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HomeMy WebLinkAbout05-12-03 Minutes WS MINUTES OF THE OCOEE CITY COMMISSION WORK SESSION HELD MAY 12, 2003 Mayor Vandergrift called the work session to order at 6:30 p.m. in the Commission Chambers. City Clerk Grafton called the roll and announced all were present with the exception of Commission Howell. City Manager Gleason advised Commissioner Howell had called at 6:25 p.m. to say he could not be present, but would listen to the recording of the meeting. PRESENT: Mayor Vandergrift, Commissioners Anderson, Johnson, and Parker. Also present were City Manager Gleason, City Clerk Grafton, Finance Director Horton, Finance Supervisor Carter, Public Works Director Wheeler, Utilities Superintendent Holland, Customer Service Supervisor Sills, Consultants from Professional Engineering Co. Tom Kelly and Ken Hooper, Michael Burton, Burton and Associates, and Mark Galvin, Southwest Financial. ABSENT: Commissioner Howell City Manager Gleason thanked the Commission for taking the time to hold the workshop due to the seriousness of the issues, saying, while this also must be addressed in regular session, it needed to be in its separate environment so two key issues could be discussed. The first issue was, since he had approached the Commission a few months earlier about refinancing, when it was possible to get about four and a half million dollars, keeping the same debt payment, but extending it out over a longer period oftime, it was discovered shortly after that there were a couple of projects that had not been accounted for and additional funds were needed for those. Second to be considered was the current utilities structure and the impact that has on both the capital improvement program, the City's potential bond rating and the ability to fund the additional money needed to be borrowed and future projects. Utility Enterprise Fund: Discussion Additional Projects-Maguire Road-Auto Auction and Old Winter Garden Road Utility Line Relocation. $2.50 million David Wheeler Public Works Director Wheeler said there were two projects that cannot be paid for from current revenues as there are no current revenues to fund them. The first is Maguire Road Phase 5 (from just north of Best Western property to the intersection at Sysco). Three years ago an agreement was entered into with Florida Auto Auction which stated the City would be under construction in three years and that comes up in October or November of this year. Included in that project is the relocation of utilities, which is not typically paid for in a road project, but in this case it will come out of the Public Works, or General Fund, or Transportation Bond Fund, or the Utilities Fund. The second project is the utilities relocation on the Old Winter Garden Road/Professional Parkway Project, for which he hopes to go to bid on soon, as soon as the right-of-way issues are resolved. Those two projects total about two and a half million dollars (one and a half million for Maguire Road and one million for Old Winter Garden Road/ Professional Parkway). These figures are just utility relocation costs and have nothing to do with building the road. Ocoee City Commission Work Session May 12, 2003 Mayor Vandergrift asked if the City actually had that much utilities under Maguire Road. Mr. Wheeler said there is a sewer force main that lays off the western edge and some other utilities in that area, as well as some additional stuff he needs to put in that area where there is no sanitary sewer. Commissioner Anderson asked about the agreement with Florida Auto Auction regarding Phase 5. Mr. Wheeler said FAA had given the City $1.2 million to improve a section of the road and the balance would cost the City $3.25 million to do the job. Those funds are in the Transportation---. Mr. Gleason explained the reason the relocation of the utilities had not been included originally was because typically that cost is paid by the developer - and in this project there is no developer to pass the cost on to. At Mr. Gleason's request, Mr. Wheeler clarified that these projects would be an additional $2.5 million added to the $4.5 million to be refinanced, which would make $7 million altogether. There was a period of open discussion during which everyone spoke at the same time. Then Mayor Vandergrift asked ifthere was enough cash on hand to do the projects without going through the financing, because it appeared that to do the financing it would be necessary to have a rate increase to solidify the other $2.5 million. Finance Director Horton responded that the City would have to have a rate increase or at least a change in the rate structure to do anything at this point, even to refinance. Mr. Gleason said the City is in violation of..... Mayor Vandergrift said that was St. Johns River Water Management District, not funding. Commissioner Anderson said he recalled reviewing this last year and we were in the red anyway. We were working in the red the whole time so it is hard to refinance when you are losing money. Mrs. Horton said Mark Galvin was en route and he would address this in more detail when he arrived. She added the preliminary engineer's report, the financial feasibility study that was done, and the last five reports submitted to this Commission showed that in the Utility Fund expenditures were growing at 8% and revenues were coming in at 4%. She said this shows we are unable to run the operation, let alone go out for capital needs. The bond coverage right now is at $1.37 and when we started with the bond we were at $1.92. Mr. Wheeler said we do not have enough money to do the utilities relocation in the Maguire Road Phase 5 project, even though there is enough to pay for the road. Mayor Vandergrift proposed using road money to relocate the utilities and Mrs. Horton advised the road impact fees are currently being used for the construction on Maguire Road and, although that money will be reimbursed over a period of years, it is not available now. Commissioner Anderson restated the issue. Mayor Vandergrift asked if a rate increase was absolutely necessary. Mrs. Horton said without some direction from City Commission, if they were to approach rating agencies or bonding agencies we would be paying a premium because, right now, we are not able to show them how we will deal with the fact that we are not earning money the way we need to be earning it. Mr. Gleason said if we were not here tonight to talk about borrowing $4.5 million and an additional $2.5 million, we still would be having this meeting to talk about rates because we have a utility department that is 2 Ocoee City Commission Work Session May 12,2003 not covering itself and will soon reach the point of requiring critical action. He said if no rates were being addressed he would have two options - personnel cuts, salary cuts, or service cuts. Mayor Vandergrift said there have been two rate increases in the past 5 years. One of them was rolled back because of the windfall and because this Commission did not think it was fair to our citizens. The other was a 3% indexing, which, staff had assured Commission, would take care of it. Mr. Wheeler explained that right after that was passed, St. Johns enacted the water restrictions requiring that operations be reduced by at least 15%. Commissioner Anderson and Commissioner Parker talked about the reasons for the changes in rates and the way the money that was gained by the brief rate increase was used to educate citizens regarding water conservation. Water Utility Rates-Inclined Block Rate with Annual PCI Index: David Wheeler-Michael Burton Michael Burton, Burton and Associates, said he had prepared a rate study, the objective of which was to provide a 5-year revenue sufficiency analysis (which was extended for 10 years), develop a conservation rate structure which would provide sufficient revenues and comply with current conservation rate criteria and standards that are being set forth around the state. The proposed rates would provide sufficient revenues for 2004 with only moderate impact to typical residential users. Those who use 10 - 12 thousand gallons and over will have increases in their bills. The proposed annual rate indexing after FY 2004 would be the greater of 3% or the CPI index. Adoption of this recommendation would provide funding and would support required financing for the next 5 - 10 years of capital improvements. Mr. Burton then reviewed the proposed rate structure and its effect on the consumer, saying those who use 5,000 gallons or less would actually experience a reduction in their bills. Those who use 12,000 gallons would experience about a 25% increase. He then reviewed the proposed rate charges for water and wastewater and recommended charging 75% of those rates for reclaimed water. (See attachment A to these minutes for the rate structure.) Discussion ensued about the rates and how best to introduce the proposed increase to the citizens so they would understand the purpose of the change was to encourage conservation, as well as to make the utilities self supporting. Mayor Vandergrift asked Mark Galvin what amount of time it would take to process a bond issue. Mr. Galvin said back in February they started working on the bond resolution, rate study, engineer's report, and the preliminary official statement. After reviewing the documents they noticed this history of the net revenues dropping and that issue has become a credit concern as to financing. The City currently has an A rating with Standard and Poor. In 1997 the net revenue coverage dollar for revenues to dollar for debt service was $1.92 to $1.00. Since that time every year that revenue coverage has continued to drop. When going before the bonding company he will have to be prepared to respond to the questions they will ask about why the revenue has continued to drop and what the City is going to do about it. In order to maintain the A rating it will be necessary to have a rate structure in place. If not, the City must be prepared to have its rating downgraded, which would result in having to pay a higher rate of interest on the refunding bonds. If nothing is done at this time, the projected revenue coverage will be $1.16 to $1.00 when they go before the bonding company. He said if nothing is done this year, the City 3 Ocoee City Commission Work Session May 12,2003 probably will go into covenant default which will ruin the City's credit and force the City to raise rates anyway. Mayor Vandergrift said he was unsettled with the figures as there were no totals. He would like to find out what Apopka does. Commissioner Anderson would like to see the usage calculated with the base amount St. Johns has considered the amount necessary or reasonable to expect a family of two to use - 8,000 gallons. Or possibly in increments of 5,000 gallons. Commissioner Anderson said he wanted the consultants to bring back the responses to the comments made by this Commission and bring back a water conservation rate that is suitable to the City to be sure it will provide the funding needed applicable to the bonding for the direction the City is going so it will not be in the red, plus it will be putting money in the reserves and it will be something that the bonding agent will feel like it is enough that will get a suitable rate. Mayor Vandergrift asked what the standard reserve for this fund is. Mrs. Horton said between 5 and 6%. The recommended percent reserve is between 20 and 40%. Commissioner Anderson then restated his request: to bring back proposed rates that will provide sufficient revenue in fiscal year 2004, with a conservation rate structure that results in a moderate impact to typical residential users, with annual rate indexing after fiscal year 2004 at the greater of 3% or the CPI index that will provide funding and will support required financing for the next 5-10 years ofCIP. Commissioner Parker said between now and the time the ordinances are prepared it would be appropriate to learn as much as possible about this issue and become conversant with the details. Commissioner Anderson said he wants to hold a community meeting in his district to discuss this. Mayor Vandergrift said, paraphrasing the Governor regarding the school system, if you do not like what you see in front of you, come up with another scheme that can be looked at with detail to it that you might be able to discuss. He said he had asked questions he wanted answers to but he hoped they would be able to move forward at the meeting when those questions were answered. Commissioner Anderson said without objection. Past Due-Late Payment-Notification-Disconnect/Reconnect Policy: Wanda Horton-Donald Carter-Cathy Sills-Robert Holland Finance Director Horton said this Commission had asked for a report on the impact of the increase of the late fees from $5.00 to $25.00 which was adopted in August 2002. The late fees first impacted the customers' accounts in October of2002. She displayed a chart showing the late fees assessed in 200112002 and 2002/2003 March through February and pointed out the number oflate fees charged in October 2002 to be 1152 and in February 2003 to be 601. This is 4 Ocoee City Commission Work Session May 12, 2003 almost a 48% decrease. As soon as the Ordinance went into effect the number of late fees assessed began to decline. Cut-offs in March 2002 were 178 and in February 2003 were 73, a 59% decrease. From the period of time that the rates were increased, October 2002 to February 2003, the cut-offs went from 84 to 73, a 13% decrease. On the next page of the report Mrs. Horton displayed the results of a survey as she had interviewed 13 other municipalities, and she reviewed the details. Mrs. Horton then reviewed the options listed: (1) Leave fee unchanged, (2) Change Fee- Establish a lower fixed amount, Establish a percentage to be applied to the outstanding balance, Establish a percentage to apply to the outstanding balance with a minimum fixed amount guaranteed, (3) Charge no late fee and cut off if bill is not paid in full by the due date. After discussion, Mayor Vandergrift said he would like to see a 5, 10, 15,25 or 10% scale. He expressed concern that increasing the fee would not be beneficial to the fund as there would be fewer people paying the fee. Mrs. Horton said they had estimated since the implementation of the $25 fee they had received an additional $14,000 in revenue during the period of time from October to February. Commissioner Parker said she would not want to lose the impetus gained by the $25 late fee but would like to see it changed to $10 - $15 for first and second offenders and graduated up to $20 on the third time and the fourth to $25 and the fifth to $35. She would also like to see a fund established so that those who wished to add a dollar or two to their payment could contribute toward the bill of the truly needy (not for the regulars, but someone who is ill or impoverished). Commissioner Anderson said he thinks the sticker shock of the $25 is over. He expressed concern over the amount of staff time that would be taken to determine the number of times an account is paid late if a graduated scale were to be incorporated. He wanted to establish a rule that a late fee could only be waived if the citizen agreed to have their checking account automatically charged for the utility bill. Mrs. Horton said their computer program does not provide the information that would be needed to implement Commissioner Parker's suggestion. Commissioner Anderson said if Commission decides to go with this type of policy the account history should be programmed into the system rather than starting from the time the program is implemented, so that those who are habitually late payers will not suddenly have a long grace period in the beginning. Mayor Vandergrift left the dais. Cathy Sills pointed out the graduated scale would cause much confusion with the customer. Mrs. Horton agreed and said the ordinance that dictates how the late fee is assessed and at what time it is actually collected needs to be reyisited to be sure it does not conflict with any proposed changes. 5 Ocoee City Commission Work Session May 12, 2003 Commissioner Anderson said he did not want to address that issue as it is labor intensive. He proposed that without objection that issue not be addressed in the ordinance unless someone else brings it up. Commissioner Parker said she had no problem with that but she would like to have the language changed on the bill, as there are two definitions of cut-off dates now. It would be helpful if language such as, "This bill is $ _.if paid by x date. After that date it will be $_ plus $25.00." Commissioner Anderson said without objection to fix that part of the ordinance. ADJOURN The meeting adjourned at 9: 10 p.m. Attest: APPROVED: City of Ocoee ,,$05~ UoJ4- S. Scott Vandergrift, Mayor v 6 ATTACHMENT A City of Ocoee Current and Proposed Rate Schedules Water Sewer Current Proposed Current Proposed Customer Charae $0.00 $1.14 Customer Charae $0.00 $1.14 Base Facility Charae Base Facility Charae Meter Size Meter Size 0.75 $7.64 $3.70 0.75 $13.81 $12.37 1 $19.10 $9.25 1 $34.53 $30.93 1.5 $38.20 $18.50 1.5 $69.05 $61.85 2 $61.20 $29.60 2 $110.48 $98.96 3 $122.24 $59.20 3 $220.96 $197.92 4 $191.00 $92.50 4 $345.25 $309.25 6 $382.00 $185.00 6 $690.50 $618.50 8 $611.00 $296.00 8 $1,104.80 $989.60 10 $878.60 $462.50 10 $1,588.15 $1,422.51 12 $1,642.60 $925.00 12 $2,969.15 $2,659.47 Volumetric Charae per 1.000 Gallons Volumetric Charae per 1.000 Gallons Residential Residential o - 4,000 $0.57 $0.78 o - 4,000 $1.65 $1.98 4,001 - 8,000 $0.57 $1.04 4,001 - 8,000 $1.65 $1.98 8,001 - 12,000 $0.57 $2.08 8,001 -12,000 $1.65 $1.98 12,001 and Greater $0.57 $3.12 12,001 and Greater $0.00 $0.00 Non-Residential Non-Residential o - 4,000 $0.57 $0.78 o - 4,000 $1.65 $1.98 4,001 - 8,000 $0.57 $1.04 4,001 - 8,000 $1.65 $1.98 8,001 - 12,000 $0.57 $2.08 8,001 -12,000 $1.65 $1.98 12,001 and Greater $0.57 $2.08 12,001 and Greater $1.65 $1.98 Reclaimed Water Reclaimed Water Current Customer Charae $0.00 Base Facility Charae Meter Size 0.75 1 1.5 2 3 4 6 8 10 12 16 Customer Charae Proposed $1.14 Allowed Monthlv Usaae in Gallons Base Facility Charae Meter Size 0.75 1 1.5 2 3 4 6 8 10 12 $2.78 $6.94 $13.88 $22.20 $44.40 $69.38 $138.75 $222.00 $346.88 $693.75 $7.65 $19.13 $38.25 $61.20 $114.75 $295.69 $676.40 $1,057.12 $1,607.88 $2,453.07 $4,864.25 12,000 30,000 60,000 96,000 180,000 699,000 1,599,000 2,499,000 3,801,000 5,799,000 11,499,000 Volumetric Charae per 1.000 Gallons Residential Volumetric Charge per 1,000 Gallons Above Allowed Monthly Usage o - 4,000 4,001 - 8,000 8,001 - 12,000 12,001 and Greater $0.59 $0.78 $1.56 $2.34 Non-Residential Residential $0.38 $0.25 Non-Residential o - 4,000 4,001 - 8,000 8,001 - 12,000 12,001 and Greater $0.59 $0.78 $1.56 $1.56