Committee of the Whole

REVISED City of Oconomowoc Committee-Of-The-Whole Tuesday, November 01, 2022 - 7:00 PM City Hall - Council Chambers 174 E. Wisconsin Ave. Oconomowoc, WI 53066 (or immediately following Public Services) 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 a. Consider/recommend approval of the 2023 Wastewater Rates b. Consider/recommend Approval of the 2023 Utility Budgets 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 UTILITY FINANCE Date: October 14, 2022 To: Utility Committee, City Council, Mayor Magnus From: John Schuh, Utility Accounting Manager Laurie Sullivan, Director of Finance/Administrative Services Re: Proposed 2023 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 2023 service rates. Wastewater treatment rates are not regulated by the Public Service Commission and are typically adjusted annually. ADDITIONAL ANALYSIS After review by the Utility Committee and recommendation from the COW, the rates would then require Council approval. FINANCIAL IMPACT The proposed rates for city customers represent an increase of 7.5% for an average residential customer. City commercial customer rates would increase on average 9.0% depending on volume and concentration of waste. This increase is recommended to cover annual operating expenses and 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 3.3% to 3.7%. 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 2023 Sanitary Sewer Rates. SUGGESTED MOTION Motion to Recommend to the Common Council the approval the Proposed 2023 Sanitary Sewer Rates. 2 3  RESOLUTION NO. 22-R3075 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 2023 and has submitted a recommendation to the Utility Committee, which has reviewed and approved the recommended 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 2023 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, 2023. DATED: CITY OCONOMOWOC By: ___________________________ Robert P. Magnus, Mayor ATTEST: ______________________________ Diane Coenen, Clerk 4 City of Oconomowoc 2023 Wastewater Rate Forecast-Adjusted Current and Proposed Rates Proposed Retail Rates (Individually Metered Customers) Class Unit of Measure 2022 Rates 2023 Rates City of Oconomowoc Domestic Strength Volume A per 1,000 gallons $ 5.94 $ 6.50 Above Domestic Strength Volume B per 1,000 gallons $ 6.51 $ 7.17 High Sgrength Volume C per 1,000 gallons $ 5.94 $ 6.50 Fixed Customer Charge n/a per customer, per month $ 6.41 $ 6.50 Outside Contract Retail Domestic Strength Volume A per 1,000 gallons $ 7.36 $ 7.63 Above Domestic Strength Volume B per 1,000 gallons $ 7.82 $ 8.16 Fixed Customer Charge n/a per customer, per month $ 3.24 $ 2.72 Proposed Retail High-Strength Surcharges Class Unit of Measure 2022 Rates 2023 Rates Biochemical Oxygen Demand (BOD) C pounds over 250 mg/L $ 0.43 $ 0.51 Total Suspended Solids (TSS) C pounds over 270 mg/L $ 0.28 $ 0.33 Phosphorus C pounds over 7 mg/L $ 13.76 $ 19.62 Proposed Wholesale Contract Rates (Metered By District) Class Unit of Measure 2022 Rates 2023 Rates Blackhawk Volume per 1,000 gallons $ 7.36 $ 7.63 Direct Cost annual $ 675.00 $ 609.00 Ixonia Volume per 1,000 gallons $ 5.53 $ 5.71 Direct Cost annual $ 863.00 $ 809.00 Mary Lane Volume per 1,000 gallons $ 5.53 $ 5.71 Direct Cost annual $ 675.00 $ 609.00 Lac LaBelle Volume per 1,000 gallons $ 5.53 $ 5.71 Direct Cost annual $ 863.00 $ 809.00 Town of Oconomowoc Volume per 1,000 gallons $ 7.85 $ 8.11 Village of Oconomowoc Lake Volume per 1,000 gallons $ 7.85 $ 8.11 Silver Lake Volume per 1,000 gallons $ 7.85 $ 8.11 COSS - 1 Y:\Financial Statements\2022\Month End\2022-10 Utility Financial Stmts, RM Report 23a1 10/12/2022, 3:49 PM 5 City of Oconomowoc 2023 Wastewater Rate Forecast-Adjusted Miscellaneous Fees Unit of Current Proposed Description Measure Fee Fee Application and Registration Fees Renewal Application per firm $ 203.00 $ 218.00 Truck Registration per truck $ 18.10 $ 19.00 Initial Application per firm $ 294.00 $ 316.00 Sampling Fees Composite Grab Sample per sample $ 10.70 $ 11.50 Grab Sample per sample $ 4.40 $ 4.70 Sample Storage per sample $ 4.40 $ 4.70 Analysis Fees Biochemical Oxygen Demand (BOD) per test $ 34.00 $ 36.60 Total Suspended Solids (TSS) per test $ 14.50 $ 15.60 Phosphorus per test $ 17.00 $ 18.30 Oil and Grease per test $ 34.00 $ 36.60 pH per test $ 4.40 $ 4.70 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 $ 0.51 $ 0.33 $ 19.62 Unit of Current Proposed Description Measure Fee Fee Septic and Holding Tank Fees Holding Tank per 1,000 gal $ 8.10 $ 10.00 Failed Septic Tank (0-180 days) per 1,000 gal $ 28.50 $ 34.10 Septic Tank per 1,000 gal $ 49.90 $ 59.50 Other Fees Recreational Vehicle per load $ 5.00 $ 5.00 Administrative Charge per load $ 24.20 $ 26.00 Special Waste Review Fee (prepayment required) per review $ 86.00 $ 92.00 COSS - 10 Y:\Financial Statements\2022\Month End\2022-10 Utility Financial Stmts, RM Report 23h1 10/12/2022, 3:57 PM 6 City of Oconomowoc 2023 Wastewater Rate Forecast-Original License Fees for Contract Communities Sanitary District 2021 2022 2023 Blackhawk - Residential $ 149.29 $ 155.26 $ 161.47 Ixonia - Residential $ 138.63 $ 144.18 $ 149.95 Ixonia - Non-Residential $ 138.63 $ 144.18 $ 149.95 Mary Lane - Residential $ 138.63 $ 144.18 $ 149.95 Mary Lane - Non-Residential $ 138.63 $ 144.18 $ 149.95 Lac LaBelle - Residential $ 138.63 $ 144.18 $ 149.95 Lac LaBelle - Non-Residential $ 138.63 $ 144.18 $ 149.95 Town of Oconomowoc - Residential $ 149.29 $ 155.26 $ 161.47 Town of Oconomowoc - Non-Residential $ 149.29 $ 155.26 $ 161.47 Village of Oconomowoc Lake - Residential $ 149.29 $ 155.26 $ 161.47 Village of Oconomowoc Lake - Non-Residential $ 149.29 $ 155.26 $ 161.47 Village of Summit - Residential $ 149.29 $ 155.26 $ 161.47 Village of Summit - Non-Residential $ 298.58 $ 310.52 $ 322.94 Silver Lake - Residential $ 149.29 $ 155.26 $ 161.47 Silver Lake - Non-Residential $ 298.58 $ 310.52 $ 322.94 Note - Fee increases 4.0% annually per contracts. Note - License fees are revenue for the municipal general fund, not the wastewater utility. Monthly First Year Amortization for Village of Summit Residential $ 149.29 $ 155.26 $ 161.47 Jan $ 149.29 $ 155.26 $ 161.47 Feb $ 136.85 $ 142.32 $ 148.01 Mar $ 124.41 $ 129.38 $ 134.56 Apr $ 111.97 $ 116.45 $ 121.10 May $ 99.53 $ 103.51 $ 107.65 Jun $ 87.09 $ 90.57 $ 94.19 Jul $ 74.65 $ 77.63 $ 80.74 Aug $ 62.20 $ 64.69 $ 67.28 Sep $ 49.76 $ 51.75 $ 53.82 Oct $ 37.32 $ 38.82 $ 40.37 Nov $ 24.88 $ 25.88 $ 26.91 Dec $ 12.44 $ 12.94 $ 13.46 Non-Residential $ 298.58 $ 310.52 $ 322.94 Jan $ 298.58 $ 310.52 $ 322.94 Feb $ 273.70 $ 284.64 $ 296.03 Mar $ 248.82 $ 258.77 $ 269.12 Apr $ 223.94 $ 232.89 $ 242.21 May $ 199.05 $ 207.01 $ 215.29 Jun $ 174.17 $ 181.14 $ 188.38 Jul $ 149.29 $ 155.26 $ 161.47 Aug $ 124.41 $ 129.38 $ 134.56 Sep $ 99.53 $ 103.51 $ 107.65 Oct $ 74.65 $ 77.63 $ 80.74 Nov $ 49.76 $ 51.75 $ 53.82 Dec $ 24.88 $ 25.88 $ 26.91 COSS - 11 Y:\Financial Statements\2022\Month End\2022-10 Utility Financial Stmts, RM Report 23i 10/12/2022, 3:57 PM 7 City of Oconomowoc 2023 Wastewater Rate Forecast-Adjusted Average Residential Customer Impact Average Residential 2022 2021 % of 2022 % of $ % Customer Rate Impact Volume Rates Total Rates Total Change Change Average Annual Usage 42,000 # of Months 12 Average Monthly Usage 3,500 Thousand Gallons 3.50 3.50 3.50 per Month Volume Rate 5.94 6.50 0.56 9.4% Volume Charge 20.79 76% 22.75 78% 1.96 9.4% Fixed Monthly Charge 6.41 24% 6.50 22% 0.09 1.4% Total Charges 27.20 100% 29.25 100% 2.05 7.5% Average Residential 2022 2021 % of 2022 % of $ % Customer Rate Impact Volume Rates Total Rates Total Change Change Average Annual Usage 42,000 Thousand Gallons 42.00 42.00 42.00 Volume Rate 5.94 6.50 Volume Charge 249.48 76% 273.00 78% 23.52 9.4% per Year Fixed Monthly Charge 6.41 6.50 # of Months 12 12 Fixed Charge 76.92 24% 78.00 22% 1.08 1.4% Total Charges 326.40 100% 351.00 78% 24.60 7.5% Note, prior year budget average customer annual estimated consumption was: 44,400 This represents a change in volume of: (2,400) -5.4% COSS - 12 Y:\Financial Statements\2022\Month End\2022-10 Utility Financial Stmts, Avg Customer 23j1 10/12/2022, 3:59 PM 8  MEMORANDUM UTILITY FINANCE Date: October 26, 2022 To: City Council, Mayor Magnus From: John Schuh, Utility Accounting Manager Laurie Sullivan, Director of Finance/Administrative Services Re: Proposed 2023 Utility Budget RELATES TO THE STRATEGIC PLAN Strategic Goal-N/A BACKGROUND The proposed 2023 Utility Budget was distributed to Council members on October 14 for their review. This budget was on the agenda at the meeting of the Utility Committee on October 25, 2022 for committee discussion and review. A majority of the City Council attended the Utility budget meeting. ADDITIONAL ANALYSIS This memo is intended to give you an overview of the budget and budgeting process. The Utility Committee reviewed the proposed the 2023 Utility Budgets and sends it forward to the Committee- of-the-Whole meeting for a recommendation to the City Council. FINANCIAL IMPACT Wastewater Budget Overview As part of the annual budget process, a detailed rate study model is 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 study results, a net 7.0% rate increase is recommended. Unlike the PSC regulated water & electric utilities, wastewater rates are typically adjusted annually. An average residential customer would have a 7.5% rate increase of $2.05/month. City commercial customers would increase 9.0% on average. Sanitary district rates are adjusted by their agreement and the rate model results, with a lower 3.3% average increase. The Wastewater Utility expands 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 2023 budget includes about $534,000 of expenses for this project. 1 9 Overall operating expenses are projected to increase 17.85% ($713,112). Depreciation represents the largest increase in operating expenses. Because the Wastewater Utility is very capital intensive, depreciation is one of the largest components, representing 27% of total operating expenses. The Wastewater capital budget continues to fund sewer main replacements and reinforcements in conjunction with street repair projects. The budget assumes completion of the digester cover replacements and the start of a septic receiving station project. Both projects are funded by previously collected Sewer Availability Charges paid by new development. The Wastewater Utility is budgeted to produce an operating loss of $58,399 and a negative rate of return of 0.40%. Actual operating expenses have usually been less than budgeted amounts. In addition, the utility has adequate cash reserves. Water Budget Overview The Water Utility is budgeted for an increase in operating revenue of 5.55% ($228,210) from updated customer and volume assumptions. Upon completion of Well #8, the second step of a previously approved rate adjustment would be implemented. However, this is not anticipated until the start of 2024. Overall operating expenses are projected to increase 6.53% ($219,039). The largest increases are from depreciation. This is the result of a growing base of assets from street project main replacements and Well #8. The multi-year tower maintenance contract will provide for repainting the West standpipe tank. The capital project budget includes $1,500,000 for water main replacements to keep pace with the sixth year of the city’s accelerated street projects. The utility borrowed $2.6 million 2022 and anticipates additional borrowing of $4.0 million in 2023. The Water Utility is projected to produce an operating income of $769,350 and a rate of return of 3.46%. Electric Budget Overview Operating revenue is projected to increase 22.3% ($5,323,700). This is mostly from the cost of purchased power, increasing 24.8% ($4,179,000). WPPI provides our initial guidance in forecasting future sales and costs of purchased power. The budget also includes revenue from an anticipated 5.0% base rate increase, effective mid- year. Electric rates were last changed in March 2019. Total operating expenses of the Electric Utility are budgeted to increase 18.7% ($4,366,400). Purchased power is the largest expenditure in the electric budget ($21,027,000) and accounts for 76% of the operating expenses. If the power cost inflationary assumptions are different than budgeted, the impact is recovered through monthly adjustments to 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 2.89% ($187,400). The largest increases are due to depreciation from a growing base of assets. The capital project budget includes $2,190,000 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 digger-derrick truck and a large bucket truck repairing overhead cable. Overall, the Electric Utility is estimated to produce $1,506,108 in operating income with a rate of return of 4.14%. 2 10 RECOMMENDATION Recommend approval of Proposed 2023 Utility Budgets. SUGGESTED MOTION Motion to recommend to the Common Council approval of the Proposed 2023 Utility Budgets. 3 11