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Memorandum 17-067 Water and Sewer Rate Recommendations
Memorandum ID:
17-067
Memorandum Status:
Information Only
Related Meetings
Details
Memorandum 17-067
TO: Mayor Zak and Homer City Council
FROM: Katie Koester, City Manager
DATE: April 19, 2017
SUBJECT: Water Sewer Rate Recommendations
Pursuant to HCC 14.08.080 and 14.04.040 water and sewer rates shall be reviewed annually and amended as necessary. Traditionally a worksession is scheduled in the spring and any rate changes are adopted by Council by June 1.
History
2014 was the first year the took effect. This was the culmination of many months of work by the Water and Sewer Rate Task Force to make changes to the model that more accurately reflect water usage. As part of the 2015 budgeting process Public Works performed an extensive review of personnel allocations between Water & Sewer Special Revenue Fund and the Public Works functions. The review in 2015 resulted in shifting about 13% of labor costs back to the General Fund. This improved the health of the water and sewer fund. In 2015 the sewer fund was running a deficit and sewer rates were amended by 6.5% by Council. In the 2017 budget cycle the City stopped billing water usage to the sewer treatment plant as this is an operational expense. Though this resulted in an almost $90,000 reduction in water revenue for 2017, it resulted in a commiserate reduction in sewer expenses.
Attached is an analysis of 2016 budget, actual and water usage by month. Overall, actual revenue for the water and sewer fund combined was down $15,000, which is a small variance in an almost $4m budget. Water usage in 2017 is up from 2016, which makes staff comfortable that we will be able to meet budget goals for 2017. Most customers use both water and sewer which makes water usage a good proxy for revenue. The 2017 budget places a healthy $335,840 in Sewer reserves which will be important as we anticipate a number equipment needs in the next few years at the sewer treatment plant, a 25 year old aging piece of infrastructure.
Recommendation:
Based on the attached analysis, the Finance Director and City Manager recommend keeping the water and sewer rate structure the same for 2017. In the future, Council may want to look at gradual regular increases to rates based on inflation (or some other modest mechanism) as a way to avoid large irregular increases. The next step for 2017 is a resolution from Mayor and Council maintaining the current rate structure that can be introduced at your next meeting.
