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Home My Public Portal About06-06-2005 Budget Work Session . . . Minutes June 6, 2005 Public Hearing and Budget WOIlIshop Page 1 of4 Minutes Approved:June13, 2005 173 Town of Hill~ - MINUTES HILLSBOROUGH TOWN BOARD June 6, 2005 7:30 PM, Town Barn gh ' The Hillsborough Town Board held a Budget Workshop on June 6, 2005 at 7:30 PM in the Hillsborough Town Barn. Present for the Budget Workshop were Mayor Joe Phelps and Commissioners Brian Lowen, L. Eric Hallman, Michael Gering, and Evelyn Lloyd. Absent from the Budget Workshop was Frances Dancy. Staff present were Town Manager Eric Peterson, Assistant Town ManagerlPublic Works Director Demetric Potts, Town Clerk Donna Armbrister, Finance Director Greg Siler, Management Intern Christina Riordan, and Town Engineer Kenny Keel. 7:35:56 PM 1. Mayor Joe Phelps called the meeting to order at 7:35 PM. 7:36: 11 PM 2. Town Manager Eric Peterson added a discussion regarding Fairview Park information he had received from Orange County as Item 7.A. 7:36:31 PM By consensus, Board approved agenda 7:37:27 PM 3. Town Manager Peterson introduced Jon Davis, Project Manager, and Nicholas Giaimo, Lead Consultant, with Raftelis Financial Consultants who proceeded to give a presentation on the Comprehensive Rate Design Study Preliminary Findings. A copy of their presentation is hereby incorporated by reference and made a part of these official Minutes as an Attachment. Mr. Davis stated that the Project Objectives are to evaluate alternative rate structures that may be more effective at addressing priority objectives and to provide forecasting and financial planning capabilities through development of a Financial Planning and Rate Setting Model. He noted the Rate Setting Objectives are to develop cost of service based rates that meet the Town's financing and pricing objectives, specifically including: revenue sufficiency, financial stability, equitable recovery of costs from different customer types, and mitigation of rate impacts. He described how rates are set as a five step process: Step 1 - Identify Financial and Pricing Objectives; Step 2 - Identify Revenue Requirements; Step 3 - Allocate Costs; Step 4 - Design Rate Structure; and Step 5 - Assess Effectiveness of Addressing Pricing Objectives. Mr. Davis outlined a comparison of three rate structure options for the Board to consider. Option 1 - Cost-of-Service based rates with a base and volume charge Option 2 - Volume rates with a 3,000 gal/month minimum charge Option 3 - Volume rate with a 2,500 gal/month minimum charge 1 . . . Minutes June 6, 2005 Public Hearing and Budget Workshop Page2of4 Minutes Approved:June 13, 2005 174' Each of the options includes the following assumptions: · The existing 1.95x outside city differential will be maintained · The minimum charge will be based on a fixed amount of use times the calculated volume charge · The FY 2006 Operating Budget and Capital Improvement Plan will be adopted The Raftelis Financial Consultants reviewed rate scenarios for each of the aforementioned options and noted that the next steps for the Board to take would be to: · Determine a preferred rate structure · Finalize the FY 2006 Budget · Finalize the Financial Planning and Rate Model around the preferred rate structure · Finalize water and sewer rate recommendations for FY 2006 · Adopt new rates 8:10:13 PM 4. The Raftelis' consultants fielded questions from the Water and Sewer Advisory Committee, the Town Board, and a citizen. 8:41 :55 PM 5. There were no other public comments. 8:42:]2 PM 6. James Watts, Chair of the Water/Sewer Advisory Committee, presented the Board with their written recommendation that read: "We, the members of the Hil/sborough Water and Sewer Advisory Committee, encourage the Town Board of Commissioners to consider water and sewer as separate funds, in accord with the Town Engineer's recommendation, and to set separate rates for each based on long-term capital needs, rather than short-term revenue projections. We further recommend that the Town of Hillsborough maintain for each fund a reserve level to protect against unforeseen capital needs that may require immediate attention. Lastly, we recommend that sinking funds (e.g. Water Capital Improvements Fund and Wastewater Capital Improvements Fund) be established and maintained exclusively to pay for periodic major capital improvements to the system. " A copy of their written recommendation is hereby incorporated by reference and made a part of these official Minutes as an Attachment. 8:47:50 PM Mayor Joe Phelps suggested setting a date for decision on a Water/Sewer mte change. The Mayor also suggested that the Water/Sewer Advisory Committee 2 . . . Minutes June 6, 2005 Public Hearing and Budget Workshop Page 3 of4 Minutes Approved:June 13, 2005 17~ schedule additional meetings to prepare a recommendation on rate structure options to provide to the Town Board. James Watts stated that the information they have presented to the Town Board over the last several months adequately address their recommendations. 9:04:55 PM Town Manager Peterson stated that deciding between the different rate structure options is really a philosophical issue. 9:13:05 PM Commissioner Gering stated that the base charge scenarios are primarily based on equity and recovery of costs and is not a very compelling argument for him. 9:13:59 PM Commissioner Hallman agreed that he prefers the minimum charge approach. 9: 15: 12 PM Mayor Phelps called for a brief recess. 9:24:59 PM Mayor Phelps reconvened the Budget Workshop. 9:25:07 PM 7. Town Manager Peterson noted a proposed $450,000 deficit in the General Fund which includes a 3.9 cent tax increase. He stated that the proposed budget includes cutting the merit program by 50% and includes a $500 COLA. 9:29: 12 PM Commissioner Lowen stated he felt these increases were too low. 9:29:21 PM Town Manager Peterson stated that after the audit is complete, if the financial picture looks better, the Board can always do an additional COLA if they desire. 9:39:25 PM Mayor Phelps initiated discussion on Code Enforcement Officer Position. 9:40: 18 PM Manager Peterson reminded the Board that they had instructed staff in March to recruit for the Code Enforcement Officer position which is currently being done. 9:40:53 PM Peterson stated that he has proposed a full-time Fire Inspector position in the Budget. He also suggested hiring a couple of MP A students as temporary employees to bring the Code Enforcement up to date until such time the Town can hire the full-time Fire Inspector. 10:16:12 PM Manager Peterson stated that the Fire Department is asking for $533,000 plus $40,000 in depreciation expenses. 3 . . . Minutes June 6, 2005 Public Hearing and Budget Workshop Page 4 of4 Minutes Approved:June 13, 2005 17'6 After some discussion, and by consensus, the Board agreed to defer the following: 10:41 :28 PM Bullet Proof Glass 10:41:39 PM Sidewalks 10:41 :50 PM Library 10:41 :53 PM Park Design amend to $15,000 this year 10:49:47 PM Cut $40,000 from Code Enforcement for temporary students 10:56:39 PM Manager Peterson suggested agreeing to these changes and possibly increase the amount of tax increase. He stated he will work up the figures with a 5.5 cent tax increase and get the information to the Board within the next couple of days for their consideration. 11: 11: 15 PM ADDED ITEM 7.A Fairview Park Manager Peterson reported that Orange County has informed him that they have not yet started work with the Fairview Park Planning Committee. Gwen Harvey, Assistant County Manager, stated that the Memorandum of Understanding states that there will be six residents from the neighborhood who will serve on the Master Planning Committee. There are currently only two residents who have been approved by the County Commissioners. They need four more before they can go forward, or they need to amend the Memorandum of Understanding. The County Commissioners meet next on June 23rd and the Town needs to have four applicants for them to consider serving on that Committee at that meeting since they will not be back in session until August, which means the residents would not be appointed until September. 8. No other items were discussed. 11: 17:29 PM 9. Upon a motion by Commissioner Lowen, seconded by Commissioner Lloyd, the Board moved to Adjourn at 11: 17 PM by a vote of 4-0. The motion was declared passed. 4 . . . 177 Town of Hill~ Hillsborough Water and Sewer Advisory Committee May 5, 2005 We, the members of the Hillsborough Water and Sewer Advisory Committee request that you, the Town Board of Commissioners, allocate funds in the 2006 Budget to conduct a water rate study that accurately determines the cost of delivering water and sewer services to both the in town and out of town customers. This work has been recommended in every report that the WSAC has delivered to the Town Board of Commissioners since the creation of the WSAC. The WSAC congratulated the Town Board of Commissioners for addressing the perceived inequities of the "double rate" policy when you decided to reduce the rate multiplier charged to out of town customers to 195% of the in town rates. We applauded when the Board indicated that it would continue to reduce the rate multiplier in future rate deliberations. Now, we ask the Board of Commissioners to turn intent into action by funding a rate study to determine the correct rate multiplier for out of town customers. I We, the WSAC, remain focused on working with you and the Water/Sewer utility staff to ensure the continued success ofthe Water/Sewer utility now and in the challenging times to come. We respectfully submit this request and await your decision. qc::;;~~ Chris Cole Dorothy Johnson Jim Singleton Dan Barker Katherine Sanders Paul Kimple I . I . " . . I . . I . . I I I I . I I I I I I .. I I 1.7,8' . Comprehensive Rate Desi n Stud Presentation of Preliminary Findings 1'0lRI ~. ,(If Hin. fM~.~<gb _, P.Wi l' I' f ,~ '-.;;t June 6, 2005 RFC RAFTEUS FINANCIAl CONSULTANTS, INC. . . . . . . . . I I , I I I I I I . I I I I 1 I .. 1 .1 179. Presentation Agenda ' o Introduction o Project Objectives o Rate Setting Process o Rate Options o Preliminary Rates and Customer Impacts D Next Steps . . . . . . . . . . Introduction ....... . Page 1 I I. I I I I I I I -- I I I I I I Ie I I 180 o National leaders in utility finance and pricing DOver 500 successful projects for municipal utilities o Recognized specialists in consensus building o Leadership role in A WW A~ WEF and other industry organizations o Authors of authoritative pricing texts and national rate survey RFC Project Team Jon Davis. Project Manager Nicholas Giaimo. Lead Consultant Lex Warmath - Technical Advisor George Raflelis. Technical Advisor . . Page 2 I I. I I I I I I I -- I I I I I I Ie I I 181 . . . . Project Objectives .. .. Project Objectives o Evaluate alternative rate structures that may be more effective at addressing priority objectives o Provide forecasting and financial planning capabilities through development of a Financial Planning and Rate Setting Model . . . Page 3 I I. I I I I I I I -- I I I I I I Ie I I l.R2 Rate Setting Objectives Develop cost of service based rates that meet the Town's financing and pricing objectives, specifically including: o Revenue sufficiency o Financial Stability o Equitable recovery of costs from different customer types o Mitigation of rate impacts . . . . . . . . Rate Setting Process . . . Page 4 I I. I I I I I I I -- I I I I I I Ie I I 183 How Rates Are Set Step 5 - Assess Effectiveness of Addressing Pricing Objectives / .Step 4 -Design-Rate Structure Step 3 - Allocate Costs Step 2 - Identify Revenue Requirements Step 1 - Identify Financial and Pricing Objectives . . . . . . . . . Rate Options . .. .. Page 5 I I. I I I I I I I -- I I I I I I Ie I I 184' Rate Options At Staff direction, we have prepared a comparison of three rate structure options: o Option 1 - Cost-of-Service based rates with a base and volume charge o Option 2 - Volume rates with a 3~OOO gal/month minimum charge o Option 3 - Volume rates with a 2~500 gallmo minimum charge . Rate Options - Pros & Cons Page 6 I I. I I I I I I I -- I I I I I I Ie I I 185 Assumptions Each option includes the following assumptions: o The existing 1.95x outside city differential will be maintained o The minimum charge will be based on a fixed amount of use times the calculated volume charge o The FY 2006 Operating budget and Capital Improvement Plan will be adopted . . . . . . . Preliminary Rates & Impacts . ... Page 7 I I .- I I I I I I -- I I I I I I Ie I I 186 Preliminary FY 2006 Rates (Inside City Customers) Water Basel Water Sewer Basel Sewer Minimum* Volume Minimum* Volume Current* $19.35 $6.45 $17.43 $5.81 Option 1 $3.86 $6.64 $3.86 $7.04 Option 2* $17.85 $5.95 $19.23 $6.41 Option 3* $15.95 $6.38 $16.98 $6.79 . Preliminary FY 2006 Rates (Outside City Customers) Water Basel Water Sewer Basel Sewer Minimum* Volume Minimum* Volume Current* $37.74 $12.58 $33.99 $11.33 Option 1 $7.53 $12.95 $7.53 $13.73 Option 2* $34.83 $11.61 $37.50 $12.50 Option 3* $37.35 $12.45 $33.13 $13.25 Page 8 I I I- I I I I I I -- I I I I I I Ie I I .1 187 Bill Impacts - Average User (5,000 gal/month Inside City Customer) : Bill Amount Percent Change Current $61.30 Option 1 $76.12 24.2% Option 2 $61.80 0.8% Option 3 $65.85 7.4% . . Bill Impacts - Low Volume User (2,000 gal/month Inside City Customer) Bill Amount Percent Change Current $36.78 Option 1 $35.08 -4.6% Option 2 $37.08 0.8% Option 3 $32.93 -10.5% . . . Page 9 I I. I I I I I I I -- I I I I I I Ie I I 188' Bill Impacts - High Volume User (8,000 gal/month Inside City Customer) Bill Amount Percent Change Current $98.08 Option 1 $117.16 19.5% Option 2 $98.88 0.8% Option 3 $105.36 7.4% . . . . . . . . Next Steps . . . . Page 10 I I. I I I I I I I -- I I I I I I Ie I I 189 Rate Options - Pros & Cons o . . Next Steps o Determine a preferred rate structure o Finalize the FY 2006 Budget o Finalize the Financial Planning and Rate Model around the preferred rate structure o Finalize water and sewer rate recommendations for FY 2006 o Adopt new rates . Page 11