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01. Resolution 4715 - Resolution Adopting Fees for Water UtilityCity of Kalispell Public Works Department Post Office Box 1997, Kalispell, Montana 59903-1997 - Telephone (406)758-7720, Fax (406)758-7831 REPORT TO: Mayor and City Council FROM: James C. Hansz, P.E., Director of Public Works/City Engineer SUBJECT: Water Rate Increase MEETING DATE: July 15, 2002 BACKGROUND: The budget for FY 2002/2003 includes significant capital outlays for replacements of water infrastructure to enhance service and pressures, install fire hydrants to improve public safety and continue meter replacements on the program begun last year. These improvements were identified and recommended in the recently completed Facility Plan and recent Fire Department hydrant survey. Subsequent discussions have revised project priorities to reduce financial impact. The improvements are now estimated to cost $825,000.00 and will be funded with bonds. Current funds and rates are not adequate for these improvements. In addition, funding of future replacements is recommended via rates. As indicated in the attached March 21, 2002 memo on the up -coming rate study, the funding of system replacements via rates is expected to be a primary recommendation of the rate study. In order to meet these needs rate increases of $0.12/1,000 gallons for improvements and $0.10/1,000 gallons for future replacements are recommended. The proposed total increase in water rates is $0.22/1,000 gallons. Also proposed is to eliminate the current $0.30/1,000 gallons price discount for large volume users. The City Finance Director has prepared amendments of the fees, schedules, rates, charges and classifications for City water customers. These are attached and were provided to all water customers. The City Attorney has prepared resolution 4715 adopting these changes. RECOMMENDATION: Approval of the proposed changes in water rates for the City of Kalispell. ACTION REQUESTED: MOTION TO APPROVE RESOLUTION 4715. FISCAL EFFECTS: Revenue increases in the water utility of approximately $220,000.00 per year to fund debt service and future replacements. ALTERNATIVES: As recommended by the City Council. Respectively submitted Ja ansz, P.E. Chris A. Kukulski Director of Public Works/ i Engineer City Manager Report compiled July 8, 2002 City of Kalispell Public Works Department ,'- Post Office Box 1997, Kalispell, Montana 59903-1997 - Telephone (406)758-7720, Fax (406)758-7831 MEMORANDUM March 21, 2002 To: Mayor, City Council and City Manager From: James C. Hansz, PE, Director of Public Works/City Subject: Water/Sewer/Storm Drainage Cost -of -Service Rate Study As recommended in the City's Facility Plan 2000 and recently briefed to City Council, the Public Works Department is about to advertise for qualifications and proposals for performing a cost -of -service rate study of our utility operations. In preparation for this, I recently attended a seminar on the basics of cost -of -service rate setting that also included a session on the fundamentals of system development charges. This was a very informative seminar that opened my eyes to exactly what this effort would entail, and also what some of its results would mean for the City. I came away with a solid appreciation of the processes involved in cost -of -service rate setting and also a regrettably clear understanding of the state of "disrepair" that exists in our present rate structure. Without delving into all the small details of rate setting, there are four main principles, or objectives, of the rate analysis effort we are preparing to undertake. • Rates should be cost -based and equitable, set at such a level that they meet the full revenue requirements of the utility. • Rates should be easy to understand and administer. • Rates and the process of allocating costs should follow the principles of cost - causation: what causes the cost and does the rate address the revenue required to cover those costs? • Rates should be stable in both their ability to provide revenues and in the customer's perception of the rates from year to year. Following these basic principles to achieve the desirable objective of fair, stable and understandable rates that meet the utility's revenue requirements will result in substantial changes from current and past practice. Two of these changes can be predicted right now. CHANGE ONE In order to bring our rate system into line with standard industry practice, it will be recommended that the City begin to fund all its system replacements from rates. Those who are wearing out the system, the current users, should fund system replacements. System needs related to growth should be funded from system development charges. Right now this is not the case. Much of our replacement need is funded from connection charges paid by new customers. This is not standard practice, and in the majority of states there are laws that prevent using connection fees this way. Rates will be recommended to rise sharply to fund replacements. CHANGE TWO The City's connection charges will be recommended for overhaul, and it is probable that 100% of these funds be recommended to be reserved and designated as system development funds to be used solely to replace/upgrade/provide facilities necessary to serve new growth. New customers pay these charges into the system. These payments are typically intended to reimburse for system capacity as it is consumed and to build future capacity needed to accommodate growth. These funds are typically not used to pay developer related system costs. City connection (system development) fees are far less than needed to deal with the demands of growth on the system. It is expected that these fees will be recommended for substantial increases. Before Public Works sets off on a cost -of -service rate study it is important for the City Council to understand that these significant changes will, with absolute certainty, be prominent among the many things to be recommended. RESOLUTION NO. 4715 A RESOLUTION TO ADOPT THE FEES, SCHEDULES, RATES, CHARGES AND CLASSIFICATIONS IMPOSED ON THE CUSTOMERS OF THE CITY OF KALISPELL WATER UTILITY. WHEREAS, pursuant to authority granted to municipalities operating utility services by Section 69-7-101, MCA, the City of Kalispell did consider it proper to amend the fees, schedules, rates, charges and classifications imposed for utility services to its inhabitants and other persons served by the City of Kalispell Water Utility; and WHEREAS, said proposed amended fees, schedules, rates, charges and classifications are reasonable and just; and WHEREAS, the City Council did, on June 3, 2002 set a public hearing to be held on July 1, 2002 on said proposed amendments to the fees, schedules, rates, charges and classifications of the Water Utility services of the City of Kalispell and gave the necessary Notice thereof as required by Section 69-7-111, MCA; and WHEREAS, due and proper Notice of said Public Hearing has been given by the City Clerk by publication and mailing as required by law; and WHEREAS, said public hearing was duly held by the City Council at a public meeting thereof in the Kalispell City Hall beginning at 7:00 o'clock P.M. on July 1, 2002, and all persons appearing at said hearing and expressing a desire to be heard were heard, and all written comments thereon furnished to the City Clerk at said meeting prior thereto were given consideration by the Council. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF KALISPELL: SECTION I. That the fees, schedules, rates, charges and classifications applicable to the use of the City of Kalispell Water Utility and other services performed by said utility as set forth in Exhibit "A", attached hereto and by this reference made a part hereof, are found to be just and are hereby established and adopted to be imposed for water utility services to the inhabitants of the City of res\4715 waterfees2002.wpd 1 Kalispell and those other persons served by its water utility service. SECTION II. This decision is final ten (10) days after filing of this Resolution with the City Finance Director. The Finance Director shall file a copy hereof with the Public Service Commission of Montana at that time. PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR OF THE CITY OF KALISPELL, THIS 15TH DAY OF JULY, 2002. Pamela B. Kennedy Mayor Attest: Theresa White City Clerk res\4715 waterfees2002.wpd 2 CITY OF KALISPELL KALISPELL, MONTANA EXHIBIT "A" UTILITY SCHEDULE FOR WATER EFFECTIVE August 1, 2002 PAGE NO. 1 SCHEDULE A RESIDENTIAL AND COMMERCIAL SERVICE Available for: User premises located within the City Limits Charge: $2.65 administrative cost per meter Meter charge: Meter Size Fee per Billing Cycle 5/8" and 3/4" residential $ 1.00 1" 1.67 1 1/2" 3.33 2" 4.67 3" 17.50 4" 24.67 > 4" determined at time of connection based upon 15 year replacement life Rate: $1.61 per thousand gallons/no minimum (Note: $ A of the rate is designated for replacement reserves) (Note: 30,000 gallon price break is eliminated) MULTIPLE USERS Number of units will not be a factor in the rate formula. Special Terms and Conditions 1. See Sheet 2 Schedule B for Sprinkling Terms, etc. 2. Out of City rate 1.25 times the in -City rate. CITY OF KALISPELL KALISPELL, MONTANA EXHIBIT "A" UTILITY SCHEDULE FOR WATER EFFECTIVE August 1, 2002 PAGE NO. 2 SCHEDULE B RESIDENTIAL SPRINKLING SERVICE Available for: Residential Users only Rate: Special summer rate -- Water used for sprinkling purposes. All residential users who do not have separately metered sprinkling services will be charged during the months of May, June, July, August, September and October $1.05 per thousand gallons on the amount of water used in excess of the average consumption for the preceding four months. Usage below the minimum in that base period will be computed at minimum to obtain the average. In as much as water bills are rendered bimonthly with the service area divided into two sections billed in alternate periods, this special sprinkling rate will be applied as follows: Section A (West Side) meters read in odd numbered months: Excess usage, defined above in the period after the March reading to the November reading, will be accorded Sprinkling Rate consideration. Section B (East Side) meters read in even numbered months: Excess usage, defined above in the period after the April reading to the December reading, will be accorded Sprinkling Rate consideration. CITY OF KALISPELL KALISPELL, MONTANA EXHIBIT "A" UTILITY SCHEDULE FOR WATER EFFECTIVE August 1. 2002 PAGE NO. 3 SCHEDULE B-1 SEPARATELY METERED SPRINKLING SERVICE Available for: All users within the City limits Rate: $1.05/per thousand gallons All water users supplied through a separately metered sprinkling service as provided in the Rules and Regulations, will be billed during the Sprinkling Season as defined herein for all water used during the Sprinkling Season. No fee will be assessed against these separate sprinkling services except during the Sprinkling Season. No Sewer fees will be assessed against these separate sprinkling services unless water is used for other purposes (which is prohibited in the Rules and Regulations.) Where usage other than during the Sprinkling Season is indicated, this separate service may be cut off and charged per Schedule A rendered for that usage. Separately metered Sprinkling Services are permitted only in conjunction with usage through a service to a dwelling or commercial account and will not be provided for irrigation purposes. Special Terms and Conditions Separate Sprinkling Services will not be granted OUTSIDE THE CITY LIMITS. CITY OF KALISPELL EXHIBIT "A" KALISPELL, MONTANA UTILITY SCHEDULE FOR WATER EFFECTIVE August 1. 2002 SCHEDULE C SPECIAL SUMMER SPRINKLING Available for: COMMERCIAL USERS AND SCHOOLS Rate: PAGE NO. 4 Commercial users, including schools, will be granted Sprinkling Rates ONLY if Separately Metered Services are installed for that purpose. Such services may be entirely separate from the main to the property or separated ahead of the principal meter serving the property. Users served in this manner for this purpose will be billed $1.05 per thousand gallons on all water used for this purpose during the Sprinkling Season outlined under Residential Meters. No Sewer Fees will be assessed against these Separate Sprinkling Services unless water is used for other purposes, which is prohibited in the Rules and Regulations. The Utility will provide 5/8" meters for these Separately Metered Services. If larger meters are needed, the cost of said larger meter will be paid by the user. Special Terms and Conditions Separate Sprinkling Services will not be permitted OUTSIDE THE CITY LIMITS. CITY OF KALISPELL KALISPELL, MONTANA 1*4 111.1Y .IU UTILITY SCHEDULE FOR WATER EFFECTIVE August 1, 2002 PAGE NO. 5 SCHEDULE D WATER ASSOCIATIONS SERVICE Available for: SERVICE TO WATER ASSOCIATIONS, OTHER WATER UTILITIES FOR RESALE Rate: Service supplied for Water Associations or their Water Utilities will not be provided under Schedule A rates, but will be based on the service to be supplied and Rates Negotiated at the time agreement is made to provide the services. MISCELLANEOUS SALES OF WATER Water sold from Hydrants to trucks by the load: $2.59 per thousand gallons, Minimum charge $22.00 per load. CITY OF KALISPELL KALISPELL, MONTANA EXHIBIT "A" UTILITY SCHEDULE FOR WATER EFFECTIVE August 1, 2002 PAGE NO. 6 SCHEDULE E Available for: COMMERCIAL FIRE PROTECTION - NOT METERED Rate: SIZE OF SIZE OF SERVICE PER MONTH SERVICE PER MONTH 2 Inches $15.40 6 Inches $24.92 3 Inches 18.20 8 Inches 31.64 4 Inches 20.16 10 Inches 43.68 CITY OF KALISPELL KALISPELL, MONTANA UTILITY SCHEDULE FOR WATER SCHEDULE F EXHIBIT "A" EFFECTIVE August 1, 2002 FEES FOR SPECIAL SERVICES Turn On PAGE NO. 7 Rate: When applicable as provided in Rules and Regulations each occurrence when made during regular working hours shall be billed at 1.5 times the current hourly rate. When required other than regular working hours will be billed at overtime rate for hours involved with a minimum of two hours. Meter Testing at Customer Request Deposits required as outlined in Rules and Regulations and refundable under conditions outlined herein. Meters up to 2" $ 40.00 Deposit Larger than 2" 100.00 Deposit CITY OF KALISPELL KALISPELL, MONTANA EXHIBIT "A" UTILITY SCHEDULE FOR WATER EFFECTIVE August 1. 2002 PAGE NO. 8 SCHEDULE H OUT OF CITY SERVICES Available for: Residential and Commercial services located outside the City limits, available only by contract approved by the City Council. Rate: Rates per all Schedules where service is allocated, PLUS SURCHARGE OF 25%.