NOTE: These minutes were not available at the last meeting of this committee so formal approval was not obtained prior to this posting.
ASHLAND WATER ADVISORY COMMITTEE
JANUARY 18, 2012
CALL TO ORDER
Mike Faught called the meeting to order at 4:35 p.m. in the Siskiyou Room, 51 Winburn Way.
Committee Members Present:
Kate Jackson, Don Morris, Amy Patton, Donna Rhee, Councilor Carol Voisin
Pat Acklin, Lesley Adams, Alex Amarotico, Darrell Boldt, Donna Mickley, Rich Whitley, John Williams
Mike Faught, Robbin Pearce, Ann Seltzer, Pieter Smeenk, Lee Tuneberg, Jodi Vizzini and Steve Walker Consultants:
David Kraska, Rachel Lanigan (Carollo Engineering – via conference call), Shaun Pigott, Steve Donovan (Shaun Pigott Associates), Mark Mularz (Moodio)
Doug Gentry, Bill Heimann, Joseph Graf
APPROVAL OF MINUTES
Rhee/Jackson m/s to approve the October 26, 2011, November 9, 2011, and November 16, 2011 minutes. Voice Vote: all Ayes. Motion passed.
ADJUSTMENTS TO THE AGENDA
Mike Faught suggested the public forum follow Shaun Pigott’s presentation. The Committee and the public approved his suggestion.
DISCUSSIONS AND DECISIONS
Financial Rate Analysis:
Mr. Pigott provided a PowerPoint presentation/handout and highlighted key areas which included: 1) restate financial position of the water utility; 2) review the master plan Capital Improvement Program (CIP) in terms of financial implications of the direction established by the Committee; 3) key assumptions in rate forecast; 4) optional financing strategies, i.e. advance funding and current funding; and 5) options for mitigating seasonal revenue volatility.
Mr. Pigott stated the City is in a favorable position, but the trend is not favorable unless some interim actions are taken. Amy Patton questioned the difference between 2011 and 2012 beginning fund balance on p. 4 of the handout. Lee Tuneberg confirmed and explained the interfund loan to the Committee. Staff explained the increases in labor costs as it relates to additional FTE, health care, PERS, and labor negotiations. Mr. Pigott and Mr. Donovan explained coverage factor on long term debt, interest rates, bonds, and means test to the Committee.
Ms. Patton asked if putting off the construction of the Water Treatment Plant (WTP) until a later date would save money. Mr. Faught answered the driving force is meeting the water demand of 2018 and building the WTP solves that problem, as well as adding the Talent Ashland Pipeline (TAP) for emergency use only. The discussion included the need based on conservation. Pieter Smeenk explained 2018 presumes 5 percent conservation which makes it difficult to plan. Mr. Faught added if we do not start increasing the cost now in preparation for 2018, and wait for conservation, then the City will need to raise rates dramatically.
Mr. Pigott explained the proposed funding options for the Master Plan CIP which includes advance funding and current funding (illustrated on pp. 8 – 11 of the handout). Ms. Patton asked if there is a potential for rates to go back down after the significant capital cost period. Mr. Pigott explained the rates will stabilize and there could be a potential for rates to go down but there will be operating and maintenance costs to consider.
The Committee looked at the graph on p. 12 of the handout and asked Mr. Pigott to explain the forecast figures. The Committee asked for clarification on the advance funding scenario. Mr. Donavan explained the City has already established the strategy to do this in the master bond resolution that allows authority to create and manage a rate stabilization account and make transfers to and from in the budget process. Mr. Pigott summarized the mechanics are established in the City Ordinance, but the rate increase will have to be approved. Ms. Patton asked if one advantage to this is taking a loan at a later date, and the possibility of taking a smaller loan if the City builds up reserves. Mr. Pigott referred to the strategy as creating a war chest to help pay for debt service, not buy down actual capital costs. Ms. Patton asked if the consultants were making an argument to build sooner. The consultants stated from a financial standpoint, building sooner and faster will cost less in the long run.
Joseph Graf/1160 Fern Street
/Stated when he looks at the curves of the graph, as a homeowner, he would pay the same no matter which scenario is chosen, but would pay less in the early years and more in the out years. Where it changes is after the next 10 years he will pay significantly less forever if the build-up early scenario is chosen.
Doug Gentry/574 Long Way/
Stated he agrees both financially and politically the big steep line on the graph is troubling but the money charged to rate owners earlier has a higher value. This scenario is asking rate payers to forego some money now that has more value verses savings in the future. He added it is a counter balancing thing and would make the same decision but made a point to note the City will be asking people to pay high value dollars and save low value dollars.
Bill Heimann/647 Siskiyou/
Stated he agrees, however he questioned if this is the right thing to do both politically and morally. The Committee would be asking the citizens to pay the interest now, for a product in the future. He asked the consultants to clarify a comment he thought they made about the fund growing, its impact on the covenant, and if this will cause a demand to increase the reserves. Mr. Donovan clarified those are two separate issues.
Ann Seltzer commented as a rate payer she would like the utility bill to be itemized to show the additional amount of money a customer will be paying specifically for the capital project. Mr. Pigott stated he thought that could be possible. Lee Tuneberg agreed it could be done, but questioned if it would help the customer accept the cost of the utility bill. The Committee, consultants, and staff discussed different ideas on how to reflect the cost on the utility bill. Mr. Faught added this will be a critical piece of the public outreach.
Mr. Pigott directed the Committee’s attention to the issue of revenue volatility as illustrated on pp. 14 – 15 of the handout and explained demand and fixed costs. Consumption, climate, and conservation were variables of discussion and how it affects revenue. Mr. Pigott suggested the most direct approach is to consider increasing the base portion of the chart and to identify the target contingency. The Committee reviewed estimated revenue, range of base charge increases, and comparisons of surrounding cities as illustrated on pp. 18 – 19.
Doug Gentry/574 Long Way/
Stated another way to think of this is in terms of base usage. He explained a stair/tier strategy that would cause high volume irrigators to pay more than lower use residents.
Mr. Pigott replied that a uniform application of any increases on both the base and use side of the equation is being explored.
Bill Heimann/647 Siskiyou
/Stated the utility bill currently reflects more than the water base rate; it also includes electricity, road use, tax, etc. The overall utility without services is already around $31.00. If $14.00 is added, this will be a large increase.
Ms. Seltzer introduced herself to the Committee and explained one of her roles in the City is to assist departments with public outreach. She explained how this particular challenge will be compiling two years of the Committee’s work into simplified information that is balanced and objective, while illustrating the problems and proposed solutions the Committee wrestled.
Ms. Seltzer announced a Community Issues Forum, partnering with the Chamber of Commerce, is scheduled in the Rogue River Room/Stevenson Union at Southern Oregon University on March 14, 2012 from 7:00 – 9:00 p.m. She emphasized the importance of AWACs role in this forum.
Mr. Faught reminded the Committee of the April 17th
target date for the adoption of the master plan and the need to shake out the financial piece at the next meeting. The Committee agreed to arrange another meeting within the next two weeks.
Meeting adjourned at 6:06 p.m.
Jodi Vizzini, Office Assistant II