Loading...
HomeMy WebLinkAbout01/27/2009 Special Council Meeting Minutesf .. ~~~~ '~ ~~~ SPECIAL COUNCIL MEETING MINUTES 11555 W. Civic Center Drive, Marana, Arizona 85653 Council Chambers, January 27, 2009, at or after 6:00 PM Ed Honea, Mayor Herb Kai, Vice Mayor Russell Clanagan, Council Member Patti Comerford, Council Member Carol McGorray, Council Member Jon Post, Council Member Roxanne Ziegler, Council Member SPECIAL MEETING CALL TO ORDER AND ROLL CALL Vice Mayor Kai and Council Members Clanagan and Post were excused. Council Member Post arrived on the dais at 6:02 p.m. A quorum was present. PLEDGE OF ALLEGIANCE/INVOCATION/MOMENT OF SILENCE APPROVAL OF AGENDA Motion by Council Member McGorray, second by Council Member Ziegler. Motion passed CALL TO THE PUBLIC David Morales commented on the number of sitting Council members. He read from a previous council agenda (January 20, 2009) regarding consent language. His concern was about moving items from consent to action and vice versa and whether this would cause the Council to become sloppy. PRESENTATIONS P 1: Presentation: Relating to Utilities Department; Water rate increase presentation Council Member Post inquired as to how this meeting was noticed. He felt that because of the discussion, more members of the public should have been in attendance. Mr. Davidson responded that the meeting had been noticed in the usual manner. Barbara Johnson presented, starting with a historical perspective from the time the Town began providing water in 1990 through the current time. Next she discussed why transition to aself-sufficient water utility enterprise is necessary, focusing on best practices and financial transparency. Ms. Johnson then discussed costs which are part of having aself-sufficient water utility enterprise, including debt payment and maintaining a debt coverage ratio. Other components. are master planning, CIP planning and the annual evaluation of the utility's financial health. Next was the importance of debt coverage, referring to Standard and Poor's criteria to achieve an adequate rating. Rating firms also look at the town's economic situation, financial data, rate setting data, operational characteristics, who's running the business -management, legal and policy teams. Dorothy O'Brien then discussed the current financial status., starting with current revenues and anticipated expenditures. She then talked about assumptions and potential variables included within the rate model as to demand over the next five years, CIP, finalization of the dissolution of CMID IGA, impact of foreclosures, economic fluctuations, and partnerships as well as unanticipated costs. Ms. O'Brien then presented four different options: the recommended adjustment; no rate adjustment, delay a rate adjustment to January 2010, and no acquisition of additional accounts. Ms. O'Brien is recommending Option A -adoption of an increase of 8% in February to take effect in March 2009 and then another 4% increase in January 2010. This option gets the utility where it needs to be. Ms. O'Brien then referred to a document entitled Water Infrastructure Finance Authority of Arizona, noting that it was common for increases in rates. She presented a comparison of surrounding providers. Economies of scale show that lesser populations have a tendency to have higher rates than do larger communities. Average water use for Marana residents is about 7,000 gallons. The base rate for Marana includes 1,000 gallons which is not the case with other utilities. Ms. O'Brien then presented the proposed rate plan. Commercial rates will be a little higher. She then discussed what will happen without a rate increase and the effect of delaying a rate increase until January 2010. Most likely, Council will have to come back in January of 2010 to implement a 12.29% rate increase. Without acquisition now, it will require a 24% increase in 2010 and we'll still be in the red. Dan Jackson and Dorothy O'Brien responded to a question from Mayor Honea about this. Mr. Jackson noted that the chart shows you will need additional rate adjustments to make up the difference. The more customers you have the more you can spread the costs and then you need fewer adjustments. He further noted how the utility is supported by the general fund and is not entirely an enterprise fund. The proposal is to move the utility fund to something entirely self-sufficient so there is no additional burden on the taxpayers. The Mayor noted that if there is a 16% rate increase, Marana will have the highest water rates in southern Arizona The average water utility is raising its rate at least 5-6% per year. Marana's ratepayers have benefited from good management for a long time, but escalating economics are causing new pressures -inflation, cost increases and workers compensation. As a utility consultant, he knows that every utility in the state has raised, is in the process or is going to raise its rates. Brad DeSpain spoke regarding the necessity of providing water to customers and to get current with the water rates for the past 12 years. To put this on an enterprise system will require a 16% increase in addition to the 8% to put it on its feet. There has been no rate increase since 2006. Erik Montague spoke to the actual cost of doing business currently. He referred to the slide "What happens without a rate adjustment?" In 2009 even with a proposed no increase there's a required coverage margin of $180,000 - a general fund subsidy. Within the rate model it is anticipated in 2010 that the enterprise utility would be moving toward self-sufficiency. This speaks to the value of the subsidy. The value of that contribution to the general fund is over $200,000. Dorothy O'Brien then spoke about the base rates for the various scenarios. She also referred to a matrix of the benefits of Scenario A. If all assumptions are accurate, the cost of service will move at the same rate as revenues. Ms. O'Brien and Mr. Montague then continued to present the benefits of an enterprise fund and answered questions from the Council. Mr. Montague reiterated the burden on the general fund to continue without an enterprise utility and how an enterprise fund would free up legal capacity. From a management and budget position an enterprise system is a benefit to the town. Barbara Johnson then concluded the presentation with a summary of the WIFA Survey, what rate adjustments provide, providing for the required coverage margin for borrowing capacity, and the acquisition of new accounts which will result in economies of scale that benefit ratepayers. She then presented a rate adjustment communication plan which Deb Thalasitis and Rodney Campbell have been working on. Mr. Campbell presented the preliminary communication plan which includes key messages for the public depending on which scenarios the council chooses. There will be opportunities to put the message out to the community and inform ratepayers on how they can get more information. Paper media, HOA newsletters, and the town website are vehicles for this information. More effort will be put toward information booths at town events such as Founder's Day, Chamber meetings and other events where the information can be disseminated to large groups. Council Member Ziegler noted that as a liaison for the Utilities CAC a letter will be coming forward to support Option A. She expressed her support for the plan, noting that a rate increase is needed and she also alluded to the professional experience of the team who presented the information on a rate increase. Mayor Honea noted that communication fell short in getting the message out to the public for this meeting. He questioned what the water impact fees are compared to other jurisdictions. Ms. Johnson will get that to Council by January 28. Although he agreed that an enterprise system is necessary, he expressed concern about getting to the enterprise system in one step. Could this be done over time? He expressed his concern about adding another cost to citizens given the current economic climate. Ms. Johnson responded that staff will back whatever the Mayor and Council wants 100%. It would be good if we could phase it, but it is necessary to look at aging infrastructure, and as the economy and growth comes back where will we be positioned if phasing takes place. She noted that there are many variables that still need to be planned for that we don't know about yet. Council Member Post asked that everyone pay attention to rates. Adjusting rates all along may have prevented us from getting to this point -even it was one or two percent all along. Ms. Johnson noted that when the town was small it was different and it made good sense not to raise rates, but the visible growth has changed that and the town hasn't kept pace. Council Member Comerford commented with regard to an increase in March of an average bill of $2 per month and then for every year after that a little over $1. Ms. Johnson noted that the average user uses about 7200 gallons. In Council Member Comerford's opinion, a couple of dollars a month does seem a lot of sacrifice compared to what it will mean to them a few years down the road. Ms. Johnson stated that it will benefit them as well to have the utility functioning in this manner. Council Member McGorray what is the lifespan of a system? Ms. Johnson answered that a system can be 40 years old without a failure with proper maintenance. Bond counsel considers 25 years is about as long as they consider a lifecycle. Council Member Ziegler encouraged the decision to implement this increase; it's time to step up and take care of this. Not doing so is a disservice to the citizens. Again, she is supporting the conversion to a true enterprise fund. Mr. Davidson recognized and thanked the team for all the work they have done in putting the presentation together and managing the complexities of a water utility. There could be additional analysis for other options, but for all the issues currently, these analyses are the best at this time. He reiterated his understanding that this is the people's utility. The decisions of Council at the public hearing presumes moving to a self- sufficient system. He further talked about re-noticing the hearing from February 20 to February 24. This could be an item for next week's agenda. Council Member Post would like to look at lowering the commercial rate to see if that would attract businesses to Marana. Mr. DeSpain addressed that concept and stated that commercial through their fire requirements require 2.5 times the flow that most homes do, so the amount of flow justifies the additional cost. They (commercial) also use more water. Marana's commercial rates are considerably lower than the City of Tucson. Mr. DeSpain can provide the exact numbers. Mr. Davidson stated that other incentives can be explored for bringing economic development to the town that wouldn't impact the operations of the utility company. He referred to the strategic plan process to bring jobs to the community. Ms. Johnson noted that one of the benefits of this type of system is that it does enable us to be shovel-ready. Right now we're reactive and ask developers to develop as they come in. Council Member McGorray noted that having worked with the school district on their budget, once there is a determination on rates is made she would like to see a consistent rate of increase so that there isn't a shock. The school district has a certain rate schedule that they stay within and that helped people not to get upset. Council Member Comerford asked to discuss changing the date. Mr. Davidson suggested that this should come forward during the Future Agenda section of the agenda. ANNOUNCEMENTS/UPDATES PROCLAMATIONS MAYOR AND COUNCIL REPORTS: SUMMARY OF CURRENT EVENTS The Mayor commented that Council Member Clanagan went for hand surgery and they found some heart irregularities. Council Member Comerford reported on the girl injured last year near the high school attended her first college class this week. MANAGER'S REPORT: SUMMARY OF CURRENT EVENTS Mr. Davidson stated that the Council Executive Report for the last two weeks is being submitted with the packet. TOWN REPORTS GENERAL ORDER OF BUSINESS CONSENT AGENDA Motion by Council Member Post, seconded by Council Member McGorray. Motion passed C 1: Resolution No. 2009-09: Relating to Administration; authorizing emergency procurement for materials and services necessary to encase the Marana Utilities Department waterline within the Union Pacific Railroad right-of--way southwest of the 13900 block of Adonis Road; ratifying procedures and budgetary limitations for this emergency procurement; and declaring an emergency COUNCIL ACTION BOARDS, COMMISSIONS AND COMMITTEES ITEMS FOR DISCUSSION/POSSIBLE ACTION EXECUTIVE SESSIONS E 1: Executive Session pursuant to A.R.S. §38-431.03 (A)(3), Council may ask for discussion or consultation for legal advice with the Town Attorney concerning any matter listed on this agenda. FUTURE AGENDA ITEMS Mr. Mayor stated that with the concurrence of the Council, the matter for re-setting the water rates would be placed on next week's agenda. ADJOURNMENT Motion by Council Member McGorray, second by Council Member Posh Motion passed. CERTIFICATION I hereby certify that the foregoing are the true and correct minutes of the Marana Town Council meeting held on January 27, 2009. I further certify that a quorum w resent. ~®~~ ~~~! 4O~~S~~~urrn~~, !®,I~ celyn C. B nson Town Clerk .~ ,~, ,~ ~ ~~ °= ~: ~ s LI~~ ~~~