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Study Session

Minutes
Monday, October 14, 2013

MINUTES FOR THE STUDY SESSION
ASHLAND CITY COUNCIL
Monday, October 14, 2013
Siskiyou Room, 51 Winburn Way
 
Mayor Stromberg called the meeting to order at 6:20 p.m. in the Siskiyou Room. 
 
Councilor Lemhouse, Rosenthal, Voisin, Morris, Marsh, and Slattery were present. 
 
1.     Review of the Medford Water Commission, Talent, Ashland, and Phoenix Systems Development Charge Proposal
Public Works Director Mike Faught explained the 1998 Water Master Plan projected a water shortage for peak demand by 2016.  The solution was hooking into the City of Medfordís water through a joint agreement that involved the City of Talent and the City of Phoenix called TAP (Talent Ashland Phoenix).  The City paid $2,600,000 for its portion of the pipe construction from Medford to Talent.  In 2008, Council delayed the project and went on to approve a new Water Master Plan to research other options. The group that worked on the Water Master Plan included the Ashland Water Advisory Committee (AWAC) who recommended constructing a 2.5 million gallon per day (mgd) water plant for peak demand.  The existing water plant was located in a gully subject to floods, slides, and fire.  That course of action eliminated the need to build TAP for peak demand.  However, from a redundant standpoint AWAC recommended hooking into TAP for emergencies only.  Staff did not think System Development Charges (SDCs) applied to an emergency line and proceeded under that assumption.  The Water Master Plan was adopted 2012.
 
Mr. Faught and Senior Engineer Pieter Smeenk started meeting with the Medford Water Commission (MWC) regarding the TAP pipeline project that would start 2015.  MWC explained they had already invested in their systems to provide future capacity for Ashland and required the City to pay SDCs whether it was an emergency or not.  An MWC manager worked with staff to explore ways to solve the issue.  One option would extend the emergency water contract with Talent to Phoenix that would provide 2 mgd surplus for Ashland to use for emergencies.  Both cities were interested but Talentís contract with MWC prohibited them from sending water outside the Urban Growth Boundary (UGB).  MWC would have to agree to change their contracts with Talent and Phoenix.
 
The two other options would have the City pay SDCs for either 1.5 mgd or 3 mgd over 20-years at zero interest.  MWC had the capacity to deliver 3 mgd with a larger SDC.  Mr. Smeenk explained the SDC calculations were based on the equivalent dwelling unit that typically used 1,200 gallons per day.  It was a onetime fee in advance for the right to purchase water.  Mr. Faught addressed the MWC restriction of sending water outside of the UGB, doubted the MWC had anticipated emergency service beyond the UGB, and noted it was a common requirement in contracts.
 
Staff consulted with Ray Bartlett from Economic and Financial Analysis on ways to finance the options.   If Ashland paid SDCs, they were not limited to emergency use only and could use the water daily.  The Water Master Plan indicated a supply demand issue by 2038 even with TID (Talent Irrigation District) water.  The options to pay SDCs for 1.5 mgd or 3 mgd would solve that issue.  Once the City signed the agreement with MWC, the water would be available.  The other benefit to these two options was the City could reduce the size of the Crowson II reservoir since most of it was emergency water storage.  Reducing Crowson II by 500,000 gallons created a $1,300,000 savings from the $6,700,000 total.
 
Mr. Faught clarified the new treatment plant would replace the current plant.  Upgrading the current water treatment plant would cost $8,000,000 and remain located in a vulnerable area.  Upgrading was not as good as building a new plant.  SDC payments were not included in the current budget since it was emergency based.  Mr. Bartlett researched a potential rate increase and found sufficient funds for the SDCs based on a zero interest rate.
 
Mr. Smeenk commented the pump for the TAP pipeline would handle 2.5 mgd.  If the City paid the SDCs and never used the water, they would save the $1,300,000 from reducing Crowson II and spend $500,000.  Mr. Faught added the City would be paying the $500,000 in advance to prepare for the 2038 water shortage. 
 
Staff would meet with the MWC October 16, 2013 to present options and wanted direction from Council on how to proceed with those negotiations. 
 
Mr. Faught explained the City owned the line from Talent to Ashland and would subsequently pay for maintenance and replacement.  Ashland, Talent, and Phoenix owned the line from Medford to Talent and shared upgrade and replacement costs.
 
Mr. Smeenk further explained it was cheaper to use water from the reservoir than pumping water from Medford.  The City of Medford would charge .55 cents per 1,000 gallons and a .10-.15 cent pumping charge.  Producing water at the Water Treatment Plant in Ashland was approximately .25-cents per 1,000 gallons and no pumping fees.  However, building out Crowson II and not paying the SDCs was not cost efficient.  The City could afford to pay extra during an emergency versus the ongoing cost of the reservoir.  The City would only save $1,000-$2,000 dollars per emergency compared to saving the $1,300,000 by reducing reservoir capacity.  The Crowson II reservoir would hold a specific amount for emergency supply.  Rather than physically storing water in the reservoir, it could come through the Talent agreement eliminating the additional capacity and saving $1,300,000.  
 
Staff preferred paying the SDC for the 1.5 mgd, the variable was whether it was zero interest or not.  If MWC applied interest, staff would review the cost effectiveness of paying the SDCs now or waiting. 
 
Mr. Smeenk explained the City had purchased water rights in Lost Creek and there were many water rights available.  Currently, Ashland had a small reservoir and hooked up to TID to augment shortages.   The City had the water right, and a priority date was established.  If Council decided to pay the SDCs, the City would perfect the right.  Once perfected, the City could not lose the water right.
 
Council directed staff to explore SDC payment options for both 1.5 mgd and 3 mgd with MWC and bring that information to Council.
 
2.     Look Ahead review
City Administrator Dave Kanner reviewed items on the Look Ahead.
 
3.     Discussion regarding the Job Council proposal
Item moved to October 15, 2014 meeting.
 
Meeting adjourned at 7:07 p.m.
 
 
Respectfully submitted,                                
Dana Smith
Assistant to the City Recorder
 
 

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