HomeMy WebLinkAboutDocumentation_Workshop_Tab 01_2/27/2023Agenda Item #1.
Workshop
STAFF MEMO
Meeting: Workshop - Feb 27 2023
Staff Contact: Marjorie Craig, Utilities Director Department: Utilities
Workshop Discussion -Water Enterprise Fund -Utility Financial Forecast and Consideration of a Water
Utility Baseline Rate Recalibration, Modified Project Schedule, and Capital Recovery Charge
SUMMARY: Ai.
-A ANM ANM
In August of 2022, the concept of a capital recovery charge with an accelerated water main replacement program
was brought before the Council. The Council was receptive to the idea but requested that we bring back more
information, specifically funding the 10 year CIP projects with at least a 75% funding ratio. Based on that, the
Utilities Department (UD) contracted with Raftelis Financial Consultants (Raftelis) to update the Water Enterprise
Fund's Utility Financial Forecast and conduct a Capital Recovery Study. Over the last year and especially since
the August Council meeting, it has became clear that the baseline water utility rates need recalibrating to reflect
current economic conditions experienced over the last few years which escalated over the last year. The Council
is well aware of these examples such as the bids received at the December bid opening for the pipe replacement
project that were 60% higher than the engineer's opinion of probable cost and the project budget, as well as
equipment and water plant chemical costs. We requested that Raftelis take the existing 10 year financial model
and expand it to a 20 year financial model to better capture the 20 year water utilities capital investment project
(CIP) program and worked with them to develop scenarios. It is recognized the model, projects, priorities, and
prices tend to be dynamic and need to be revisited periodically for the water utility to remain financially stable.
The current rate structure and funding is not adequate to execute all of the projects that are presently at or near
100% design or planned over the next several years, even with the existing rate indexing in place. There are
several ways to address this challenge. For the Council's consideration, our recommendation consists of three
(3) components: slightly increasing the baseline water utility rate; modifying the phasing of the existing project
schedule; and introducing a nominal water capital recovery charge to help fund projects that are specifically
identified as infrastructure system repair and replacement (R&R) projects. These projects would include fire
protection and hydraulic improvement projects, aged pipe replacement projects, plant hydraulic efficiency
projects, and any other project specific to our current CIP infrastructure R&R program. This charge would only
be in place as long as the currently planned programs are ongoing, and would sunset after that point. The
recommended charge is $10 per month on a customer's water utility bill over a 20 year period, but would end if
the projects were funded by other sources and/ or completed sooner. This fund, along with the Florida
Department of Environmental Protection's State Revolving Fund Loan Program (SRF) and projected revenues
would be used to fund the projects. The other options are to permanently raise rates higher or significantly slow
down the planned and designed projects, with the risk of further infrastructure degradation.
Raftelis has significant institutional knowledge of the Village and has been conducting financial rate and fee
modeling, and other financial recommendations for over 30 years for the Village. Under the recent scope, they
developed a 20 year financial model based on their original 10 year model and Village's existing CIP plan. Even
within the two years since the last update of the model, the CIP plan and data was outdated and required
significant retooling. Utilities staff worked with their suite of consultants and Raftelis, to take a hard look at the
existing CIP plan to determine what projects are most critical to operations and most at risk of failure, in order to
develop a programmatic, efficient, and effective program for the long term operation of our water utility.
Page 3 of 50
Agenda Item #1.
Since September 2020, 25 pipe breaks have occurred due to aging pipe. There are an additional number of pipe
failures due to contractors hitting the pipes.
Decision criteria included safety, regulatory requirements, age/ risk of failure, material, efficiency, funding
availability, while sensitive to the impact that construction might have on our citizens and customers while
considering project phasing and modeling scenarios. See the attached recommended priority projects and
timing.
This document and any attachments may be reproduced upon request in an alternative format by
completing our Accessibility Feedback Form, sending an e-mail to the Village Clerk or calling 561-768-
0443.
PROJECT NAME: Workshop
Discussion - Water Enterprise
Fund - Utility Financial Forecast
and Consideration of a Water
Utility Baseline Rate
Recalibration, Modified Project
Schedule, and Capital
Recovery Charge
Proposed:
N/A
PROJECTED TOTAL: N/A
BUDGET: N/A ENCUMBERED: N/A
Consider recommendations and provide direction.
Projected Remaining:
N/A
23.0227.Council Workshop WTP Plan Update Chart
2023 0218 VOT CIP WM Replacement Cost Update Priority-MGCraig
2023 Water Main Repl Progrm FINAL2
Page 4 of 50
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