2000 JT CUA AGN JUL 18 I01 - Laserfiche WebLink

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Formation of the Authority provides an opportunity to reduce the annual in -lieu payments to the General Fund (to be replaced by a lower lease payment), and as a result, the residential customer monthly rate increase only needs to be $3.20 instead of $6.00. At the conclusion of the Public Hearing the City Council directed staff to prepare the necessary resolutions to 1.) adopt wastewater rates, 2.) proceed with the sale of bonds to fund construction of treatment facilities, 3.) form the Colton Utility Authority, and 4.) retain appropriate consultants to appraise water and wastewater assets. Staff was to return to the City Council in the near future (tonight's meeting) for formal City Council approval of the aforementioned resolutions. DISCUSSION / ANALYSIS: The total estimated cost of necessary Wastewater Treatment capital improvements is, again, $5 million. Bond debt service reserves and costs of issuance result in a bond issue size of $5.7 million. Related estimated annual debt service is $425,000. As previously stated, the necessary wastewater rate increase approximated 33% to pay for this debt service and the debt service associated with the State Revolving Fund (SRF) loan. Annual debt service on the SRF loan approximates $462,000. Construction funded from the SRF loan began in 1998 and should approximate $8 million upon completion. On a combined basis, the aggregate wastewater improvements, both underway and to begin in the near future, equate to $13 million ($8 million original expansion, $4 million emergency replacement, and $1 million for lift station and line replacements.) Combined new annual debt service (SRF loan plus bonds) approximates $887,000. When considering debt service coverage requirements (a minimum cushion of 25% is mandated) and anticipated capital outlay expenses, new revenue originally needed to pay for this debt service approximated $1.5 million, or a 33% rate increase. Since the May 30 Public Hearing, staff has identified operating efficiencies of approximately $500,000 which lowers the revenue requirement to $1 million, necessitating a rate increase of 22% versus 33% as originally projected. As previously indicated, instead of expensing around $450,000 for annual routine capital outlay items, it requires less annual revenue to bond finance $1 million of these items. This lowers the annual capital outlay expense to $150,000, saving $300,000 in annual expense. The remaining $200,000 in reduced expenses is attributable to lower operating costs. Formation of the Authority calls for the General Fund to eliminate its present water and wastewater annual in -lieu payments ($870,000 -water and $770,000 -wastewater) and replace them with lease payments at equal or lower amounts ($870,000 -water and $570,000 -wastewater). This $200,000 annual savings further reduces the revenue requirement to $800,000, or a 17.3% rate increase. For residential customers, this means a monthly increase of $3.20 versus $6.00 originally projected. Since the City of Colton provides wastewater treatment service to the City of Grand Terrace, their rates would also be increased. The revenue requirement indicates that it is appropriate to raise the monthly charge to the residential customer in Grand Terrace to $17.07 from the current rate of $14.62. The proposed Authority structure is a joint powers authority (JPA). This approach has already been implemented in five California cities with others in progress. The name of the proposed JPA would be the Colton Utility Authority. Its members would be the City and the Redevelopment Agency. The governing body would still be the members of the City Council acting as the JPA's Board of Directors. The Redevelopment Agency's only involvement is for legal purposes of forming the JPA. The Redevelopment Agency will not have any financial relationship with the Authority. Only the assets and activities of the City's Water and Wastewater funds would be a part of the JPA. The Electric Utility Fund would remain independent of the JPA. City employees, the advisory role of the Utility Commission, and the enterprise fund identity of the Water and Wastewater funds remain unchanged.