 in FY16. For the minimum usage customer (5,000 gallons or less per month), the monthly impact would be a total of $4.50. This item was presented at the Finance and Citywide Projects Committee on July 17, 2015. THE ADMINISTRATION RECOMMENDS APPROVING THE AMENDMENT TO THE ORDINANCE ON FIRST READING AND SCHEDULING A SECOND READING PUBLIC HEARING. Financial lnformation : Source of Funds: Amount Account Approved 1 2 OBPI Total Glerk's Office rackin Sign-Offs: Department Director.- Assistant clk{a:reer citv Maflaser JJFIETC -fiT ETC/MT\T LY JLt'tfrf I t:\agenda\201 S\septembeApublic works setp 10\fy l5 water and sewer rateltOinance summ.doc \/ ace*,AffiffiE MIAMIBTACH 56 g MIAMI BEACH City of Miomi Beqch, I200 Convention Center Drive, Miomi Beoch, Florido 33I39, www.miomibeochfl.gov COMMISS N MEMORANDUM To: Mayor Phillip Levine and Members the City FROM: Jimmy L. Morales, City Manager DATE: September 10,2015 SUB]ECT: AN ORDINANCE OF THE MAYORAND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, AMENDING APPENDIX A, ENTITLED "FEE SCHEDULE", TO CHAPTER 110 OF THE M!AM! BEACH CITY CODE, ..UTILITIES," ARTICLE IV, ENTITLED "FEES, CHARGES, RATES AND BILLING PROCEDURE;" DIVISION 2, ENTITLED "RATES, FEES AND CHARGES,'' SEGTION 110.166, ENTITLED ..SCHEDULE OF WATER RATESANDTAPPING CHARGES,"AND SEGTION 110-168, ENTITLED "SANITARY SEWER SERVICE CHARGE," TO INCREASE THE WATER AND SANITARY SEWER RATES BY THE SAME PERCENTAGE ENACTED BY MIAMI. DADE WATER AND SEWER DEPARTMENT (WASD); PURSUANT TO SECTIONS 110. 166 AND 110-168; PROVIDING FOR CODIFICATION, REPEALER, SEVERABILITY, AND AN EFFECTIVE DATE. ADMINISTRATION RECOMMENDATION The Miami-Dade Water and Sewer Department has informed all wholesale customers that the proposed water rate for FY16 would decrease by $0.0475 to $1.7341 per 1,000 gallons. WASD has also notified wholesale customers that their proposed sewer rate will be $2.7879, an increase ol $0,2279 from the current rate of $2.56 per 1,000 gallons. The cost of the proposed FY16 sewer rate increase to Miami Beach is approximately 8.9%. ANALYSIS The City's utility rates for water and sanitary sewer services are structured to collect the necessary revenues to meet annual operating and maintenance costs of the water and sanitary sewer infrastructure, to cover debt service for water and sewer bonds to maintain adequate operating fund reserves, and, to pay Miami-Dade County for wholesale water purchased, the treatment of the City's sewage and other fees. ln general, the rates for water supply and sanitary sewer services consist of:. Pass-through of the wholesale rate the City pays to Miami-Dade County for the purchase of potable water and treatment of sewage;o Debt service for the Water and Sewer Revenue Bonds;o Operating and maintenance costs for the water and sewer utility;. 7.5o/o fee of previous year total revenue paid to the Miami-Dade County Environmental Resource Management Department (DERM). F!RST READING 57 Commission Memo September 10,2015 Water and Sewer Rale Ordinance Memo Page 2 of 3 FY2015/16 Miami Dade Gountv Wholesale Water and Sewer Rates The Miami-Dade Water and Sewer Department has informed all wholesale customers that the proposed water rate for FY16 would decrease by $0.047S to $1.7341 per 1,000 gallons. The operational expenditure decreases for the County are due to projected operating expenses, debt service increases in FY16, and other revenue, charges and adjustments such as reserye requirements, decreased interest earnings and renewal and replacement. WASD has also notified wholesale customers that their proposed sewer rate will be $2.7879, an increase of $0.2279 above the current rate of $2.56 per 1,000 gallons. The cost of the proposed FY16 sewer rate increase to Miami Beach is approximately 8.9%. The proposed wholesale water and sewer rates are subject to approval by the Board of County Commissioners at their Public Budget Hearings, scheduled for first and second reading on September 3, 2015 and September 17, 2015 respectively. Water and Sewer Revenue Review recommendations Millian, Swain & Associates, lnc. (MSA) were retained to assist in evaluating the level of revenues produced by current water and sewer rates and the potential need for rate adjustments. The following are their findings (below): Water Revenue Review and Recommendation An increase in debt service payments for new bonds is the driver for the potential FY16 deficit. 1. The increase is required to cover debt service on approximately $35 million in water capital needs over the next few years. 2. The current rate of $4.43 per thousand gallons is insufficient to cover the cost providing water service. Based upon the proposed FY16 budget, the water rate would need to be increased by 5% to $4.65 per 1,000 gallons in FY16. 3. All operational expenditure increases related to the proposed adjustments to salaries, increased costs of health insurance and pension, and increases in other operating costs can be absorbed without the requirement to increase the water rate. Sewer Revenue Review and Recommendation An increase in WASD Treated Sewerfees and scheduled increase in debt service paymentfor new bonds are the largest contributors to a rise in the projected FY16 deficit. 1 . The current rate of $7.55 per thousand gallons is insufficient to cover the cost of providing sewer service. Based on the proposed FY 16 budget provided by the City, rates would have to be increased by 8.9% to $8.23 per thousand gallons in FY16. 2. Rate increases are needed to cover debt service requirements of a proposed $18 million sewer debt issuance in FY16 and to cover further increases in costs (due to inflation, etc.) beyond FY15. 3. Fees charged to Satellite Cities to transport wastewater to WASD appear to be insufficient to cover the cost of providing this service. As part of the comprehensive cost of study, MSA also performed a detailed cost allocation study to address the proper charges to the Satellite Cities and found that those charges needed to be increased from $2.727 to $3.1047 which is approximately 13.9% 58 Commission Memo September 10,2015 Water and Sewer Rafe Ordinance Memo Page 3 of 3 A significant portion of the deficit is due to additional operating expenses related to waste water treatment as well as additional debt service to cover capital improvement costs. Atthe Finance and Citywide Projects Committee (FCWPC) meeting of July 17,2015, PublicWorks staff presented a summ ary of their findings and recommendations. Conclusion Fee (per thousand gallons) FY 20L41 L5 Fee Prop. FY 20tsl t6 Fee Difference From FY 2013/ t4 Water s 4.43 s 4.6s 5 o.zz Sewer S z.ss S g.zE S o.oe Combined Fee 5 L1.98 S rz.ee s 0.90 Monthly Cost to 11,000 Gallon Customer s 131.78 s 141.68 S g.so Monthly Cost to 5,000 Gallon Customer S sg.go S 64.40 s 4.s0 Based on the above, the Administration recommends that the City Commission approve a rate increase for water customers of $0.22 and a rate increase for sewer customers of $0.68 effective October 1,2015. For the average 1 1,000 gallons per month customer, the combined water and sewer rates result in a monthly increase of $9.90 in FY2015/16. For the minimum usage customer (5,000 gallons or less per month), the combined monthly impact would be a total of $4.50. ln addition, the Administration recommends moving fonruard with the recommended cost of service study and implement the suggested modifications to the water and sewer fee ordinances including allocation of appropriate costs to the Satellite Cities and implementation of recommendations to address the financial stability of the utility by codifying the annual pass through of all percentage increases as enacted by Miami-Dade WASD and increasing the operating budget consistent with the County percentage increase. JLM/ETC/JJF/NNN t:\agenda\2O 1 4\september\fy1 5 water and sewer rate ordinance memo.doc 59 ORDINANCE TO BE SUBMITTED 60 THIS PAGE INTENTIONALLY LEFT BLANK 61