Littleton City Council Meeting Minutes 13 January 2009

Littleton City Council Study Session

January 13, 2009

 

There were two agenda items – Littleton Housing Authority and the 2009 sewer rates.

 

The Littleton Housing Authority had a very nice conversation with the Council and a handout was provided.  Rather than including it in these minutes I would refer you to the City’s web site where they should be posted.  The handout gave the reader a very good overview of the LHA, what they do and what they are planning to do in the future.  (As of this writing this particular meeting was not on the website but I am assuming it will be there soon.)

 

Discussion of Sewer Rates

 

A motion was made and passed to allow public input at the study session to allow representatives of the sewer districts to speak to the Council.

 

Pat Fitzgerald, representing the Platte Canyon and SW Metro Sewer districts stated that they would accept the increases in the 2009 rates as proposed by the staff.  The increases are necessary to pay for the debt service, plant upgrades and ongoing expenses.  He expressed his concern that the outside users were continuing to subsidize the internal collection costs and based on their analysis the rate for the internal users needs to be higher.

 

The connector districts have banded together and hired a rate consultant.  They are waiting for documents from the City’s staff.  He asked Council to direct the staff to take a more active role in the rate study – he believes the outcome would be better and would reduce some of the animosity from the past.

 

Doug Clark asked Fitzgerald if he had any figures to back up his claims.

 

Fitzgerald thought the rate study would bear out his claim – he did not have the numbers.

 

Clark asked if they came to the conclusion first then authorize a study to support their conclusion.

 

Fitzgerald said no, they told the consultant to do a study on the cost of service principles under the standard utility rate practices.

 

Clark told Fitzgerald that he continues to claim that we do not collect enough to cover our costs but yet he does not present any numbers to show why it is true.  Fitzgerald said it would be pretty easy to do if staff would break out the collection and treatment costs.  Clark agreed that it was an easy exercise but yet Fitzgerald didn’t do it even though he has the information.  Fitzgerald said he would be happy to sit down with the other connector districts and finance and come up with the numbers.

 

Larry Moore, Roxborough Sewer District, thought the 3 proposed rates by staff were acceptable.  He thought smaller gradual increases were easier for customers.  He was concerned about the subsidy of the collection costs within the City by the outside districts and Littleton needed to be as transparent as possible.  We are all in this together and he would be happy to come in and work with the finance department – it is in our best interest to get this plant paid for.  We need $5 million to cover the debt service be we also need to prepare for a catastrophic event.  He preferred to see a prudent approach to finances and would like to see a 5 year plan.  We are in tough times and tap fees are slim.  The gravy days are gone.

 

Clark told Moore it is very easy to figure how much we pay for our internal collection system for commercial.  There’s the rate we charge for inside the city and the rate we charge for outside the city. And we have more commercial inside the city than all the districts combined.  It is very easy for you, if you do not believe our calculations, to take the gallons of commercial sewage times the amount we collect for internal collection system costs.  You talk about an adversarial relationship and you just joined us in 2007 and you came in with the assumption that we are cheating you along with everyone else and you haven’t seen the data.

 

Moore said that it is easy to make that jump when you (Littleton) are not transparent.

 

Doug Farman said the HOAs asked the city to establish the sewer rates earlier in the year to help with their budgeting process.  There were three alternatives presented by the staff.

 

  1. Best Estimate
  2. No Increase
  3. Conservative

 

 

Jim Woods said there’s a big footnote – the 5 year table is not in concrete.  The water quality regulations continue to be upgraded and there is no doubt that there will be higher standards in the next 5 years.  Those costs are not plugged into the analysis because we don’t know what the costs will be.

 

Farman said the only thing they do know is the debt service – all other costs are based on assumptions and projections.  The question for the council is how comfortable are you with the bare minimum in reserves.

 

Clark said $5 million is the minimum that they have to have in reserves legally but a $10 million in reserves would be more comfortable.  Right now we are under-collecting and drawing down the reserves.  If we were to raise rates to meet the actual cost of service we would need another $3.3 million in the reserves in 2009.  How much of an increase would that be?

 

Farman said they could figure that but they had not yet.

 

Peggy Cole said she would like to see that number.  She was also concerned that they are not collecting enough to cover the costs and with higher standards coming the users could be hit with a double whammy.

 

Woods said they needed to know what council was comfortable with – a steady increase or keep rates low and be hit with a spike in future years.

 

Cole inquired about charging based on output – do we have any idea about the feasibility of charging based on actual use.  If you have taken steps to be water conservative – we (the Cole’s) don’t use any where near all the water allocated to a single resident – so we pay more.

 

Woods said it would take the cooperation of the Denver Water Board – there would be winners and losers – large families will pay more.  Commercial customers are already on a consumption base.

 

Denise, from accounting, said the single family residents would not be difficult – the multi family units would be but they could get the apartment numbers from the Denver Water Board.

 

Clark said it was a philosophical problem – we are already collecting the operating costs.  The difficulty is caused by not collecting the debt service which was based on population growth that didn’t happen.  The expansion was driven by certain assumptions based on gallons use per residence.  To change how we bill is fundamentally unfair.

 

Cole said Englewood does it. Clark told her Englewood was a whole different affair.  We are covering our operational costs. The problem is we are not collecting tap fees and it is unlikely that we are going to so we are forced to raise user rates to cover the expansion costs.

 

Clark handed out a document that shows the historical financial data of the sewer plant.  The assumption is (by the outside districts) since we didn’t raise rates and costs were going up we were using the outside money but we were taking on new users.  The districts are taking one or two pieces of data and coming to an incorrect conclusion and making assumptions, writing white papers that are not true.

 

Cole repeated that she would like more information on billing for actual usage.  Ostermiller told her that the problem is people will decrease their consumption which will decrease revenues and then the rates go way up.  You have no control over your revenues – Englewood used to be lower than us but now they are higher than us which he thinks is due to conservation.  Anytime you conserve, revenue goes down.

 

Cole made a motion to direct staff to get information on a consumption based billing system for the residential users in the City.  Her motion died for a lack of a second.

 

The spokesperson for Ken Caryl district said they raised their 2009 rates 4%.  When their rates were increased last year by 20% ($30) they only passed on a 7% increase to their customers.  They would be fine with a 6% increase.

 

Clark said the rates needed to be set fairly so the inside users were not subsidizing the outside districts and that is still happening.  They produce 23.5% more sewage per dwelling unit than we and the rates are 20% different.  He moved to raise the rates for the outside customers 6% for commercial and residential and to raise the rates for the inside customers to a rate that is 23.5% less than the outside customers.

 

Ostermiller said they were working off a bunch of guesstimates and supposition with no basis.  It is time to get a rate consultant and do a study.  Whatever we do should be the same for the inside and outside users for this year and immediately do a rate study so we know what we are talking about.

 

Taylor said Fitzgerald offered for us to participate with their study.  Looking at a different methodology might give us a better perspective.  Why not share the cost with the other districts?

 

Cole said they raised the rates 20% on the outside users last year and nothing on the inside users and part of that was based on very good analysis.  She was not in favor of the differential this year based on the census data being 8 years old.

 

Jose said the whole thing is to bring the rates in line – what would it cost to bring them up to us?

 

Clark said $17.00 and Taylor reminded them that the outside users also pay a mill levy.

 

Jose thought it would be good to get everyone paying the same but it won’t happen this year.  The plant upgrades are the biggest problem we have.

 

Clark said a rate study takes your philosophy and gets it embedded in the rate structure.  The numbers are the numbers – they come to us for the numbers.  It comes down to what you accept as the buy-in for the assets of the plant – the Red Oak study was valid even if it took 120 years to pay for the plant.  Consultants won’t solve the problem.

 

Motion failed on a 3/4 vote with Brinkman, Ostermiller, Taylor and Cole dissenting.

 

Cole moved to raise the residential rates 6% for both the inside and outside users.  Ostermiller seconded. 

 

Brinkman said she was shocked when she received her sewer bill after moving to Littleton.  We are fighting tap fees and she did not think this was the year not to act conservatively.  6% is fair. 

 

Motion passed 4/3 with Mulvey, Clark and Jose dissenting.

 

Cole asked more information be provided in October or November next year and they do the impossible – make the best estimate to build up reserves to cover the next five years of mandates.

 

Clark said the bill was getting high enough that they should consider billing twice per year.

 

Farman said he had been thinking about that already and will provide the Council with the advantages and disadvantages.  They will have to work with the City Code and the County Certification date of November 1st and software issues.

 

Taylor moved to authorize the staff to participate in the rate study.

 

Woods said Blosten and Farman are accumulating a large amount of information already.

 

Taylor said it was public information anyway and they needed the best information to make rate decisions and to have our staff actively participate would benefit us.

 

Ostermiller said especially to analyze and massage the results.  We have to have someone involved to give input.

 

Cole said we have earlier studies and wondered why we needed another.

 

Ostermiller said things are different – operating costs are not as high, reserves are higher.  Can we really determine collection costs?

 

Suzanne asked for the definition of participate.  If Blosten was here he would say he is already participating.

 

Ostermiller asked if every word had to be defined.

 

Taylor said if the outside districts are funding a biased study the only way to make certain it is not biased is to actively participate.

 

Mulvey wanted to know the cost.  Taylor said he had no idea and that bothered Mulvey.

 

Clark said he had fond memories discussing the philosophical merits of the Red Oak study.  Every study determined tap fees at $1100 to $1200.  We are at $5000 per tap and it is not even close to covering the cost of the plant.  If we participate in another study where it doesn’t matter when the plant is paid off – if they want historical information to try and determine the cost of the plant – I have been there.  We have a declining flow; the amount being used per person is going down….

 

Ostermiller asked what was wrong with doing a study every year – you assume that tap fees have to pay off the note when it is due.  Let’s get the study done.

 

Suzanne said the cost would be about $103,000 per year.

 

Fitzgerald said the Districts would bear the cost of the study.  What they really want is for the staff to participate.

 

Jose called for the question – motion failed on a 4/3 vote with Brinkman, Taylor and Ostermiller dissenting.  (It takes 5 votes to Call the Question.)

 

Brinkman asked Woods to comment on staff time.  Farman said he would need to know the level of involvement – if it meant a new project it would be difficult to do – if you are talking about 5 hours that would be manageable.

 

Taylor tried to withdraw his motion to no avail. Ostermiller asked Woods what kind of time would be required in a rate study and Woods said it would be pretty significant.  Woods said it was really a philosophical question and how to divide up the cost.

 

Clark agreed – if the methodology and philosophy is not what the Council will buy into – you have to get the Council involved and the consultant has already been hired.

 

Woods saw a hybrid – staff could review the accuracy of the information.  The staff is very clued into what Clark said about any philosophical issues would have to have Council approval but in terms of checking the data – to that extent we can provide data and have staff review data – having gone through many hours with Red Oak we know the threshold.

 

Clark said there are all sorts of philosophical questions on what appears to be black and white numbers.

 

Motion failed 2/5 with Brinkman, Cole, Jose, Clark and Mulvey dissenting.

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