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HomeMy WebLinkAbout01/15/2002 Study Session MinutesMINUTES OF COUNCIL STUDY SESSION MEETING MARANA TOWN HALL JANUARY 15, 2002 II. IlL Mo PLACE AND DATE Marana Town Ha/l, January 15, 2002 CALL TO ORDER By Vice Mayor Kal at 5:38 p.m. PLEDGE OF ALLEGIANCE Led by Vice Mayor Kal LNVOCATION/MOMENT OF SILENCE A moment of silence was observed. IV. _ROLL CALl, COUNCIL. Bobby Sutton, Jr. Herb Kal Jim Blake Patti Comerford Tim Escobedo Ed Honea Carol McGorray STAFF Michael Hein Michael Reuwsaat Dan Hochuli Jocelyn Entz Jim DeGrood Brad DeSpain Mayor Vice Mayor Council Member Council Member Council Member Council Member Council Member Excused Present Present Present Present Present Present Town Manager Assistant Town Manager Town Attorney Town Clerk Development Services Administrator Utilities Director Attached is a list of public attendees. _APPROVAL OF AGENDA Upon motion by Council Member Blake, seconded by Council McGorray, approval of the agenda as presented was unanimous. Member MINUTES OF COUNCIL STUDY SESSION MEETING MARANA TOWN HALL JANUARY 15, 2002 VI. G.__ENERAL ORDER OF BUSINESS A. COUNCIL ACTION Discussion and possible action: Presentation of the water rate analysis study by Raftelis Financial Consulting (Brad DeSpain) Brad DeSpain began the session by acknowledging the key persons involved in the study process. The group of participants included Ann Meaders, Roy Cuaron, Mike Hein, Mike Reuwsaat, Thom Martinez, Robert Condit, Jerry Harris, Joe Reilly, Betty Horrigan, Ora Mae Harn, Jo Rex, Sherry Rollins, Mark Myers, Sharon Megdal, Hut"cie Davis and Dave Wostenberg. ' Mr. DeSpain briefed the Council on the Raftelis Financial Consulting firm background and remarked that George Raftelis, principal, was considered by the American Waterworks Association to be among the most renowned in the field of water rate analysis. He conzmented that Lex Wormath, representing Raftelis Financial Consulting, would deliver the presentation to the Council. A booklet composed of the presentation information was distributed to the Town Council and staff and has been made a permanent part of this record. An in-depth presentation followed and covered a variety of water rate related topics such as rate structure, rate impacts, budget and growth projections, financial planning regarding service revenue, and the Town's ability to address growth within its rapidly expanding service area. One change in the rate structuring was recommended and it was to eliminate the existing base charge system which varied according to meter size. The recommendation was that the Town institute a universal base charge, structured to recover administrative overhead as well as a portion of fixed capital costs, also known as readiness-to-serve costs. Mr. Wormath stated that the universal charge made more sense to the customer and provided additional benefits to the service provider in terms of financial planning and modeling. He pointed out that a universal charge associated the base charge to specific cost components while the remainder of the bill was driven by volume consumption. MINUTES OF COUNCIL STUDY SESSION MEETING MARANA TOWN HALL JANUARY 15, 2002 The presentation continued and included data related to asset replacement and rehabilitation, capital reserves, definition of costs, growth accommodation, and financial rate impacts associated with tentative Tucson Water systems acquisition. Mr. Wormath reported that two scenarios had evolved from this water study. The first scenario entailed maintaining the same service area without the acquisition of Tucson Water customers, but for Marana Water to become a self-sufficient enterprise, fund-based utility immediately. This plan would mean that, beginning in FY 2003, rates would be adjusted to recover all of the revenues required to pay off the debt service associated with th? Town's existing water systems. The second scenario included the purchase of water systems within the Town's boundary currently owned by the City of Tucson for an estimated $16M purchase price. Operating the merged system as a self-sufficient, enterprise fund-based utility was part of the plan. Implementation of scenario two would take place over two or three years during which time water customers from the different area systems would be phased into the Town's program. It was pointed out that both scenarios provided significant challenges to the Town for the near future but also provided significant potential benefits over the long term. Mr. Wormath commented that it made sense for the Town to move toward scenario one, and he emphasized that growth, a significant factor to be considered, would rapidly catch up with systems costs. The presentation shifted its focus to revenue requirements and projections, operating costs, debt service costs, allocated overhead, projected rates and charges, and customer impacts. The consultant concluded by stating that the next step involved-direction from the-Town- Council and Water Advisory Board. He specifically recommended that the Town adopt changes to the rate structure and explg_re_tl3_e~p_h~__s_e_dzin approach to becoming a self-sufficient, enterprise fund. He also recommended continued negotiations with the City of Tucson using a rate model to evaluate financial and rate impacts of a potential acquisition. MINUTES OF COUNCIL STUDY SESSION MEETING MARANA TOWN HALL JANUARY 15, 2002 There were a number of questions from the Vice Mayor and Council regarding rate subsidies, utility tax revenues factored into the general fund, bond subsidies, water price elasticity, and rate penalties. A short discussion resulted that addressed all of these topics. Mr. DeSpain asked for direction from the Council. Mr. Hein said that the next step in the process was for the Council and community to digest the data presented through the water study and to understand the water rate structures and subsidy system. Mr. Wormath reported that Raftelis Financial Consulting would provide a narrative that included the study findings and recommended scenarios. He added that the Water department staff would also put together some additional scenarios for the Council's consideration. XI. ADJOURNMENT Upon motion by Council Member Escobedo and seconded by Council Member McGorray, unanimous approval to adjourn was given. The time was 6:38 p.m. CERTIFICATION I hereby certify that the foregoing are the true and correct minutes of the Marana Town Council Study Session held on January 15, 2002. I further certify that a quorum was present. '~]~'ocelyn~. Entz, T o~n(~ "' /' - Council Mect/n0 Attendees Name -A' ~ .,.. . , . ~-- Address