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HomeMy Public PortalAboutFY15 Water and Sewer Rates_201406111033066285 TOWN OF 1630 WATERTOWN • Office of the Town Manager H :;r Administration Building 149 Main Street Watertown,MA 02472 Phone:617-972-6465 Michael J. Driscoll Fax:617-972-6404 www.watertown-ma.gov Town Manager town/migr@watertown-nia.gov To: Honorable Town Council -" From: Michael J. Driscoll, Town Manager Date: June 5, 2014 RE: Fiscal Year 2015 Water & Sewer Rates As you know, the Fiscal Year 2015 Water and Sewer Enterprise Budgets were discussed at the June 3, 2014 Committee of the Whole Meeting. Mr. Christopher P.N. Woodcock, President, Woodcock and Associates, Inc. provided an Informational Presentation on the Proposed Water and Sewer rates and charges for Fiscal Year 2015 (see attached Review document). Additionally, Mr. Thomas J. Tracy, Town Auditor previously forwarded the attached June 2ad email which included a report from Woodcock and Associates regarding the Fiscal Year 2015 Water and Sewer Rates analysis and recommendation. It is anticipated the Honorable Town Council will take formal action on the Fiscal Year 2015 Budget at its regular meeting on Tuesday, June 10, 2014. Therefore, I respectfully request a First Reading on an Order establishing water and sewer rates and charges for Fiscal Year 2015 be placed on the June 10, 2014 Town Council Agenda. The Public Hearing and consideration of rate schedules and fees designed to raise sufficient revenues to support the Fiscal Year 2015 operation of the services provided to customers of the Town's Water/Sewer System would be scheduled for the June 24, 2014 Town Council Meeting. Thank you for your consideration in this matter. cc: Gerald S. Mee, Jr., Superintendent of Public Works Thomas J, Tracy, Town Auditor Karen Norton,Assistant Town Treasurer/Collector LEGAL NOTICE OF PUBLIC HEARING The Town Council of the City known as the Town of Watertown hereby gives notice of a public hearing on Tuesday, June 24, 2014, at 7:15 PM, in the Richard E. Mastrangelo Council Chamber, at which time the Town Council will consider rate schedules and fees, designed to raise sufficient revenues to support the Fiscal Year 2015 operation of the services provided to customers of the Town's water/sewer system. All rates are based on a multi-step rate structure in which the rate per 100 cubic feet of water increases with consumption. The water rate schedule would maintain the current structure of usage tiers for consumption. PROPOSED WATER& SEWER RATES (Use at 105.5 million cu ft/yr) WATER Current Proposed 2015 % Change Use/auarter Rate($/100cuft) Rate($/100cuft) 0 - 3000 cu ft $4.00 $4.15 3.7% 3001 - 30,000 cu ft $6.22 $6.45 3.7% All Over 30,000 cu ft $9.82 $10.19 3.8% Irrigation $9.82 $10.19 3.8% Service Charge Meter Size / uarter / uarter 5/8 $6.14 $6.37 3.7% 3/4 $6.52 $6.77 3.8% 1 $7.70 $7.99 3.8% 1 1/4 $9.27 $9.62 3.8% 1 1/2 $9.27 $9.62 3.8% 2 $13.55 $14.06 3.7% 3 $45.13 $46.80 3.7% 4 $56.82 $58.92 3.7% 6 $84.12 $87.23 3.7% Fire Charges $/ uarter / uarter 2 $10.00 $10.00 0.0% 3 $35.00 $35.00 0.0% 4 $70.00 $70.00 0.0% 6 $205.00 $205.00 0.0% 8 $435.00 $435.00 0.0% 10 $785.00 $785.00 0.0% SEWER Current Proposed % Change Use/auarter Rate ($/100cuft) Rate ($/100cuft) 0 - 3000 cu ft $7.73 $7.95 2.8% 3001 - 30,000 cu ft $9.98 $10.27 2.9% All Over 30,000 cu ft $13.38 $13.76 2.8% Consumption from a second water meter for irrigation purposes would be charged at the highest tier rate. 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CO N I-- CO M CA 00 T T N (6 L CM � N® O OOCA a WMN v7M00 CANN I� NT N T M tp N CO It V CA N N U Uf, Nff) Ef} lf} EA � N C6 (6 � r C N N E N N � c°'n ~ din ~ u� ~ din ~ T > m ® m c�a (aa v v a c m p m a a zr 4? o o EO tp O OM NO j V LO N T - Ev E (0 C v iT U U U U U +�-' O "= O 3O O o 3O 36 O O O i 0 i 0 N to O O N uj N �j EN <t uS EN Er- p O O i C1 N Cl N C' :5 .N =3 0 5 U U J o \ -00, 0 N ti N 00 00 M M N Ir- U C ® W O > O 0) O \ O cu It coU') W � p� U c \ V > N V) cu LVl t ` � O M O \ -00, cu (N LO U') ° a) 4 M M N U � C cu i N W � 0 U � > O O O O j < Q 7 O O O O ^ O O O O ® O O^ O O { J- N V > ^ Ci E 0 LU Hand, JoAnna From: Driscoll, Michael Sent: Tuesday, June 03, 2014 10:15 AM To: Hand,JoAnna Cc: Osmond, Marsha Subject: FW: Emailing: FY 15 Water and Sewer Rate Report from Woodcock and Assoc.pdf, FY 15 Water and Sewer Power Point Presentation.pdf Attachments: FY 15 Water and Sewer Rate Report from Woodcock and Assoc.pdf, FY 15 Water and Sewer Power Point Presentation.pdf -----Original Message----- From: Tracy,Thomas Sent: Monday,June 02, 2014 3:49 PM To:Town Councilors Cc: Driscoll, Michael; Magoon,Steven; Mee, Gerald; Dpwdept; Norton, Karen; Gallagher,Sharon; Mahoney,Joseph Subject: Emailing: FY 15 Water and Sewer Rate Report from Woodcock and Assoc.pdf, FY 15 Water and Sewer Power Point Presentation.pdf Councilors, Attached please find two items from Chris Woodcock of Woodcock and Associates regarding the FY 15 Water and Sewer Rates. The two items are Mr.Woodcock's Annual report regarding the required rates for the upcoming Fiscal Year, as well as his power point presentation for tomorrow night's budget hearing. Please contact me if you have any questions. Thanks Tom The message is ready to be sent with the following file or link attachments: FY 15 Water and Sewer Rate Report from Woodcock and Assoc.pdf FY 15 Water and Sewer Power Point Presentation.pdf Note:To protect against computer viruses, e-mail programs may prevent sending or receiving certain types of file attachments. Check your e-mail security settings to determine how attachments are handled. 1 WOODCOCK &ASSOCIATBSy INC. Utility Rates&Flnence June 2, 2013 Mr. Michael J, Driscoll Town Manager Watertown Administration Building 149 Main Street Watertown, MA 02472 FY 2015 Water and Sewer Rates Dear Mr, Driscoll: We have been working with officials from Watertown over the past few months to review the current water and sewer rates considering the proposed water and sewer budgets for FY 2015 and the most recent water sales. Our findings and conclusions regarding the water and sewer rates for next fiscal year are embodied in this report. BACKGROUND/HISTORY In 2002 we prepared our first rate study for the Town that addressed a number of issues and concerns. Over the past decade we have examined a number of matters related to the Town's water and sewer rates and billing practices. Recognizing that various members of the Council have joined over the past dozen years, we are providing some brief historical background regarding the analysis of the Town's rates over this timeframe. Among the issues we have examined were historic water use trends, the second or deduct' meter policy, an analysis of indirect charges, fire service charges, minimum and service charges, rate tier alternatives, a life-line discount, miscellaneous fees and charges, quarterly billing, and per unit r In some cases a meter Is added after the primary meter to measure water use that is not returned to the sewers. The use on that additional meter Is deducted from the total meter use of the primary meter to determine the sewer bill. WOODCOCK&ASSOCIATES, INC. Mr. Michael J. Driscoll Town of Watertown Page 2 billing for owner occupied apartments and condominiums. Our recommendations over the past few years have built on that earlier work. In adopting new water and sewer rates, the Town Council typically makes the rates effective on all water use after July 1. Any bills that included meter readings with water use before the effective date of the new rates are pro-rated to charge for earlier use at the prior rates. Customers are only charged the new rates for usage after the effective date of the new rates. ESTIMATED EXPENSES AND REVENUES Proposed budgets for the water and sewer enterprise funds have been developed by the Town for FY 2015 and provided to us to use for our study. The budgets reflect the latest estimated assessments from the MWRA for water and sewer. The FY 2015 water budget is $6,465,839'. In addition to the water rates and charges, the Town receives some revenues from interest earnings, liens, interest and penalty charges, municipal charges, and other miscellaneous water fees. After deducting the estimated revenues from these miscellaneous charges and accounting for 1% of all billings being uncollectible, some $5.93 million must be derived from the water rates, meter service charges, and private fire protection charges. We estimate the current water rates, meter service charges, and fire protection charges will produce annual revenues of about $5.72 million, leaving a deficit of approximately $215,000. The proposed sewer budget for FY 2014 is $9,048,617 2. After deducting the estimated revenues from miscellaneous charges and accounting for 1% of all billings being uncollectible, some $8,57 million must be derived from the Town's sewer rates. The current sewer rates are estimated to produce annual revenues of$8,34 million, leaving an estimated sewer deficit in FY 2015 of some $236,000. The MWRA assessments comprise the largest single expense for both the water and sewer enterprise funds. In the case of the water enterprise, the 2,Note that the water and sewer budget numbers presented herein do not Include proposed transfers of $500,000 from reserves for water and sewer capital projects. The impact of this Is discussed later In the report. WOODCOCK&ASSOCIATES. INC. Mr. Michael J. Driscoll Town of Watertown Page 3 MWRA assessment is 48% of the total cost, While the projected overall increases in water assessments for all MWRA communities is about 3,9% for 2015, the MWRA water assessment for Watertown is projected to increase by 5.2% over the final 2014 water assessment. Last year, Watertown's water assessment was well below the average increase. The MWRA's water assessments are generally based on each community's relative share of total MWRA water purchases from the prior year. Over the past few years, Watertown's shares of the MWRA water assessments have been: • FY 2011: 1.49% • FY 2012: 1.45% • FY 2013: 1.49% • FY 2014: 1.46% • FY 2015: 1 .47% (preliminary) As this historic comparison shows, the Town's share of the MWRA water assessments generally ranges between 1.45 and 1.49%. The year to year changes do not necessarily reflect changes in the Town's overall water purchases, but the share compared to all other communities. The Town's MWRA sewer assessment for 2015 is projected to increase by 2.2% in comparison to an overall increase in the MWRA sewer assessments of 3.3%. Unlike the water assessment, the sewer assessment is not based strictly on volume. The sewer assessment is based on three historic years of wastewater discharge, peak flows, septage discharge, the relative strength of the sewage pollutants, and population served. The MWRA sewer assessment represents some 64% of the overall sewer enterprise budget. The Town's recent share of the total MWRA sewer assessments are as follows: WOODCOCK&ASSOCIATES, INC, Mr. Michael J. Driscoll Town of Watertown Page 4 • FY 2011: 1.35% • FY 2012: 1.37% • FY 2013: 1.33% • FY 2014: 1,33% • FY 2015: 1.31% (preliminary) As this shows, Watertown's share of the MWRA sewer assessments has been slowing dropping. USAGE ESTIMATES At the turn of this century, the Town experienced revenue shortfalls due to unattained usage estimates. The Town Council had to adopt increases to make up these revenue shortfalls plus pay for the annual increases in MWRA assessments and local operational and debt costs. As a result, the estimates of usage have been closely watched to try and avoid deficits and large rate increases the following years. For more than a decade now, Watertown has generally been able to cover its water and sewer expenses with rate increases and has rebuilt the retained earnings in the two enterprise funds. This has provided the Town with the flexibility to use reserves to minimize the impact of large rate increases and fund capital projects; but more importantly, it has allowed estimates of water sales to be made with less concern of incurring a shortfall, The Department of Revenue has issued guidance that allows communities to use their retained earnings to make up any revenue deficits in that year. Because the Town Council has adopted water and sewer rates that were sufficient to rebuild the reserves, Watertown is now in a position to take advantage of this ruling, if needed. The estimate of water consumption is critical to the estimation of future revenues. If consumption exceeds projections, the Town generates surpluses that are held as retained earnings; funds that can be used to offset future rates and/or be applied to future capital needs. if consumption falls short of estimates then expenses must be cut, programs put off, and any existing retained earnings can be applied to the deficit. WOODCOCK&ASSOCIATES. INC. Mr. Michael J. Driscoll Town of Watertown Page 5 The following graph presents total calendar sales by the MWRA since 2003. While there has been a slight increase in sales over the past year or two3, over the past decade, there has been an overall trend of reduced water sales in New England. MWRA Sales (MGD) 270.00 260.00 250.00 / 240.00 / 23000 220.00 2000 --� 200.00 190.00 I `�--� 180.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 The next chart shows water consumption in Watertown since FY 1994. 145,000,000 140,000,000 13 ,000,000 130,000,000 125,000,000 1 ,000,000 11515,000,000 110,000,000 II 105,000,000 i 100,000,000 Q a Several communities have been added to the MWRA system in recent years accounting for some of this increase. WOODCOCK&ASSOCIATES, INC. Mr. Michael J. Driscoll Town of Watertown Page 6 The Town converted to quarterly billing in FY 2008, resulting in an increase in billed revenues as water use was billed earlier. As a result, the actual water sales in FY 2008 are not representative of annual sales. We have included an estimate of"annualized" use for FY 2008 on the graph above. For the FY 2015 rates, we have looked at the sales through the last full fiscal year (FY 2013), where annual sales fell to just below 106.5 million cubic feet. Based on data for FY 2014 through May, we are projecting that consumption will be 105.E million cubic. In the coming year we are forecasting a leveling off of sales at 105.5 million cubic feet. PROPOSED RATES AND CHARGES To fully recover the budgeted costs for FY 2015, Watertown will need to increase the water rates and charges to the typical resident4 by $3.98 per quarter. The quarterly water bill for a typical resident will increase from $106.14 to $110.12. The quarterly sewer bill for a typical resident will need to increase about $5.50 per quarter, from $193.25 to $198.75. The overall or combined water and sewer bill for a typical resident would increase from $299.39 per quarter to $308.87 per quarter; for an overall increase of $9.48 per quarter, or about 3.2%. This is just slightly less than last year's proposed increases. The daily cost of both water and sewer service in Watertown would Increase from $3.29 per day to $3.39 per day, or approximately $0.10 per day. If a household can reduce its daily water use by about 6.5 gallons per day, it would offset the cost of this increase. The following tables present the current and proposed water and sewer rates. On the next following page is a table that presents the impact on bills for some typical customers. 4 Typical resident assumed to use about 200 gallons/day or 2,500 cubic feet per quarter WOODCOCK&ASSOCIATES. INC. Mr. Michael J, Driscoll Town of Watertown Page 7 PROPOSED WATER & SEWER RATES (Use at 105.5 million cu ft/yr) WATER Current Proposed 2015 Use/quarter Rate ($/100cuft) Rate ($/100cuft) % Change 0 - 3000 cu ft $4.00 $4.15 3.7% 3001 -30,000 cu ft $6.22 $6.45 3.7% All Over 30,000 cu ft $9.82 $10.19 3.8% Irrigation $9.82 $10.19 3.8% Service Charge Meter Size /Quarte /Quarto 5/8 $6,14 $6.37 3.7% 3/4 $6.52 $6.77 3.8% 1 $7,70 $7.99 3.8% 1114 $9.27 $9.62 3.8% 1112 $9.27 $9.62 3.8% 2 $13.55 $14.06 3.8% 3 $45.13 $46.80 3.7% 4 $56.82 $58.92 3.7% 6 $84.12 $87.23 3.7% Fire Charges / uarter / uarter 2 $10.00 $10.00 0.0% 3 $35.00 $35.00 0.0% 4 $70.00 $70.00 0.0% 6 $205.00 $205.00 0.0% 8 $435.00 $435,00 0.0% 10 $785.00 $785.00 0.0% SEWER Current Proposed 2015 Use/quarter Rate ($/100cuft) Rate ($/1 Mot ift). % Change 0 -3000 ou It $7.73 $7.95 2.8% 3001 -30,000 cu It $9.98 $10.27 2.9% All Over 30,000 cu It $13.38 $13.76 2.8% WOODCOCK&ASSOCIATES, INC. Mr. Michael J. Driscoll Town of Watertown Page 8 Customer Impacts - Quarterly Bills Proposed Customer with 5/8 inch meter Current New Change % Change using 2,500 cuft/grt (200 gal/day) Water $106.14 $110.12 $3.98 3.7% Sewer $193.25 $198.75 $5.50 2.8% Total $299.39 $308.87 $9.48 3.2% $3.29 per day $3.39 per day using 4,000 cuft/grt (325 gal/day) Water $188.34 $195.37 $7.03 3.7% Sewer $331.70 $341.20 $9.50 M Total $520.04 $536.57 $16.53 3.2% using 5,000 cuft/grt (410 gal/day) Water $250.54 $259.87 $9.33 3.7°% Sewer $431.50 $443.90 liLLO M Total $682.04 $703.77 $21.73 3.2% Customer with 1 inch meter using 25,000 cuft/grt(2300 gal/day) Water $1,496.10 $1,651.49 $55.39 3.7% Sewer $2,427.60 $2,497,90 $70.40 2.9% Total $3,923.60 $4,049.39 $126.79 3.2% Customer with 4 inch meter using 75,000 cuft/grt (6900 gal/day) Water $6,275.22 $6,610.42 $235.20 3.7% Sewer $8,947.50 $9,203.40 $255.90 2.9% Total $16,222.72 $16,713.82 $491.10 3.2% WOODCOCK&ASSOCIATES. INC. Mr. Michael J. Driscoll Town of Watertown Page 9 SENSITIVITY TO WATER SALES As we indicated earlier, the rates we have proposed are based on sales of 105.5 million cubic feet year. Different assumptions regarding future water sales will impact the resulting rates and charges. The following table shows the impact on the rate increase of various assumptions for water sales. Impact on Rate Increase of Alternative Sales Water Sewer Overall Volume (mill cu ft/vr) Increase Increase Increase 105,000,000 4.2% 3A% 3.7% 106,600,000 3.7% 2.8% 3.2% 106,000,000 3.5% 2.5% 2.8% 107,000,000 2.5% 1.4% 1.8% Note: For customer using 2,500 cu ft/quarter(200 gal/day) SENSITIVITY TO USE OF RESERVES Earlier it was noted that $500,000 of reserves are proposed to be used to help fund both water and sewer capital improvements. As part of our study we looked at the impact of using these reserves to fund capital projects. If the Town does NOT use the $500,000 of water and sewer reserves, and instead pays for the budgeted capital projects through rates, the water rates would need to be increased by 12.6% and the sewer rates by 8.9%. The overall increase would be 10.2% instead of the 3.2% we recommend. Once again it has been a pleasure to work with the Town of Watertown. We are pleased to see the progress in multiple areas since we began working with the Town. e The Town restored and is maintaining its retained earnings in the enterprise funds providing flexibility to the Council in future rate deliberations and for funding capital projects. WOODCOCK&ASSOCIATES, INC. Mr. Michael J. Driscoll Town of Watertown Page 10 _ • Condominium owners with master meters are now charged the same as single family homes. • New rate blocks were adopted that better reflect Watertown's water use patterns by different customer classes. • New rates for irrigation meters were adopted to reflect the higher cost of providing irrigation water. • Quarterly water billing has been successfully implemented. • The annual increases in water and sewer rates have leveled off over the past seven years, averaging about 3.4%/year, with a maximum increase of 6% in FY 2010. Please feel free to call us if you have any questions on this report. Very truly yours; Woodcock & Associates, Inc. '',+ Digitally stoned byChrlstopherWoodcock Christopher WOOdCOC[ DN:cn=Chrlstopher Woodcock,o=Woodcock&Associates, Inc.,on,email=woodcock@w•a.com,c=US Date:2014.06.0210:54:07.04'00' Christopher P.N. Woodcock President