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HomeMy WebLinkAbout06/10/1987 - Workshop Minutes City Council MINUTES CITY COUNCIL WORKSHOP MEETING WEDNESDAY, JUNE 10, 1987 4:00 P.M. COUNCIL MEMBERS PRESENT: Mayor Ringer, Councilmen Boughton, Jones, McIlhaney, Gardner, Brown COUNCIL MEMBERS ABSENT: Councilman Haddox STAFF PRESENT: City Manager Cole, City Secretary Jones, Deputy Finance Director Schroeder, Administrative Assistant Magoon, Assistant City Manager Ragland, Director of Public Utilities Woody, Utilities Office Manager Piwonka, Public Information Officer Calliham, Council Coordinator Hooks STUDENT GOV'T LIAISON: Kevin Buchman VISITORS PRESENT: See guest register. Agenda Item No. 1 - Council Concerns. Councilman McIlhaney reported that the stop sign at the corner of Sebesta Road and Sandstone is missing. Mr. Cole replied that staff will look into this. Mayor Ringer expressed thanks to Cindy Magoon and Toni Rose who helped make the workshop retreat a successful one. Also, he thanked Ms. Dian Jones for her assistance with the Joint City Council Social with Bryan. Agenda Item No. 2 - City Manager Concerns. City Manager Cole reported that his office is in the process of tabulating the priorities of goals set by Council at their work- shop meeting held May 31, 1987 and June 1, 1987. The report will be placed on a future workshop agenda. Agenda Item No. 3 - Discussion of notification by Cooke Cable- vision, Inc. of increase in rates for cable television service in the City of College Station. Mr. Cole stated that no action is required by the Council. This item is to bring to the Council's attention the increase in rates effective July 1st. The Family Pac rate will increase to $16.95 from $15.00 and the charge for each additional outlet will in- crease to $3.25 from $3.00. He noted that the City of College Station has limited ability to regulate the rates because "effec- tive competition" exists in the Brazos Valley. "06227 CITY COUNCIL WORKSHOP MEETING WEDNESDAY, JUNE 10, 1987 Page 2 Councilman McIlhaney asked if there have been inquiries from Col- lege Station residents about the economy package. Mr. Southard stated there may be three or four who have inquired about the smaller package. He noted that only 300-400 Bryan residents re- ceive the economy package. Agenda Item No. 4 - Presentation and discussion of proposed water, sewer, and electric rates as outlined by the recent Cost of Service Study. Mr. Cole recalled that the Council was presented the Cost of Service Study a month ago. The study indicated many deficiencies in the water and sewer departments in the utility fund. Subse- quently, the Council directed the staff to develop scenarios with possible rate increase structures. Mr. Jim McCord of McCord Engineering presented rate designs for the electric, water, and sewer departments. He referred to Exhibit I-A. The schedule is a proposed Year 1 revenue increase allocation for the water department. The in- crease required to equal cost of service is 76% overall. The target Year 1 increase in revenues will apply 10% increase for residential customers and 9.6% increase for commercial customers. He noted that Exhibit I-C summarizes the proposed monthly service charge for residential customers, $5.00 and commercial customers, $6.50. Exhibit I-D presents rate comparisons for selected usages for each class of customer. Mr. McCord continued with Exhibit II-A which illustrates proposed Year 1 revenue increase allocation for the sewer department. The increase required for the target Year 1 is 16.8% overall. He noted that the commercial sewer rates were found to be very in- adequate. Exhibit II-B illustrates the adjusted test year base rate revenues. Exhibit II-C is a tabulation of the proposed in- crease in rates for residential, $10.00 to $11.00; the monthly service charge for commercial is maintained at $10.00 with an in- crease in the charge for each additional seven thousand gallons of usage, to $3.50 instead of $2.50. He continued by describing Exhibit II-D, which illustrates the rate comparisons for selected usages in the sewer department. Mr. McCord pointed out that the staff has proposed to place the commercial sewer customer on the same type of billing structure as the commercial water customer. He explained that the rate '06228 CITY COUNCIL WORKSHOP MEETING WEDNESDAY, JUNE 10, 1987 Page 3 schedules are based on the average water usage and this is re- flective of the amount of sewage placed in the system. He noted that this rate structure has been in effect for some time, but if the Council elected to change this structure, the staff would have no problem with converting the rate as the same for com- mercial. Mayor Ringer noted that he does not see a problem with the flat rate for residential, but the proposed rate for com- mercial sewer begins lower than the residential charge. Mr. McCord replied that an option to require a minimum charge to com- mercial customers could apply with the same type of rate structure. Mr. Cole noted that Exhibit II-B shows that revenue from commercial customers increases approximately 100%. Mr. McCord explained the Electric Department rates, Exhibit III-A. Case No. 1 maintains Electric Department revenues at the present level, and provides for Utility Fund revenues to in- crease by the amount of the water and sewer rate increases. Case No. 2 decreases Electric Department revenues by one-half of the proposed Year 1 increase in Water and Sewer Department revenues. He noted that this rate design would result in increased Utility Fund revenues in an amount equal to one-half of the proposed FY 1987-88 Water and Sewer Department rate increases. Mr. McCord further explained that Case No. 3 would result in no increase in Utility Fund revenues over the present level. He noted that Exhibit III-B illustrates Electric Department revenue allocation on equalized rate of return. He noted that the cost of service allocation shows decreasing the commercial rates and increasing the residential rates. He also noted that the electric rates have stayed the same since 1983. Mr. McCord stated that GSU will implement the load growth pro- vision of the settlement contract on July 1, 1987. This means that all additional load growth of the City above the base year purchase cost will be purchased at the load growth rate. The load growth rate is equivalent to the purchase power rate. He indicated that load growth could be generated by weather varia- tions; therefore, additional increases could possibly be added to the GSU percentage rates. Councilman McIlhaney asked if Case II includes the GSU load growth factor. Mr. McCord noted that there may be a 2-3 percent added to billing statements, but this factor is not interpreted in the figures shown. 06229 CITY COUNCIL WORKSHOP MEETING WEDNESDAY, JUNE 10, 1987 Page 4 Mr. McCord explained Exhibit III-C. The schedule represents the proposed revenue allocation for the test year period FY 1985-86. Exhibit III-D illustrates the flat rate and step rate designs for each Electric Department revenue scenario. He explained that the step rate design defines block rates where the charge to the customer becomes less with increased usage. The flat rates are defined as a flat charge throughout the range of service. Mr. McCord stated that the staff's recommendation is Rate Case 2A and retaining the Step rates; this decision was based on the GSU wholesale rate contract. Another recommendation is that cost of service be obtained in small increments. He indicated that staff's recommendation is to require master metering for all com- mercial accounts and eliminate all sub-metered discounts. Mr. McCord further explained Exhibit III-E and Exhibit III-F. Staff is proposing to raise the monthly electric service charge for residential customers to $5.50. Exhibit III-G illustrates the rate comparisons for selected usages applying Rate Case 2. He noted that the low usage range with flat rates will have a re- duction and in the higher usage range, rates will increase. Utilities Office Manager Linda Piwonka explained the rate compar- isons booklet. She presented overheads of rate schedules for Cases 1, 2 and 3. She listed a few large commercial customers: College Station Hilton, Skaggs, USDA, Foley's, ARC, and the High School. She stated that the average monthly billing for these customers is $20,903. The Case IA - Step Rates would allow a de- crease and allow for more competition. She noted that the City is very competitive in the large commercial Case IA sewer rates. Ms. Piwonka referred to Case 2A. She noted that the recommended proposal would change the average electrical rates for residen- tial customers to $75.26. The average water rates would increase to $20.00 and the sewer rates would increase to $11.00. Ms. Piwonka presented a table listing billing comparisons for non-average electric consumers, showinG a low consumption of 400 kwh paying $34.97 with the flat rate. The high consumption con- sumer uses 2300 kwh would pay $174.97 under the flat rate. She noted that there is a large use of electric heat by apartment users durinG the winter months. She explained that the small commercial customer, (service stations, small grocery stores, small office facilities) is ' 06230 CITY COUNCIL WORKSHOP MEETING WEDNESDAY, JUNE 10, 1987 Page 5 proposed to pay $175.97 per month for all utilities. The medium commercial customer, (smaller hotels, Safeway, restaurants) will pay $1367.50 for the average monthly bill. Applying the Case 2-A rates to large commercial accounts would reduce the average monthly billing. She noted that Westinghouse's average monthly billing would reduce by 12% with an increase for water and sewer, electric decreasing 14%. Ms. Piwonka presented tables illustrating Case 2-B. This case would return 50% of the revenue increase using a flat rate struc- ture to the electrical area. Currently, the average residential customer pays $121.67 overall, and the proposed cost is $123.68. Ms. Piwonka stated that Case 2A defines the goals outlined to meet cost of service and eventually eliminate the subsidy from the electrical department to the water and sewer departments. This Case would also offer electric rates competitive and reason- able for all classes of customers and establish a large com- mercial rate which would attract industrial development to the area, yet still retain a beneficial tax rate. She pointed out that the staff feels the flat rate conflicts with the GSU rate contract. The staff is recommending that the City remain with the declining block rate. She noted that the effective date of the proposed ordinances is July 1st. City Manager Cole stated that the income statement history indi- cated in 1986, $85,212.00 cash after transfers in electric funds. In 1984, the cash after transfers in the electric funds was $3,116,000. He added that in his opinion, the City does not have the latitude to take the risk of completely off-setting all water revenue increases while working with a small margin. Councilman Brown stated that Case II-A rate design will allow the City to become attractive for industrial growth. Ms. Piwonka commented that she receives many calls from potential businesses inquiring about the utility rates. Councilman Gardner noted that he had hoped the flat rate study would show a more dramatic increase overall. He mentioned that he prefers a lower tax rate, along with effective electric rates to obtain a better balance. Mayor Ringer stated that Mr. Gardner's concern is another objec- tive the Council may wish to address at another time. ^06231 CITY COUNCIL WORKSHOP MEETING WEDNESDAY, JUNE 10, 1987 Page 6 Agenda Item No. 5 - Discussion and consideration of approval of decision packages for Utility and Sanitation Funds. Deputy Finance Director Glenn Schroeder presented this item. He stated that 39 decision packages were submitted in the Utility Fund. The first 29, totaling $520,028.00 are recommended for ap- proval. Most of the items are replacement items or relate to safety. Councilman McIlhaney asked if the rate study requested by Lone Star Municipal Power Agency was included in the budget. Mr. Cole suggested leaving the budget as is and the Council may want to consider this funding at another time. He added that the multi- plying adder cannot be placed on a bill until the Council passes an ordinance. Councilman Brown moved approval of the decision packages for the utility fund as recommended by staff. Councilman Boughton seconded the motion which passed unanimously, 6-0. Mr. Schroeder explained four decision packages, totaling $262,000. Two of the items are replacement items, a pickup truck and refuse truck. Councilman Boughton moved approval of the decision packages for the sanitation fund as recommended by staff. Councilman Brown seconded the motion which carried unanimously, 6-0. Agenda Item No. 6 - Ad)ourn. Mayor Ringer adjourned the meeting at 5:50 p.m. ATTEST Di~n APPROVE D: " 06232