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HomeMy WebLinkAboutDocumentation_Special Meeting_Tab 4_12/7/1995 MEMORANDUM TO: Thomas G. Bradford, Village Manager FROM: Thomas C. Hall, Water System Manager 41, DATE: December 1, 1995 SUBJECT: New Ordinance for Increasing Water Rates On December 5, 1995, the Town of Jupiter has scheduled for second reading an Ordinance raising the bulk water rate for the Village of Tequesta. The proposed rate will increase our purchased water cost nearly ninety-seven percent. We cannot absorb this increase and jeopardize the financial integrity of our Water Department. In light of this, it will be necessary for us to adjust our water rates to meet the additional charges imposed by the Town of Jupiter. To meet this need, we asked Mr. Phil Gonot of P.M.G. Associates, Inc. to review this matter and make a recommendation. This report is attached., The Village Attorney has been requested to prepare an Ordinance which will amend our current water rates. The new base rate which is proposed, will not generate surplus funds beyond those required for the increase from Jupiter. It has further been noted that for financial tracking and quantification, our most logical application of this increase should be in the monthly base rate structure. A copy of this ordinance is attached. Mr. Gonot will be unable to attend our December 7th Village Council Meeting due to a prior commitment. In his absence, I believe staff and legal counsel should be able to address any concerns of the Village Council. TCH/mk Attachment t c: Bill Kascavelis, Director of Finance 9911i0 etsmiciate,s, ECONOMIC, MARKETING AND MANAGEMENT CONSULTANTS Mr. Tom Hall, Utility Director Village of Tequesta 357 Tequesta Drive Tequesta, Florida 33469 Mr. Hall, Please find enclosed the report commissioned by the Village of Tequesta regarding the emergency rate increase for water charges for the Tequesta Utility System. This increase is due to the proposal by the Town of Jupiter to raise the bulk rates charged to Tequesta. The following report includes the analysis of several options and our recommendation to increase the Base Rate to cover the added financial implications of the proposed action by Jupiter. If you have any questions, please contact me. Very truly yours, rue Associates, Inc. Philip M. Gonot vice President 3880 N. W. 2ND COURT • DEERFIELD BEACH, FLORIDA 33442 • (305) 427-5010 IMPACT ON VILLAGE OF TEQUESTA UTILITY SYSTEM CREATED BY PROPOSED INCREASES FROM TOWN OF JUPITER INCREASES IN RATES FOR POSSIBLE ESCROW ALLOCATION 1 . INTRODUCTION This analysis addresses the modification in utility rates for customers of the Village of Tequesta Utility System that is caused by the proposed increase in charges from the Town of Jupiter. The increased revenues from these changes are designed to meet the additional demands from Jupiter should they prevail in raising rates to the Village of Tequesta. Revenues collected through this process would be placed into an escrow account until the issue of the increase from Jupiter is settled. • The Town of Jupiter has proposed increasing the gallonage charge to Tequesta from the current rate of $1 .22 per one thousand gallons to a rate of $2.40 per one thousand gallons. This rate would apply to the entire commitment by the Village of Tequesta of 1 .5 million gallons per day (MGD). 2. OPTIONS FOR GENERATING REQUIRED FUNDS There are three options considered to adjust the rate structure to generate the required funds. This analysis .will discuss each option identifying the advantages and disadvantages of that alternative. The three options include increasing the Base Rate, the Volume Rate or adding a percentage surcharge on the entire utility bill. BASE RATE: This option would include a fixed charge to the utility bill to be added to the Base Rate. This could be accomplished by either increasing the currently established Base Rate, or by including an addition line item on the utility bill which represents the required fix amount. Advantages: • Guarantees that the revenue will be collected regardless of the actual usage of the system. Page 2 '- • Readily identifies the new revenue amount and the source of the revenue requirement (Increase by Jupiter). • Ensures proper allocation of the expenses among the system customers based on meter size and capacity required. • Simplifies the segregation of the funds for future use. Disadvantages: • Requires a significant increase to the Base Rate. Volume Rate: Due to the fact that Jupiter intends to increase the charges to Tequesta on a per gallon basis, the Village of Tequesta could also elect to pass on the charges to customers on a per gallon basis. The volumetric charges would be appropriately increased to generate sufficient funds. Advantages: • Larger water users will pay a higher proportion of the costs of the increase. • The increase in charges will be based on the usage of the system by each customer. Disadvantages: • Requires a significant increase to the Volume Rate.. • The large increase in rates may cause a decline in consumption, lowering revenues below the point necessary to meet obligations. • Customer rates per thousand gallons will be significantly higher than actual production costs to the system. Page 3 - If this option is selected, a significant increase on the volumetric charges will occur. It is very likely that the customers of the system will reduce consumption due to this increase. There is no accurate method to determine the reduction in consumption since no comparable action has occurred in Tequesta: For this analysis, it was assumed that the Single Family customers will reduce consumption an average of 15%. No reduction in consumption is considered for Multi-Family or other Non-Residential customers. When setting a volume rate, this reduction in consumption (and billable gallons) must be taken into consideration. The result is a rate structure that will adjust for the loss in billable gallons. If the customers do not reduce consumption by the assumed amount, this rate structure could generate surpluses. The increase in volume rates would be approximately 45.5% over the current structure. This increase would apply to all Step categories. The current and proposed rate should the Tequesta Village Council elect to impose the increase on volume charges are as follows: Customer Category Current Rate Increased Rate Step 1 (0 - 12,000 gallons) 1 .44 2.10 Step 2 (13,000 - 25,000 gallons) 2.40 3.49 Step 3 (26,000 - 40,000 gallons) 3.30 4.80 Step 4 (Over 40,000 gallons) 4.20 6.11 Surcharge on Total Bill: This option includes a fixed percentage increase on the entire utility bill for each customer. The percentage surcharge will be established to generate the required revenues to meet the increased charges by Jupiter. Advantages: • Simpler method to generate additionally required funds. • Each customer will pay a proportionate share of the obligation. • All utility customers will experience the same increase in their bill. Page 4 - Disadvantages: • Legal limitations on the surcharge for customers outside the Village municipal limits may not permit this option. • _The large increase in rates may cause a decline in consumption, lowering revenues below the point necessary to meet obligations. 3. RECOMMENDATION The key element in utility financing is insuring that the rate structure is sufficient to meet all of the obligations of the system. Equity in the rate structure is important so that each customer pays their fair share of the costs. Based on the following factors, it is recommended that the Village of Tequesta implement the emergency rate increase on the Base Rate portion of the utility rate structure. 1 . The guaranteed revenues are essential to insure that the system meets the financial obligations. 2. The potential loss of revenue from reduced consumption in either the Volume Rate or the Surcharge options will jeopardize the financial soundness of the system. 3. Legal uncertainties with the Surcharge option are too risky for implementation. 4. Equity within the rate structure is maintained since.the Base Rate is founded on the principal of charging customers based on the potential capacity required. 4. RECOMMENDED BASE RATE The following represents the'recommended changes in the Base'Rate for the Tequesta Utility System. Other charges such as the Utility Tax and Surcharges for the Palm Beach County and Martin County customers would still apply. This rate adjustment generates sufficient funds to meet the additional charges that would be imposed by Jupiter should they succeed in the current action Page 5 - against Tequesta. This rate adjustment does not generate surplus funds beyond those required for the increase from Jupiter. Meter Current Increase Due Total Size Rate To Jupiter Rate 5/8 & 3/4" 8.80 7.00 15.80 1 " 22.00 17.50 39.50 1-1/2" 44.00 35.00 79.00 2" 70.40 56.00 126.40 3" 132.00 105.00 237.00 4" 220.00 175.00 395.00 6" 440.00 350.00 790.00 5. TIME FRAME It is the stated purpose of the Village of Tequesta to impose these rates solely to generate a reserve to pay the additional charges proposed by Jupiter. Based on that premise, the new rate structure should be in place on or about the time that the Jupiter increase is imposed. 12.01 .95 ORDINANCE NO. AN ORDINANCE OF THE VILLAGE COUNCIL OF THE VILLAGE OF TEQUESTA, PALM BEACH COUNTY, FLORIDA, AMENDING CHAPTER 18 OF THE CODE OF ORDINANCES "WATER" AT SECTION 18-3 , SUBPARAGRAPH (a) , SO AS TO AMEND THE MINIMUM MONTHLY SERVICE CHARGE FOR RESIDENTIAL AND NON-RESIDENTIAL CUSTOMERS SO AS TO INCORPORATE INCREASES NECESSITATED AS A RESULT OF THE TOWN OF JUPITER' S INCREASE IN WATER RATES TO THE VILLAGE OF TEQUESTA; PROVIDING THAT A SEPARATE ACCOUNTING BE MADE OF FUNDS REALIZED FROM SUCH INCREASE; PROVIDING THAT MONIES REALIZED AS A RESULT OF THIS INCREASE BE REFUNDED TO THE CUSTOMER FROM WHOM THEY WERE RECEIVED IN THE EVENT TEQUESTA IS SUCCESSFUL IN ITS CHALLENGE OF OVERTURNING THE INCREASES IMPOSED BY THE TOWN OF JUPITER; . PROVIDING FOR SEVERABILITY; PROVIDING FOR REPEAL OF ORDINANCES IN CONFLICT; PROVIDING FOR CODIFICATION; PROVIDING AN EFFECTIVE DATE . WHEREAS, the Town of Jupiter by way of the adoption of Ordinance No. 50-95, has increased rates for the delivery of bulk water to the Village of Tequesta; and WHEREAS, in order that Tequesta be in a position to pay for said increases, it must pass such increases on to the customers of the Village of Tequesta Water System; and WHEREAS, pursuant to Jupiter' s Ordinance No. 50-95, the increased rates shall become effective January 1, 1996 ; and WHEREAS, it is the intent of the Village Council, in the event it is successful in its challenge of the increased water rates by Jupiter to the Village of Tequesta, to reimburse Tequesta customers for increases passed on to said customers as a result of Jupiter' s increase to Tequesta; and WHEREAS, in the interim, while said legal challenge is pending, it is necessary for the Village of Tequesta to increase its rates to its customers in order to accommodate the water rate increase by the Town of Jupiter in the event Jupiter is successful in increasing said rates . II • r. j - 2 - NOW, THEREFORE, BE IT ORDAINED BY THE VILLAGE COUNCIL OF THE VILLAGE OF TEQUESTA, PALM BEACH COUNTY, FLORIDA, AS FOLLOWS: ,.. Section 1. Chapter 18 of,the Code of Ordinance of the Village of Tequesta relating to "Water" is hereby amended at Section 18-3, Subparagraph (a) , to read as follows: "Sec. 18-3. Same - Enumerated. The schedule of rates and charges be', and the same are hereby determined, as follows: (a) M1_) I, ,uT °At yaSi Service Charge. csi . ,.. e �� ^` s 1 Per_ dw4 i i y— • $_.r8_ r t I - + anrnl l ng -- - 83'�CiIi-itii - - unit . 8'0 5/8 - inch meter . . 8 . 80 1 . 0 - inch meter . . . 22 .00 1 .5 - inch meter . . . 44 . 00 2 .0 - inch meter . . . 70 .40 3 . 0 - inch meter . . . 132 . 00 4 .0 - inch meter . . . 220 . 00 6 . 0 - inch meter . . 440 . 00 . tl-3S1'`i ! ■` [•,... ... . Cetr:a,bb11 ..��r Vl 1E10-re-uiuts `_, - m.. -- u �.". d, --n---an_amount -1• • , - min • um The following rates shall be effective beginning January 1, 1996, and assessed in lieu of the above rates to accommodate increases in rates caused by an increase in water rates to the Village of Tequesta from the Town of Jupiter. (1) Minimum Monthly Service Charge. (1) 1_.o___ Q•-es e-en c ap.&- Q\ON -4stter141oJ • - 3 - • ,. - 5/8 - inch meter 15.80 3/4 - inch meter • 15.80 1. 0 - inch meter ▪ 39.50 1.5 - inch meter ▪ 79.00 2 .0 - inch meter ▪ 126 .40 3 . 0 - inch meter • 237.00 4 . 0 - inch meter ▪ 395.00 6 . 0 - inch meter • 790.00 The table attached hereto indicates that portion of the increase due to increased charges made to Tequesta by the Town of Jupiter which are passed on to Tequesta customers as a result of Jupiter' s increase in water rates to Tequesta. Funds realized as a result of this increase shall be accounted for in a manner so as to provide that in the event the Village of Tequesta is successful in overturning the water rate increase imposed by the Town of- Jupiter that increases can be accounted for and refunded to the customer from whom they were paid, whereupon the rates set forth in the above schedule in place prior to the increase will be reinstated. Increases enacted herein shall be returned to the customer who made payment on same in the event Tequesta is successful in overturning the rate increase. Otherwise, said funds shall remain with the Village of Tequesta and the rates imposed herein shall remain in effect. " Section 2 . Severability. If any provision of this Ordinance or the application thereof is held invalid, such invalidity shall not affect the other provisions or applications of this Ordinance which can be given effect without the invalid provisions or applications, and to this end, the provisions of this Ordinance are , hereby declared severable. Section 3 . Repeal of Ordinances in Conflict . All other ordinances of the Village of Tequesta, Florida, or parts thereof which conflict with this or any part of this Ordinance are hereby repealed. Section 4. Codification. This Ordinance shall be codified and made a part of the official Code of Ordinances of the Village of Tequesta. - 4 - Section 5. Effective Date . This Ordinance shall take effect immediately upon its passage and approval, as provided by law. THE FOREGOING ORDINANCE was offered by Councilmember , who moved its adoption. The Ordinance was seconded by Councilmember and upon being put to a vote, the vote was as follows : FOR ADOPTION AGAINST ADOPTION The Mayor thereupon declared the Ordinance duly passed and adopted this day of , 1995 . MAYOR OF TEQUESTA Ron T. Mackail ATTEST: Joann Manganiello Village Clerk Increase Due Meter Size Current Rate to Jupiter Total Rate 5/8" 8 . 80 7 . 00 15 . 80 3/4" 8 . 80 7 . 00 15 . 80 1" 22 . 00 17 . 50 39 . 50 1-1/2" 44 . 00 35 . 00 79 . 00 2" 70 .40 56 . 00 126 .40 3 " 132 . 00 105 . 00 237 . 00 4" 220 . 00 .: 175-. 00 395 . 00 6" 440 . 00 350 . 00 790 . 00 I