Committee of the Whole

City of Oconomowoc Committee-Of-The-Whole Tuesday, November 16, 2021 - 6:50 PM City Hall - Conference Room 3 174 E. Wisconsin Ave. Oconomowoc, WI 53066 Notice: If a person with a disability requires that the meeting be accessible or that materials at the meeting be in accessible format, call the City Clerk at least 48 hours prior to the meeting to request adequate accommodations. Tel: (262) 569-2186. 1. Call to order and confirmation of appropriate meeting notification 2. Committee Business 1 Consider/recommend Resolution 21-R2933 Amending the Wastewater Utility Rates - 2022 2 Consider/recommend Adoption of the 2022 Utility Budget ***Please bring your Budget Books*** 3. Adjourn ________________________________ Diane Coenen, City Clerk City of Oconomowoc Notice is hereby given that a majority of the Common Council will be present at the above scheduled meeting to gather information about a subject over which they have decision-making responsibility. This constitutes a meeting of the Common Council pursuant to State ex rel. Badke v. Greendale Village Board, 173Wis. 2d 553, 494 N.W. 2d 408 (1993) and must be noticed as such, although the Common Council will not take any formal action at this meeting. 1  MEMORANDUM DEPARTMENT Date: October 21, 2021 To: Utility Committee, City Council, Mayor Magnus From: John Schuh, Utility Accounting Manager Laurie Sullivan, Director of Finance/Administrative Services Re: Proposed 2022 Sanitary Sewer Rates RELATES TO THE STRATEGIC PLAN Strategic Goal-N/A BACKGROUND A thorough cost of service study has been conducted so that the Wastewater Utility is recovering adequate revenues to meet its financial needs. Service rates based on the study have been developed so that all customers pay a fair and proportional share of all operating and capital costs. See the attached pages showing the current and proposed 2022 service rates. Wastewater treatment rates are not regulated by the Public Service Commission and are typically adjusted annually, however, they were not changed last year. ADDITIONAL ANALYSIS If approved by the Utility Committee, the rates would then require council approval. FINANCIAL IMPACT The proposed rates for city customers represent an increase of 3.2% for an average residential customer. City commercial customer rates would increase on average 5.6% depending on volume and concentration of waste. This increase is recommended to cover annual operating expenses and provide a rate of return to fund capital projects. The revenue in excess of expenses is needed to continue funding capital projects necessary to maintain the integrity of our collection system, pumping stations and the treatment facility. Overall combined charges for the extraterritorial customers will also increase as a result of this rate review. Charges to this customer group consist of annual license fees based on the number of residential equivalent connections (RECs), and volumetric charges based on metered flow from each sanitary district. The license fees are municipal (non-utility) revenue that increase annually by 4.0% per year under the terms of the sewer service agreements. Volumetric charges are impacted by changes in operating and maintenance expense, annual flows and capital costs. The volumetric rates vary by district and would increase 3.2% to 4.5%. Under the terms of the agreements, the extraterritorial customers pay an 8.5% return on the net investment rate base. 1 2 RECOMMENDATION Recommend approval of Proposed 2022 Sanitary Sewer Rates. SUGGESTED MOTION Motion to approve the Proposed 2022 Sanitary Sewer Rates. 2 3  RESOLUTION NO. 21-R2993 RESOLUTION FOR WASTEWATER TREATMENT RATE ADJUSTMENT WHEREAS, §13.50 of the Municipal Code of the City of Oconomowoc sets forth the various sewer service charges and fees and provides in §13.50(6)(d) that the Common Council shall establish the charges and fees by resolution; and WHEREAS, §13.50 provides that there shall be an annual review of the user charge system, which shall be computed by the Finance Director and presented to the Common Council in time to provide for implementation of new charges for the following year; and WHEREAS, the Finance Director has computed all rates, charges and fees for 2022 and has submitted a recommendation to the Utility Committee, which has reviewed and approved the recommended 2022 sewer user rates, charges and fees for all wastewater treatment plant users, including extraterritorial users, and the proposed septage disposal charges and fees. NOW THEREFORE, BE IT HEREBY RESOLVED that the attached schedule of sewer rates, charges and fees, including septage disposal charges, are approved and established as the 2022 sewer rates, which rates shall remain in effect until further amendment by Common Council resolution. BE IT FURTHER RESOLVED that all other rates, charges and fees, including the sewer availability charge, shall remain in effect unless amended by ordinance or resolution of the Common Council. BE IT FURTHER RESOLVED that this resolution and the rates, charges and fees set forth on the attached schedule shall become effective January 1, 2022. DATED: CITY OCONOMOWOC By: ___________________________ Robert Magnus, Mayor ATTEST: ______________________________ Diane Coenen, Clerk 4 City of Oconomowoc 2022 Wastewater Rate Forecast Current and Proposed Rates Proposed Retail Rates (Individually Metered Customers) Class Unit of Measure 2021 Rates 2022 Rates City of Oconomowoc Domestic Strength Volume A per 1,000 gallons $ 5.60 $ 5.94 Above Domestic Strength Volume B per 1,000 gallons $ 6.11 $ 6.51 High Sgrength Volume C per 1,000 gallons $ 5.60 $ 5.94 Fixed Customer Charge n/a per customer, per month $ 6.80 $ 6.41 Outside Contract Retail Domestic Strength Volume A per 1,000 gallons $ 7.09 $ 7.36 Above Domestic Strength Volume B per 1,000 gallons $ 7.51 $ 7.82 Fixed Customer Charge n/a per customer, per month $ 3.57 $ 3.24 Proposed Retail High-Strength Surcharges Class Unit of Measure 2021 Rates 2022 Rates Biochemical Oxygen Demand (BOD) C pounds over 250 mg/L $ 0.39 $ 0.43 Total Suspended Solids (TSS) C pounds over 270 mg/L $ 0.25 $ 0.28 Phosphorus C pounds over 7 mg/L $ 16.35 $ 13.76 Proposed Wholesale Contract Rates (Metered By District) Class Unit of Measure 2021 Rates 2022 Rates Blackhawk Volume per 1,000 gallons $ 7.09 $ 7.36 Direct Cost annual $ 524.00 $ 675.00 Ixonia Volume per 1,000 gallons $ 5.32 $ 5.53 Direct Cost annual $ 704.00 $ 875.00 Mary Lane Volume per 1,000 gallons $ 5.32 $ 5.53 Direct Cost annual $ 524.00 $ 675.00 Lac LaBelle Volume per 1,000 gallons $ 5.32 $ 5.53 Direct Cost annual $ 704.00 $ 863.00 Town of Oconomowoc Volume per 1,000 gallons $ 7.61 $ 7.85 Village of Oconomowoc Lake Volume per 1,000 gallons $ 7.61 $ 7.85 Silver Lake Volume per 1,000 gallons $ 7.61 $ 7.85 Y:\Financial Statements\2021\Month End\2021-10 Utility Financial Stmts, RM Report 22a 10/18/2021, 5:40 PM 5 City of Oconomowoc 2022 Wastewater Rate Forecast Customer Bill Impacts Number of Annual Volume per Customer Monthly Customer Invoice Customers (1,000 gallons) (using 2022 volume) 2021 2022 2021 2022 Percent 2021 2022 Percent Representative Average Invoice Study Study Study Study Change Rates Rates Change City of Oconomowoc Residential 5,750 5,810 42.3 44.4 5.0% $ 27.52 $ 28.39 3.2% Commercial Domestic Strength 555 560 240 252 5.1% $ 124.31 $ 131.05 5.4% Commercial Above Domestic Strength 38 39 337 300 -10.9% $ 159.55 $ 169.16 6.0% Industrial Domestic Strength 30 30 777 877 12.9% $ 415.93 $ 440.38 5.9% Industrial Above Domestic Strength 5 5 1,720 1,140 -33.7% $ 587.25 $ 624.86 6.4% Total 6,378 6,444 Village of Summit Residential 200 233 23 51 n/a $ 33.76 $ 34.58 2.4% Commercial Domestic Strength 6 8 2,600 2,300 -11.5% $ 1,362.49 $ 1,413.91 3.8% Total 206 241 Village of Oconomowoc Lake Commercial Domestic Strength 6 7 467 400 -14.3% $ 239.90 $ 248.57 3.6% Commercial Above Domestic Strength 1 1 1,000 1,000 0.0% $ 629.40 $ 654.91 4.1% Total 7 8 Wholesale Sanitary Districts Blackhawk 1 1 2,900 2,700 -6.9% $ 1,639 $ 1,712 4.5% Ixonia 1 1 38,000 30,000 -21.1% $ 13,359 $ 13,898 4.0% Mary Lane 1 1 15,000 12,000 -20.0% $ 5,364 $ 5,586 4.1% Lac LaBelle 1 1 12,000 11,000 -8.3% $ 4,935 $ 5,141 4.2% Town of Oconomowoc 1 1 39,000 39,000 0.0% $ 24,733 $ 25,513 3.2% Village of Oconomowoc Lake 1 1 600 700 16.7% $ 444 $ 458 3.2% Silver Lake 1 1 10,300 9,500 -7.8% $ 6,025 $ 6,215 3.2% Total 7 7 TOTAL 6,598 6,700 Y:\Financial Statements\2021\Month End\2021-10 Utility Financial Stmts, RM Report 22b 10/18/2021, 5:43 PM 6 City of Oconomowoc 2021 2022 Volume 2022 2022 Wastewater Rate Forecast Budget at 2021 Rates Budget Volume Rate Total Volume Rate Total Utility Revenue Summary Revenue Revenue Revenue Change Change Change Change Change Change City of Oconomowoc Residential 1,830,000 1,919,000 1,979,000 89,000 60,000 149,000 4.9% 3.1% 8.1% Commercial Domestic Strength 790,000 835,000 881,000 45,000 46,000 91,000 5.7% 5.5% 11.5% Commercial Above Domestic Strength 82,000 75,000 79,000 (7,000) 4,000 (3,000) -8.5% 5.3% -3.7% Industrial Domestic Strength 133,000 150,000 159,000 17,000 9,000 26,000 12.8% 6.0% 19.5% Industrial Above Domestic Strength 53,000 35,200 37,500 (17,800) 2,300 (15,500) -33.6% 6.5% -29.2% Total 2,888,000 3,014,200 3,135,500 126,200 121,300 247,500 4.4% 4.0% 8.6% Village of Summit Residential 42,000 94,400 96,600 52,400 2,200 54,600 124.8% 2.3% 130.0% Commercial Domestic Strength 112,000 130,800 135,700 18,800 4,900 23,700 16.8% 3.7% 21.2% Total 154,000 225,200 232,300 71,200 7,100 78,300 46.2% 3.2% 50.8% Village of Oconomowoc Lake Commercial Domestic Strength 20,000 20,200 20,900 200 700 900 1.0% 3.5% 4.5% Commercial Above Domestic Strength 8,000 7,600 7,900 (400) 300 (100) -5.0% 3.9% -1.3% Total 28,000 27,800 28,800 (200) 1,000 800 -0.7% 3.6% 2.9% Wholesale Sanitary Districts Blackhawk 21,000 19,700 20,500 (1,300) 800 (500) -6.2% 4.1% -2.4% Ixonia 203,000 160,300 166,800 (42,700) 6,500 (36,200) -21.0% 4.1% -17.8% Mary Lane 81,000 64,400 67,000 (16,600) 2,600 (14,000) -20.5% 4.0% -17.3% Lac LaBelle 65,000 59,200 61,700 (5,800) 2,500 (3,300) -8.9% 4.2% -5.1% Town of Oconomowoc 301,000 296,800 306,200 (4,200) 9,400 5,200 -1.4% 3.2% 1.7% Village of Oconomowoc Lake 5,000 5,300 5,500 300 200 500 6.0% 3.8% 10.0% Silver Lake 79,000 72,300 74,600 (6,700) 2,300 (4,400) -8.5% 3.2% -5.6% Total 755,000 678,000 702,300 (77,000) 24,300 (52,700) -10.2% 3.6% -7.0% Total Wastewater Treatment Revenue 3,825,000 3,945,200 4,098,900 120,200 153,700 273,900 3.1% 3.9% 7.2% Other Operating Revenue Disposal Fees 229,000 229,000 229,000 - - - 0.0% 0.0% 0.0% Miscellaneous 14,000 14,000 14,000 - - - 0.0% 0.0% 0.0% Total 243,000 243,000 243,000 - - - 0.0% 0.0% 0.0% Total Operating Revenue 4,068,000 4,188,200 4,341,900 120,200 153,700 273,900 3.0% 3.7% 6.7% Y:\Financial Statements\2021\Month End\2021-10 Utility Financial Stmts, RM Report 22d 10/18/2021, 6:01 PM 7 City of Oconomowoc 2022 Wastewater Rate Forecast Miscellaneous Fees Unit of Current Proposed Description Measure Fee Fee Application and Registration Fees Renewal Application per firm $ 197.22 $ 203.00 Truck Registration per truck $ 17.53 $ 18.10 Initial Application per firm $ 284.88 $ 294.00 Sampling Fees Composite Grab Sample per sample $ 10.38 $ 10.70 Grab Sample per sample $ 4.27 $ 4.40 Sample Storage per sample $ 4.27 $ 4.40 Analysis Fees Biochemical Oxygen Demand (BOD) per test $ 32.97 $ 34.00 Total Suspended Solids (TSS) per test $ 14.05 $ 14.50 Phosphorus per test $ 16.44 $ 17.00 Oil and Grease per test $ 32.97 $ 34.00 pH per test $ 4.27 $ 4.40 Rates may be set for a particular originator based on sampling averages. BOD TSS P Septic and Holding Tanks Assumed Strength (mg / L) (mg / L) (mg / L) Holding Tank 350 500 18.2 Failed Septic Tank 2,700 5,500 21.0 Septic Tank 5,000 11,000 23.9 High Strength Rate per Pound $ 0.43 $ 0.28 $ 13.76 Unit of Current Proposed Description Measure Fee Fee Septic and Holding Tank Fees Holding Tank per 1,000 gal $ 8.03 $ 8.10 Failed Septic Tank (0-180 days) per 1,000 gal $ 26.29 $ 28.50 Septic Tank per 1,000 gal $ 45.42 $ 49.90 Other Fees Recreational Vehicle per load $ 5.00 $ 5.00 Administrative Charge per load $ 23.47 $ 24.20 Special Waste Review Fee (prepayment required) per review $ 83.82 $ 86.00 Y:\Financial Statements\2021\Month End\2021-10 Utility Financial Stmts, RM Report 22h 10/18/2021, 5:44 PM 8 City of Oconomowoc 2022 Wastewater Rate Forecast License Fees for Contract Communities Sanitary District 2019 2020 2021 2022 Blackhawk $ 138.03 $ 143.55 $ 149.29 $ 155.26 Ixonia $ 128.17 $ 133.30 $ 138.63 $ 144.18 Mary Lane $ 128.17 $ 133.30 $ 138.63 $ 144.18 Lac LaBelle $ 128.17 $ 133.30 $ 138.63 $ 144.18 Town of Oconomowoc $ 138.03 $ 143.55 $ 149.29 $ 155.26 Village of Oconomowoc Lake $ 138.03 $ 143.55 $ 149.29 $ 155.26 Village of Summit - Residential $ 138.03 $ 143.55 $ 149.29 $ 155.26 Village of Summit - Non-Residential $ 276.06 $ 287.10 $ 298.58 $ 310.52 Silver Lake - Residential $ 138.03 $ 143.55 $ 149.29 $ 155.26 Silver Lake - Non-Residential $ 276.06 $ 287.10 $ 298.58 $ 310.52 Note - Fee increases 4.0% annually per contracts. Note - License fees are revenue for the municipal general fund, not the wastewater utility. Y:\Financial Statements\2021\Month End\2021-10 Utility Financial Stmts, RM Report 22i 10/18/2021, 5:51 PM 9  MEMORANDUM DEPARTMENT Date: November 11, 2021 To: City Council, Mayor Magnus From: John Schuh, Utility Accounting Manager Laurie Sullivan, Director of Finance/Administrative Services Re: Proposed 2022 Utility Budget RELATES TO THE STRATEGIC PLAN Strategic Goal-N/A BACKGROUND In late October, a copy of the proposed 2022 Utility Budget was distributed. This budget was approved with an amendment to add a wastewater capital project at the Utility Committee meeting on November 2nd. The budget will be on the agenda at the next Committee-of-the-Whole on November 16, 2021 for recommendation to the council. This memo is intended to give you an overview of the budget and budgeting process. If the Committee-of-the-Whole recommends the proposed 2022 Utility Budget, it could be approved by the City Council later that same evening. If further discussion and consideration is needed, the budget could go to the Council for final adoption on December 7th. ADDITIONAL ANALYSIS To assist and expedite the budget review process, a detail spreadsheet report listing of the budget ledger accounts is included inside the front cover of the budget binder. The spreadsheet column and row numbers are included for reference. On this report, accounts are listed in numerical order (wastewater – green, water – blue, electric – yellow). Columns X and Y reflect the change from the previously approved (2021) budget to the proposed (2022) budget. Accounts with an unfavorable increase greater than $5,000 are highlighted in red. The Notes column includes a brief explanation for most of the significant changes. Each section total on the report in column G lists the corresponding budget binder page number. Note that the detail budget reports in the binder are sorted numerically based on the third of the four segments of the ledger account number (xxx-xxx-XXXX- xxx). FINANCIAL IMPACT Wastewater Budget Overview As part of the annual budget process, a detailed rate study model has been updated for the planned expenses. This provides guidance on how to structure rates for both our metered city customers and the outlying adjacent sanitary districts. The model also reflects anticipated customer growth and changes in volume flow. Based on 1 10 study results, a net 3.9% rate increase is recommended. Unlike the PSC regulated water & electric utilities, wastewater rates are typically adjusted annually. However, no wastewater rates were changed last year. An average residential customer would have a 3.2% rate increase of $0.87/month or $10.44/year. City commercial customers would increase 5.6% on average. Sanitary district rates are adjusted by their agreement and the rate model results, with a lower 3.6% average increase. The majority of the Wastewater operational budget remains similar to prior years. The utility continues funding significant activities related to the Oconomowoc River watershed phosphorus reduction project. The primary purpose of this innovative project is to avoid significantly larger capital equipment expenses at the treatment facility in future years. The 2022 budget includes about $347,000 of expenses for this project, similar to the prior year budget. Overall operating expenses are projected to increase 2.39% ($93,504). Depreciation represents the largest increase in operating expenses. Because the Wastewater Utility is very capital intensive, depreciation is one of the largest components, representing 26% of total operating expenses. The Wastewater capital budget continues to fund sewer main replacements and reinforcements in conjunction with street repair projects. Another significant project is the replacement of the secondary digester cover. The primary digester cover is a current year project. These digester projects are being funded by previously collected Sewer Availability Charges paid by new development. The Wastewater Utility is expected to produce an operating income of $340,574 and a rate of return of 2.33%. *Included with this memo is a revised budget page WW-7, reflecting a capital project subsequently added after the distributed copy was printed. This addition was approved by the Utility Committee on November 2nd. Water Budget Overview The Water Utility implemented the first part of a two-step rate increase effective September 1, 2021. This mid- year implementation was anticipated in the 2021 utility budget. As a result, the 2022 budget also includes an annualized revenue increase of $215,000 over the current budget. The second part of the rate increase will be implemented after Well #8 is placed into service, which is not anticipated until early 2023. Therefore, the second step adjustment is not reflected in this budget. Overall operating expenses are projected to increase 6.87% ($215,836). The largest increases are from the payment in lieu of tax to the general fund and depreciation. Both are the result of a growing base of assets from street project main replacements. The multi-year tower maintenance contract will provide for repainting the East standpipe tank. Also included is a study to determine the potential need for a reservoir at the north side Well #4 & #6 facility. The capital project budget includes $931,000 for water main replacements to keep pace with the fifth year of the city’s accelerated street projects. The budget also includes $665,000 for mains adjacent to the Olympia Fields development and $1,016,000 for continuing construction of the Well #8 facility. The utility borrowed $2.4 million 2020 and anticipates additional borrowing in 2022, currently projected at $3.5 million. The Water Utility is projected to produce an operating income of $757,359 and a rate of return of 3.90%. Electric Budget Overview Operating revenue is projected to remain relatively unchanged (increase 0.01%, $2,700). WPPI provides our guidance in forecasting future sales and costs of purchased power. The current electric rates were implemented 2 11 in March 2019. As a result, the 2022 budget does not include any base rate changes. It is anticipated that an electric rate adjustment will be needed for 2023. Total operating expenses of the Electric Utility are budgeted to increase 1.47% ($338,048). Purchased power is the largest expenditure in the electric budget ($16,848,000) and accounts for 72% of the operating expenses. Power costs are were budgeted by WPPI to increase 0.71%. If inflationary market changes occur, they will be recovered through monthly adjustments of our Purchase Cost Adjustment Charge (PCAC) which minimize the impact to our local utility operations. Excluding purchased power, the remaining operating expenses are expected to increase 3.51% ($220,048). The largest increases are due to depreciation and a projected increase in the payment in lieu of tax to the general fund. The capital project budget includes $2,150,000 of distribution system upgrade projects. This represents a continued expansion of efforts to replace problematic cable, implement distribution voltage improvements, and upgrade industrial services. The budget also includes replacement of our single digger-derrick truck for replacing overhead poles. Overall, the Electric Utility is estimated to produce $540,349 in operating income with a rate of return of 1.51%. RECOMMENDATION Recommend approval of Proposed 2022 Utility Budget. SUGGESTED MOTION Motion to approve the Proposed 2022 Utility Budget. 3 12  CITY OF OCONOMOWOC 2022 BUDGET WASTEWATER UTILITY - CAPITAL PROJECTIONS WORKORDER AMOUNT TITLE & DESCRIPTION NUMBER 122010 $80,000 LIFT STATION SCADA SYSTEM Replacement of 2-4 lift station SCADA control panels that are operating very slow. Updates required to maintain DNR permit compliance. 122011 $50,000 TRUCK #19 - REPLACEMENT 1/2 TON TRUCK Replacement of 2006 1/2 ton pickup truck with four-door short box truck. Transfer current lift gate to truck #87. 122012 $350,000 TELEVISING VEHICLE New vehicle to house sewer main televising equipment and related computer control system. Unit will be used to relevise all construciton areas prior to project design and for routine system cleaning and problem area investigations. 122013 $8,000 (b) INFLUENT WETWELL FLOORING REPLACEMENT Replacement of flooring that is deteriorating due to the environment inside the influent wetwell. New plastic flooring will provide greater safety for crew staff. 122014 $8,000 (b) TANK SAFETY RAILING REPLACEMENT Replacement of rusted railings on tanks and related concrete repairs. New rails not be mounted into the concrete, but bolted on top. 122015 $990,000 NORTHEAST REGIONAL LIFT STATION Design, management and construction of a new wastewater lift station to be located at the new Northeast regional park. This facility will allow for continued development in the area. The structure will include a park shelter and restroom facility. The Park Faciliities Impact Fee Fund will provide an additional $350,000 of funding for their part of the project. 122016 $50,000 (b) CAPITAL CONTINGENCY Additional funding for unplanned emergency capital projects. $6,092,000 TOTAL (a) - Project funded by Sewer Availability Charges (b) - Project funded by Equipment Replacement Fund WW - 7 13