(1)AR 042109 Water Rates - Laserfiche WebLink

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ITEM #1 CITY OF COLTON AGENDA REPORT FOR THE CITY COUNCIL AND COLTON UTILITY AUTHORITY MEETING OF APRIL 21, 2009 HONORABLE MAYOR AND CITY COUNCIL TO: HONORABLE PRESIDENT AND BOARD MEMBERS FROM: ERIC R. FRASER, DIRECTOR OF WATER & WASTEWATER OPERATIONS DARYL PARRISH, CUA EXECUTIVE DIRECTOR SUBJECT: CITY & CUA: PUBLIC HEARING — PROPOSED ADJUSTMENTS TO WATER RATES (AMENDING EXHIBIT "A" OF ORDINANCE # 15-98) DATE: April 12, 2009 BACKGROUND: The City and Colton Utility Authority's (CUA) water rates pay for all operating expenses as well as fund, on a pay-as-you-go basis, capital projects and debt service (annual principal + interest payments on outstanding debt). When the City and CUA issued bonds in the past to fund significant capital projects, the City and CUA guaranteed, and committed in these agreements, to establish and maintain water rates at levels sufficient to "cover" or pay for all debt service payments. The City and CUA remain committed to replacing aging water infrastructure and securing an adequate water supply to meet current and future demand. To that end, the City and CUA have undertaken several infrastructure improvement projects to replace and/or repair the City's water infrastructure. In fact, nearly all of the $11,120,000 of bonds secured in December 1, 1998 have been expended on projects such as the construction of three replacement and two new wells, over 30,000 feet of pipeline, and property for groundwater recharge facilities. The remaining funds are allocated to the construction of a new reservoir and booster station facility. The existing commodity rate for water was adopted in 1998 and has not changed since that time. DISCUSSION/ANALYSIS: On June 7, 2007, the City and CUA contracted the services of a professional water rate consulting firm, Glenn M. Reiter & Associates, to perform the analysis and determine an updated water rate structure that would meet the fiscal needs of the City and CUA. Key components of the rate structure to be proposed were: (1) conformity with current laws; (2) fair and objective; (3) establish a methodology to retire debt in a reasonable time frame; (4) accountable and stable; (5) easy to administer and explain to customers; (6) establish a capital reserve, rate stabilization, and capital replacement fund; and (7) meet revenue requirements of the existing bond issue. The City and CUA provided Glenn M. Reiter & Associates with comprehensive financial and water consumption data for the past five years that help to determine customer consumption patterns. Predictive usage and financial data was used to establish future revenue requirements through the estimated build out of approximately 13,000 customers using current land use plans. The results of the attached study established the need to implement a rate structure that would meet the desired objectives using a phased approach in order to minimize the impact to the