02. Resolution 4716 - Resolution Adopting Fees for Sewer 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: Sewer Rate Increase
MEETING DATE: July 15, 2002
BACKGROUND: The recently completed Facility Plan identified many sewer infrastructure
replacement needs. This study also concluded that current sewer rates are adequate to meet only a portion
of these needs. A small number of critical replacement projects are included in the proposed FY
2002/2003 budget. These replacements total $255,000.00. The current rates can fund these projects but
are not adequate for future replacements. Funding replacements is typically accomplished via rates.
Further, 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. The budget
for FY 2002/2003 includes a proposed rate change of $0.10/1,000 gallons to be dedicated for
replacements. This rate increase is critical to ensure adequate funding for the system. The City Finance
Director has prepared revisions to the rates, schedules, fees and charges and these are attached. The City
Attorney has prepared Resolution 4716 adopting these changes.
RECOMMENDATION: Staff recommends approval of a sewer rate increase of $0.10/1,000 gallons for
the City of Kalispell to fund system replacements.
ACTION REQUESTED: MOTION TO APPROVE RESOLUTION 4716.
FISCAL EFFECTS: Revenue increases in the sewer utility of approximately $75,000.00 per year to
fund replacements.
ALTERNATIVES: As recommended by the City Council.
Respectively s /�
C TT. `
ansz, E. Chris A. Kukulski
Director of Public WorksAtilyEngineer 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. 4716
A RESOLUTION TO ADOPT THE FEES, SCHEDULES, RATES, CHARGES AND
CLASSIFICATIONS IMPOSED ON THE CUSTOMERS OF THE CITY OF KALISPELL
SEWER 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 Sewer 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 Sewer 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 Sewer 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 sewer utility
services to the inhabitants of the City of
res\4716 sewerfees2002.wpd 1
Kalispell and those other persons served by
its sewer 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\4716 sewerfees2002.wpd 2
CITY OF KALISPELL
KALISPELL, MONTANA
EXHIBIT "A"
UTILITY SCHEDULE FOR SEWER
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
Rate: $3.38 per thousand gallons/no minimum *
*Water billed per Sprinkling rate or separately metered for Sprinkling not subject
to Sewer fee. (Note: $ .10 of this rate is designated for the replacement account)
MULTIPLE USERS
Number of units will not be a factor in the rate formula.
Special Terms and Conditions
1. Out of City rate 1.25 times the in -City rate.
CITY OF KALISPELL
KALISPELL, MONTANA
EXHIBIT "A"
UTILITY SCHEDULE FOR SEWER
EFFECTIVE August 1, 2002
PAGE NO. 2
SCHEDULE B
RESIDENTIAL AND COMMERCIAL
Available for: Users of the system NOT SERVED by the City Water Utility but within the City
limits of Kalispell
Rate: Premises discharging sewage into the system from water service originating from
other than metered City Water must install a meter, at user's expense, so as to
provide a measure of usage.
This provision covers all outside sources of water including wells and outside water
systems.
The charge for sewer services: $2.65 Administrative cost per meter AND
$3.38 per thousand gallons/no minimum
In the case of temporary absence of metering, usage will be estimated.
At the date of the adopting of this Schedule there are wells supplying commercial
and industrial premises, these are required to be metered. Until this metering is
accomplished, the sewer discharge from those premises will be determined from
the capacity of the pump delivering the water and hours of operation of the pump.
In the case of restaurants and bars, etc., served in the same manner, sewer volume
may be determined by comparison with a like situation now metered.
MULTIPLE USERS
Number of units will not be a factor in the rate formula.
Special Terms and Conditions
Out of City Rate 1.25 times the in -City rate.
CITY OF KALISPELL
KALISPELL, MONTANA
EXHIBIT "A"
UTILITY SCHEDULE FOR SEWER
EFFECTIVE August 1, 2002
PAGE NO. 3
SCHEDULE C
Where it has been determined that concentration of BOD (Biological Oxygen Demand) and SS
(Suspended Solids) are present in sewage discharged by a Commercial or Industrial user, a
surcharge will be made as determined herein:
The Utility will consider the average Residential component of sewage to be 200
PPM BOD and 250 PPM SS. Surcharges will be assessed to all users discharging
wastes which exceed the component of residential waste as indicated above:
For each 25 PPM BOD above 200 PPM - $.20 Per Thousand Gallons
For each 25 PPM SS above 250 PPM - $.17 Per Thousand Gallons
SEPTIC WASTES
Septic sewage introduced into the sewage system shall be charged at the rate of $2.50 per hundred
(100) gallons with a minimum charge of $15.00 per load for bulk loads. The volume charge will
be based on the capacity of the hauling tank, not on the volume of the contents.
Special Terms and Conditions
Out of City rate 1.25 times the in -City rate.