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HomeMy Public PortalAbout2009_tcmin0728 COUNCIL MEETING July 28, 2009 Council Chambers, 25 West Market Street, 7:30 p.m. Mayor Umstattd presiding. Council Members Present: Thomas S. Dunn, II, Katie Sheldon Hammier, David Butler, Marty Martinez, Kenneth "Ken" Reid, Kevin Wright and Mayor Kristen Umstattd. Council Members Absent: Vice Mayor Hammier arrived at 7:35 p.m. Staff Present: Town Manager John Wells, Town Attorney Jeanette Irby, Director of Public Works Tom Mason, Director of Planning and Zoning Susan Berry Hill, Director of Finance Norm Butts and Clerk of Council Lee Ann Green AGENDA 1. Call to Order ITEMS 2. Salute to the Flag Mayor Umstattd 3. Invocation was lead by Council Member Wright 4. Roll Call showing Vice Mayor Hammier arriving at 7:35 p.m. 5. Minutes a. Work Session Minutes of July 13, 2009 On a motion by Council Member Butler, seconded by Council Member Reid, the minutes were passed 6-0-1 (Hammier absent). b. Regular Session Minutes of June 14, 2009 On a motion by Council Member Reid, seconded by Council Member Butler, the minutes were passed 6-0-1 (Hammier absent). 6. Adopting the Meeting Agenda (Amendments and Deletions) Council Member Wright presented a motion to adopt the Meeting Agenda. The motion was seconded by Council Member Martinez. Council Member Reid made a motion for an amendment to defer Item 12a until the first meeting in August. The motion to amend was seconded by Council Member Butler. The motion to amend passed by the following vote: Aye: Butler, Dunn, Hammier, and Reid Nay: Martinez, Wright, and Mayor Umstattd Vote: 4-3 The motion to adopt the meeting agenda with the amendment to defer Item 12a was approved by the following vote: Aye: Butler, Dunn, Hammier, and Reid Nay: Martinez, Wright, and Mayor Umstattd Vote: 4-3 Town Council Meeting of July 28. 2009 Page 2 7. Presentations a. Certificates of Recognition - H-2 Committee On a motion by Council Member Reid, seconded by Council Member Martinez, Certificates of Recognition were presented to the members of the H- 2 Committee for their work. The certificates were approved by a vote of 7-0. Doris Kidder Ed Fleming Scott Gustavson Chance Harrison Mary Harper Teresa Minchew Tom O'Neill Jim Sisley 8. PETITIONERS The Petitioners section was opened at 7:37 p.m. There were no petitioners present. The Petitioners section was closed at 7: 38 p.m. 9. ADOPTION OF THE CONSENT AGENDA On a motion by Vice Mayor Hammier, seconded by Council Member Dunn, the followi ng consent agenda was proposed: a. Making an Appropriation from a Donation to the R.O.C.K. Program RESOLUTION 2009-87 Approving a Supplemental Appropriation of $3,795 to the FY2010 Budget Resulting from a Donation to the Community Outreach Program from American Management of Virginia (Heritage Square Homeowner's Association) b. Makino an Appropriation from a Donation to the R.O.C.K. Program RESOLUTION 2009-088 Approving a Supplemental Appropriation of $1,000 to the FY2010 Budget Resulting from a Donation to the Community Outreach Program from Ms. Sandy Delhez The Consent Agenda was approved by the following vote: Aye: Butler, Dunn, Hammier, Martinez, Reid, Wright and Mayor Umstattd Nay: None Vote: 7-0 10. PUBLIC HEARINGS a. Utility Rate Input Session The session was opened at 7:40 p.m. Mr. Wells presented a PowerPoint to Council. He stated he will be reviewing eight specific areas including service area, customer counts, customer growth, system capacity, system costs, recommended methodology for establishing rates, and examples of typical utility bills for that methodology. He stated he would also be reviewing some changes in the ordinance that will be part of the rate setting process scheduled to be adopted at the next meeting. Town Council Meeting of July 28. 2009 Page 3 He stated the utility service area encompasses the Town boundaries as well as some areas outside the boundaries within the Urban Growth Area. He noted a few sections of the O'Connor property on the north end of town and the Upper Sycolin Sewershed are not included in the service area. Presently, he identified 14,024 water customers, and 14,944 sewer customers. He stated the system has grown from 750 water service customers and slightly less using wastewater services in 2005 and the growth has been similar in both in and out of town percentages. He noted the ratio of in town to out of town customers is approximately 80/20. He displayed slides showing capacity and usage. He noted it may appear there is extra capacity, but projected usage over the next five years shows the system at capacity. He stated some projects have already been approved, but have not begun to use the system. He discussed expenditures in the fund for actual debt service and capital projects. He noted the estimated expenditures in the FY2010 operational budget are actually less than the amount spent in 2006 and added that staffing has been decreased from 88 positions in 2006 to 81 positions in 2010. He stated the results of the management audit requested by Council are due back in December. Mr. Wells stated the big challenge for the rate consultants has been to meet the requirements of financial bonds and the requirements of the court order. He stated the result of this effort is the consultant's recommendation of the utilization of the cash method to establish the in town rates and using the utility method to establish the out of town rates. He highlighted the modified court order method which includes the revenue requirements of the system, meets the reserve requirements of the bonding, and meets the requirements of the court order. He described the rates recommended by the consultant. He highlighted the current in town rates would increase over a six year period by a decreasing percentage of 7%, 6%, 5%, 4%, 3% and 3%. He stated the out of town differential is based upon the utility rate method is 33%. He stated the out of town consumption rate would decrease by 29%, but over the six years, the increases would track the in town rate increases. He stated the sewer rate analysis is similar, but not exact. He noted the declining sewer increases would be 7%, 7%, 6%, 5%, 4% and 3%. He stated out of town consumption rates are based on the utility rate method which establishes a differential of 53% resulting in the decrease in out of town consumption rates of 8.1 % and then a trending increase tracking equally to in town rate increases. He stated one of the challenges has been to meet the bond requirements and the coverage test for percent of revenue above debt service. He stated that requirement is 125% noting it needs to be met every year, not on average. He discussed the use of the utility needs method to establish the differential between in town and out of town rates. He stated they tried to apply the same methodology to both sets of customers. He discussed typical bills including fixed charges and consumption charges and noted the typical in town water bill would go from $45.18 to $48.84 a quarter. Similarly, he noted the typical in town sewer charge goes from $58.26 to $62.72 a quarter. He Town Council Meeting of July 28. 2009 Page 4 stated a typical out of town bill would decrease the first year from $84.18 to $62.52 because of the court ordered adjustment. Sewer would drop from $110.22 to $92. He displayed typical use costs for several levels of utility usage. Ms. Irby stated there are some changes to the rate ordinance that will need to be made to reflect the current rate methodology and some policy positions that have caused the need for the Town Code to be updated to meet practice. She stated some clarification of definitions and collections are also included. She went over some of the changes to the ordinance that are reflected in the draft ordinance. Mr. Wells stated any appropriate fiscal policy changes that will need to be made as a result of the rate changes will be brought to Council at the August 10-11 meetings. Council Member Dunn stated this is a lot to take in. He questioned whether there is excess capacity in the system. Mr. Wells clarified some of that capacity is set aside for developments that have been approved, but are not yet on line. He stated because of the amount of potential development and the amount of time it takes to build additional capacity, there are several projects within the service area that could take the town above capacity. There was discussion over utilities staff reductions. Mr. Wells noted that over the past several years, at Council's direction, staff has sought ways to reduce costs and maintain efficient operations. He stated he did not feel that Council had mandated any particular way in which to operate, other than to operate the system within the federal and state guidelines. Council Member Dunn stated it is difficult for him to look at just one side of the equation by only looking at revenue increases through taxing or charging higher rates. Mr. Wells stated the results of the management audit directed by Council to find ways to cut expenses will be ready in December. Vice Mayor Hammier clarified the court order has directed the timing of the possible change in rates. She stated this is a case of the judicial and legislative branches of government being at odds. She stated the questions from Council Member Dunn are relevant to overall costs, but will be readdressed in December when the audit is received. She noted the real costs of the utility system have gone down over the past several years due to several factors including changes in management style which has "right-sized" the staffing and capital decisions. She stated there was guidance in the court order by Judge Horne to follow the utility rate method, which the consultants used to come up with the recommended rates which showed a clear methodology. She added the recommended changes amount to about an $0.08 per day increase for her in-town family's water usage. She stated she is looking forward to hearing from the public. Town Council Meeting of July 28. 2009 Page 5 Council Member Martinez stated he believes to find efficiencies in government, you have to provide the quality of service the taxpayers deserve. He stated he feels town staff is providing that quality. He stated he is unhappy with the short period of time allotted by the court order for this decision. Council Member Wright questioned the high usage fee. It was clarified that the high usage fee is applied to all water consumed, not just the amount that qualifies as high usage and this is not a change from the previous practice. There was discussion as to the high use surcharge and how to take into consideration part-time residents who may only have water usage some months out of the year. Council Member Butler stated his recollection is the billing system is able to capture those instances and not use the billing periods when no water is used as a low usage level. Ms. Irby noted using "lowest quarter" as opposed to "winter quarter" to figure the conservation surcharge seemed to be the most fair and equitable way to calculate over use. She stated it may need to be looked at in the future. Council Member Wright clarified the rate model assumptions would not need to be changed if there was no change to the methodology for calculating high usage. Council Member Butler noted there are a lot of idiosyncrasies in the system that will have to be adjusted over time. He stated he is looking forward to hearing from the public. Council Member Reid stated he is looking forward to the public's comments and questions. He welcomed Steve Cloninger and his son, Kevin. He stated Kevin is working on a merit badge and is using the utility rates debate as a subject. He asked for clarification that the in town increase will be 27% for water over the five fiscal years and 30% for sewer. He noted in 2005, the water rates went up by 21 % and 35% for sewer for in town users. He stated he is concerned they are not having a discussion about expenses and new customers. He stated he cannot support the recommended rate changes unless a discussion is held on expenses. Vice Mayor Hammier stated she would like to engage in a revenue/cost discussion; however, the town is obligated to make a decision at the first meeting in August. Council Member Reid stated Council could at least give some direction to staff regarding expenses. Council Member Wright added directing staff to hire a consultant for the management audit is directing staff. Sheryl Stevens, Draper Aden Consultants, displayed a chart showing combined water and sewer rates for nearby utilities. She stated the existing Town Council Meetino of July 28. 2009 Page 6 rates and proposed rates compare quite favorably to many other utilities and are in fact, much lower than those charged by many other utilities. Vice Mayor Hammier questioned surcharges for out of town users. She questioned how many other jurisdictions use the utility rate method. Ms. Stevens stated other communities who have in and out of town users with a differential, were surveyed. Seventy-four survey responses showed a differential varying from 3% to 150% for water and between 4% to 250% for sewer. She stated they are aware of some utilities that use the utility rate method to determine prices for wholesale water users or purchasers outside their jurisdictions, not residential customers. Council Member Butler stated he did a weighted average per population and it turned out to be almost exactly a 50% surcharge as the median. Council Member Reid stated the suburban areas have lower rates than rural areas. He stated he would like to see an "apples to apples" comparison with other similarly sized jurisdictions. Mayor Umstattd stated the Council does not have a straight utility method proposal before it. She noted using the straight utility rate method would result in a surcharge of 96% with a maximum of as much as 250%. She stated she does not think the goal of trying to run the system to the benefit of the owners (taxpayers) is being accomplished by using a modified method. Tom Cox, Draper Aden Consultants, stated his direction was to follow the court ordered method to the best of their ability. He stated they certainly could have employed methods using utility rate variations to come up with higher differentials, but they did not feel that was in keeping with Judge Horne's directive. He displayed the numbers run through various methods. He stated they also looked at a modified rate of return/differential method. He stated this is a common technique used by American Water Works Association Manual of Practice 1 as well as the Water Environment Federation Manual of Practice 27. He stated the modified Montana method stems from a court case in Billings, Montana. He stated this method does not deduct for developer contributions because they are assets in the system. He noted the modified CIAC method, which refers to Contributions in Aid of Construction, generally refers to deductions for availability fees and developer contributions. He stated each method results in increasing differentials. Mayor Umstattd questioned what the loss of revenue will be with the modified court ordered method and asked that information be provided before the public hearing in August. She questioned how much of the increase in the in town rates is due to the decrease in the out of town rates. Council Member Wright clarified the utility rate calculation method is a published method of calculating rates. He questioned which method is the most popular. Mr. Cox stated the Modified Montana method only came into being as a result of arbitration over a rate case. He stated some of the methods are Town Council Meetino of July 28. 2009 Page 7 simply a recognition that there are higher owner's risks for the owners of the system and some rates do not take that into consideration. He stated rate setting is contentious and no single way is right or wrong in any particular case. Council Member Wright clarified that the basis was calculated by the cash needs method and married to the utility rate method. Council Member Butler questioned whether the modified court ordered method displayed has an actual name in rate setting literature. Mr. Cox stated they originally called it the full CIAC method. He stated both contributions in aid of construction were given full deduction. He stated the authors of the manuals do not always assign names to the methods. Council Member Dunn questioned whether any analysis of cost cutting was done. Mr. Cox stated the there were two criteria that limited them in coming up with proposed rates - debt covenants and operating reserve. He stated they did have some changes in capital cost that were taken into consideration. Vice Mayor Hammier questioned whether any of the methods shown use the utility rate method to come up with the differential. Mr. Cox confirmed that all methods use the utility rate method to determine the differential. Brian Shifflett. Derry Township, Pennsylvania, stated he is a property owner at 18578 Burlong Court and a plaintiff in the Giordano vs. Town of Leesburg water and sewer rate case. He stated the rate design changes have not been vetted. He stated the proposed rate changes are not really the true rate changes. He stated the Council chose to leave out the services of the Utility Rate Advisory Committee. He stated Draper Aden did a very good job of putting the package together. He stated the two rate design changes in the proposal - the increase of the high water use surcharge from 36% to 45% creates more effective billing units. He stated the change that concerns him is billing sewer on 100% of water usage rather than winter quarter usage. He stated people will come in to yell and scream about this. He stated by charging on 100% of the water usage for sewer, you are charging people for a service they are not getting. He stated other jurisdictions who figure their sewer charges this way allow residents to install deduct or irrigation meters. He stated this is a benefit for the utility and the customer. Stewart Curlev, President of River Creek Owner's Association and a plaintiff in the water rate suit. He stated he is also a member of Loudoun Citizens for Fair Water Rates organization. He stated he has had a tough time following these numbers. He questioned how big the revenue hole is because you cannot look at methodologies unless you know how much of a shortfall there is. He questioned why the Town has not been more proactive. He stated the seasonal surcharge increases for the amount they use over the norml but it should not be figured from gallon one. He stated the two surcharges to the out of town customers is not proportional to the cost to the Town Council Meeting of July 28. 2009 Page 8 system. He stated if there is excess capacity, why is the Town looking at conservation. He stated they should sell as much water as possible. Melanie Fondaco, 18896 Goose Bluff Court, gave some examples of different billing scenarios to show the impact of the rate increases and the rate design changes. She displayed billing examples for several types of users. She stated the proposed changes unfairly put the responsibility to raising money on the out of town users. John Caron stated they are trying to demonstrate the increases caused by the rate redesign, depending on water usage, can have a significant impact. He stated raising the sewer rates overall would be a logical and predictable way to gain the necessary revenue. He expressed concern the Council was unable to use input from the URAC. He stated the consultant has done a good job of putting together the analysis. Joseph Wright, 43063 Candlewick Square, stated he is heartened by what he saw of the presentation. He stated this is a problem of mismanagement. He stated it is obvious to him that management of the utility system has not improved significantly. He stated someone else may be better suited to manage the system. He suggested selling the system to Loudoun Water. He stated he is disheartened by Judge Horne not allowing reimbursement of the overcharges paid over the years due to mismanagement. The public input session was closed at 9:25 p.m. Ms. Irby asked for guidance on the advertisement for the public hearing to be held on August 11. Vice Mayor Hammier pointed out the court ordered deadline is driving how in depth investigation into various scenarios can be. She stated she would have supported having the URAC give input; however, it will not be possible because of the court order. Ms. Irby noted the Town fought vigorously for additional time to study the rates, but the plaintiffs in the utility rate case adamantly refused to give any extra time. Council Member Butler stated he supports going forward with the current advertisement. He stated Council has been put in a bad position. He stated the new method for charging for sewer is not ideal, but a choice has to be made. He stated it is not realistic to assume that the rates would go down by selling the system to Loudoun Water. He stated the expenses would be the same and in fact the rates Loudoun Water gets when purchasing water from Fairfax County may change over the next few years causing an increase in their rates as well. He stated staff may have not been totally 100% effective in the management of the system, but the true mismanagement came from Councils in the past seeking to keep the rates flat for at least 15 years. He stated the decision to keep the rates artificially low was made on the dais and caused the fund balance to drop lower than what was needed to expand the plant which necessitated the borrowing of more money to expand the plant to serve the additional customers. He stated the $5 million in debt service is Town Council Meeting of Julv 28. 2009 Page 9 20% of the utility budget. He acknowledged this isn't pretty. He stated over the next five years some rate changes will have to be phased in to fix this. Council Member Wright stated he does not see another option other than advertising the recommended report. He questioned whether this would be the beginning of a process that would allow the Council pay closer attention to rates and be able to adjust rates as further information becomes available. Mr. Wells stated one of the things going forward would be tracking the development activity in the Town against projections so any time things went off track, it could be identified quickly and adjusted for. He stated this type of management information system needs to be developed as part of the fiscal policy. He stated those changes will be tracked on a regular basis and adjustments can be made as part of the budget process. Council Member Wright thanked the public for coming out to speak. He stated he appreciated them taking the time to do the analysis on how changes to the rate structure will impact all users. Vice Mayor Hammier stated she appreciates Council Member Butler's time and analysis. She stated it is reasonable to think that an annual rate increase corresponding to the inflation rate may need to be part of the fiscal policy. She stated it works out to about an increase of $0.08 per day, which is a small amount for a tremendous service. Council Member Dunn stated he is not a rich man. He stated he has experienced some wealth, but these days are tough. He stated working multiple jobs and cutting back on things that were just considered average has him not saying this is just a little increase. He stated for his family, this is a big increase. He stated in essencel we are basing our decision on what we will be charging for rates. He stated it is unfortunate that we had to get to this point of just increasing rates with no consideration of alternative funding sources or cost cutting. He stated Council takes direction from Mr. Wells and Mr. Wells takes direction from the Council. He asked who is chasing who. He stated he will not vote for a rate increase. He questioned what would happen if Council does not vote for the rates. Mr. Wells stated he could answer that in closed session. He stated he could not give any direction as to what to advertise. He stated this meeting was advertised as public input, but we will not go forward with their suggestions. Mayor Umstattd stated the consensus is to go forward with the proposed advertisement. Council Member Martinez left the meeting at 9:55 p.m. 11. ORDINANCES a. None. 12. RESOLUTIONS a. None Town Council Meeting of July 28. 2009 Page 10 13. OLD BUSINESS a. Capital Program Bond Financino Mr. Butts stated the updated information requested was provided to Council showing some alternate debt service schedules. He noted in order to move forward, he would need direction to advertise the public hearing. Council Member Wright made the following motion MOTION Directing Staff to Advertise all Legal Notices as Appropriate for Issuance of 2009 General Obligation Bonds The motion was seconded by Council Member Martinez. Council Member Wright stated in reviewing the report reanalyzing the borrowing plan to sync up with the Town's borrowing needs eliminates some of the concerns with the debt service exceeding the pro forma expectations in the budget. Mr. Butts confirmed this. There was discussion on interest rates. Mr. Wells noted it is less a matter of mechanism, but of timing. He stated it is to the Town's advantage to borrow under current conditions. Mr. Butts stated they are hoping to get at or about 5%; however, there is no telling what the rate will be, but it is expected that interest rates will increase due to federal government borrowing. Council Member Dunn questioned how this would impact the budget going forward in meeting the repayment for this advanced borrowing. Mr. Butts stated any increase in debt service will have an impact on the budget. Mayor Umstattd stated she would like to make a motion to amend eliminating the Downtown Improvements! Phase II, and Phase I and reserve debt service payments on those for other needs that she feels are more pressing, such as police. The motion died for lack of a second. Council Member Wright clarified this is to move forward with advertising for the FY2010 bonded debt. The motion was approved by the following vote: Aye: Butler, Dunn, Hammier, Reid, Wright and Mayor Umstattd Nay: None Vote: 6-0-1 (Martinez absent) 14. NEW BUSINESS FOR ACTION None Town Council Meeting of July 28. 2009 Page 11 15. COUNCIL COMMENTS Council Member Reid disclosed a phone call from Steve Wolfson, ARC of Loudoun, talking about possible town funds for a playground. He stated he learned the Town has not been approved for the COPS grants. He stated he wants to have a discussion about milling and paving to help pay for additional police officers. He stated it might be prudent to defer some of the streets. He stated Larry Rosenstrauch spoke to the Economic Development Commission and stated Leesburg's economy is now bigger than Annapolis. He stated Loudoun County now has 900 prime federal contractors. He stated some property owners will be submitting an RFP for the George Mason Campus. He reported Ms. Edwards gave a report on prospects and businesses retained and gave several examples of how staff is working to retain businesses. Council Member Butler stated he appreciated the tone of the meeting tonight. He stated he volunteered for Acoustic on the Green, which was great. He stated people are estatic over the dog park. He stated he had the opportunity to visit Shoe's Cup and Cork and encouraged everyone to visit the coffee shop. Council Member Wrioht stated he drove around the Town this weekend reviewing the street included in the resurfacing program and compared his scoring to the PCI. He stated the Commission on Public Art rescheduled their meeting to last Monday due to lack of a quorum for their regularly scheduled meeting. He noted there are still two openings on the Commission. He requested a press release to generate interest in the vacancies. He stated despite the rain over the weekend, Acoustic on the Green still drew about 100 people to listen to the concert in the basement. He echoed Council Member Butler in that he appreciated the tone of the rate setting discussion so far in what looks to be a stressful process. Vice Mayor Hammier disclosed conversations with Mike Banzhaf on July 16 and July 23. She stated she attended a dinner with Todd stottlemeyer of INOVA and Dr. Dietrich Stephan on July 16 dealing with biotech. She noted she paid for her own dinner. She welcomed 1757 Real Estate Company to Leesburg for which she performed the ribbon cutting. She stated Senator Herring and School Board Member Marshall and his wife also attended. She stated a ribbon cutting is the wonderful culmination of hard work and a dream come true. She stated her dog had finally recovered enough from his surgery to enjoy the dog parkl which was a wonderful social place for both she and her dog. She stated Crossroads of Leesburg voted at their annual meeting to dissolve as an organization as part of the momentum towards consolidation of a downtown management structure. She applauded Council and staff on the Exeter tunnel closure. She stated unfortunately this also symbolizes things in the communitYI like graffiti, that everyone wishes did not take place. She reminded everyone that August 4 is National Night Out with the Leesburg Police Department. She stated she is happy to report her 10-year-old finally got his hair cut at L1oyds. Council Member Dunn disclosed a conversation with Steve at ARC on funding for the swingset. He stated it is important to discuss how we conduct ourselves at the meetings. He stated members should allow others to speak without interruption regardless of whether they agree with what is being said. He stated he is encouraged that the Mayor would look at resetting priorities in the interest of getting additional police. He stated Council only wanted to fund two additional police in the budget, whereas he had proposed nine additional officers. He stated this is why he did not vote for the budget because he felt that priorities were not being set properly. He noted Council remained silent when Mr. Wells came up with funds for two additional Town Council Meetino of July 28. 2009 Page 12 officers out of the approved budget. He stated this shows him that we can accept changes to the budget. 16. MAYOR1S COMMENTS Mayor Umstattd stated the National Guard will be visiting some of the retirement homes over the weekend as part of their community service. She stated Leesburg is very lucky to have this great bunch of men and women based in Leesburg. 17. MANAGER'S COMMENTS Mr. Wells confirmed Council Member Reid's news that the Town was not the recipient of the COPS grant for additional officers. He stated the request was not denied, but is in a pending status. He stated staff will follow up and find out what this status means. He stated National Night Out is August 4 and will be held at two locations: 6 p.m. at Crossroads Baptist Church on Edwards Ferry Road and then at 8 p.m. at the Greenway Farms pool. He announced citizens can now view live web streams of the Planning Commission, Board of Architectural Review and Board of Zoning Appeals meetings on the website. He stated those webcasts will be archived as well. He stated there has been an initiative to create a body of information that people can access similar to cable type programs. He stated there are two tree commission videos now archived on the website on the value of trees and how to prune a tree. 18. CLOSED SESSION None 19. ADJOURNMENT On a motion by Council Member Wright, seconded by Council Member Butler, the meeting was adjourned at 10:20 p.m. ~~t~ Town of Leesburg