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HomeMy WebLinkAboutRes2015-091 Sponsored by: Hunt CITY OF SEWARD,ALASKA RESOLUTION 2015-091 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA,AMENDING THE WATER TARIFF TO PROVIDE FOR A 4.3% INCREASE IN THE 2016 CALENDAR YEAR AND A 2.4% INCREASE IN THE 2017 CALENDAR YEAR, AND ALLOW FOR AN AUTOMATIC ANNUAL ADJUSTMENT THEREAFTER TO ALL RATES AND FEES BY AN AMOUNT EQUAL TO THE FIVE PREVIOUS FULL YEARS'AVERAGE INCREASE IN THE ANCHORAGE CONSUMER PRICE INDEX FOR ALL URBAN CONSUMERS WHEREAS, the City of Seward's enterprise funds are operated in a manner similar to private business entities, in that they establish charges intended to cover the full cost of providing services (including direct and indirect costs) for operations and maintenance, overhead, system expansion and charges for the use of capital facilities; and WHEREAS,in 2013,the City began repayment of the Third Avenue Water Line Debt at a rate of$156,844 per year; and WHEREAS,the Water Fund is not in a position to contribute to the Major Maintenance& Replacement Fund(MMRF); and WHEREAS,the 2016 Budget anticipates a deficit of($250,675)after the 4.3%rate increase, leaving no funds available to contribute to the Major Repair and Replacement Fund, to cover depreciation costs or to make contributions to the Motor Pool; and WHEREAS,the 2017 Budget anticipates a deficit of($185,721)after the 4.3%rate increase in 2016 followed by the 2.4%rate increase in 2017,and would require rates be raised an additional 12%to cover only operating costs with no capital contributions; and WHEREAS,limiting the rate increases only by the Consumer Price Index(CPI)alone will not sufficiently cover the cost of operations,critical capital infrastructure repairs and replacement or demonstrate adequate financial health that is needed to qualify for low interest loans,necessitating that rates continue to be incrementally adjusted beyond the CPI each year ; and WHEREAS,the rate and fee schedule will resume the automatic annual adjustment by the previous published five years' annual increases in the CPI once the Fund is able to achieve sustainability in covering annual operating and capital costs.. CITY OF SEWARD,ALASKA RESOLUTION 2015-091 NOW,THEREFORE,BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEWARD,ALASKA that: Section 1. The Water Tariff for 2016 is hereby amended substantially as presented at this meeting as "Water Rates and Charges—2016", and is effective January 1, 2016. Section 2. The Water Tariff for 2017 is hereby amended substantially as presented at this meeting as "Water Rates and Charges—2017", and is effective January 1, 2017. Section 3. All previous Resolutions in conflict herewith are hereby repealed effective December 31,2015. Section 4. This resolution shall take effect ten days following approval. PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this 26`h day of October 2015. THE CITY OF SEWARD,ALASKA • an Bardarson,Mayor AYES: Keil, Butts, Altermatt, McClure, Bardarson NOES: None ABSENT: Squires, Casagranda ABSTAIN: None ATTEST: / r J h hanna Ki Mr MC 1 ity Clerk ®ost ®n0bg6,0 ° '6' Seal-s`'d,' (City Seal) ®®` °..•.°° SEAL ° d e. I Gtr ° 6* m' Agenda Statement ses Meeting Date: October 26,2015 ° ° To: City Council 41.460' Through: City Manager,Jim Hunt From: Public Works Director, W.C. Casey Agenda Item: Amending the Water Rates and Charges in the 2016 and 2017 Tariff BACKGROUND & JUSTIFICATION: Reaching a level of financial stability in the Water Enterprise Fund has been an ongoing challenge for the last 10 years.With diminishing reserves due to operational and maintenance challenges in the water fund,the City finds a need to increase rates to enable the successful operations of the utility. In 2013,the City began repayment of the Third Avenue Water Line debt, at a rate of$156,844 per year. Due,in part,to this new loan payment,the Water Fund does not generate sufficient revenues to cover operations, let along to contribute funds to the Major Maintenance & Replacement Fund (MMRF). With the ongoing need to reach and maintain a positive cash position for the successful operation and maintenance of our systems, the administration recommends continuing past practice of incrementally increasing tariffs in order to minimize rate shock to customers,while still rebuilding the Fund to achieve long-term sustainability. To that end,the 2016 Water Tariff is slated to increase 4.3%in 2016 and 2.4%in 2017. INTENT: The adoption of the proposed change in the Water Tariff does not sufficiently bring the Fund to a breakeven position, but provides for incremental improvement toward improving the financial condition of the Water Enterprise Fund,while minimizing the adverse impact to ratepayers. CONSISTENCY CHECKLIST: Yes No N/A 1. Comprehensive Plan(document source here): X 2. Strategic Plan(document source here): X 3. Other (list): Design Study Report(CRW) June 2000 Pages 8-22 X FISCAL NOTE: These rate increases are insufficient to produce a positive cash flow in 2016 or 2017. The projected cash deficit in 2016 is ($250,675) and in 2017 is ($185,721). Staff will continue to recommend incremental rate increases in future years to bring the Fund into a positive fmancial position. . rs Approved by Finance Department: .56,0. 411410 ATTORNEY REVIEW: Yes No X Not Applicable RECOMMENDATION: Approve Resolution 2015-091, amending the Water Rates in the 2016 and 2017 Tariff.