Agenda 07/08/2014 Item #16C117/8/2014 16.C.11.
EXECUTIVE SUMMARY
Recommendation to direct the County Manager or his designee to advertise a resolution amending
schedules One through Two of Appendix A to Section Four of Collier County Ordinance No. 2001-
73, as amended, titled the Collier County Water -Sewer District Uniform Billing, Operating, and
Regulatory Standards Ordinance, to include proposed rates for water, wastewater, and irrigation
quality water services with effective dates of October 1, 2014, October 1, 2015 and October 1, 2016
for schedules One and Two.
OBJECTIVE: Advertise a resolution (Exhibit 1) amending schedules One and Two of Appendix A to
Section Four of Collier County Ordinance No. 2001 -73, as amended, titled the Collier County Water -
Sewer District Uniform Billing, Operating, and Regulatory Standards Ordinance.
CONSIDERATIONS: Water, wastewater and Irrigation Quality (IQ) water user rates and other
miscellaneous revenue are used to recover system operation, repair, maintenance, capital improvements
for upgrades, replacements, expansions and debt service costs as required by bond covenants from
residential and non - residential property owner system users within the boundaries of the Collier County
Water -Sewer District (District) utility system.
On July 27, 2010, the Board of County Commissioners (Board) adopted Resolution 2010 -158, Item 8A,
which included a 2.7 percent rate increase for water and wastewater user rates effective for FY2011.
On February 8, 2011, Item 8A, the Board approved Resolution 2011 -30, which increased IQ water user
rates by 4.5 percent each year for FY2012 and FY2013. That same resolution included no water and
wastewater user rate increases for either FY2012 or FY2013 based upon recommendations from the rate
consultant, Public Resources Management Group, Inc. (PRMG), in the water and wastewater 2011 rate
study. Further, the Board approved the FY2014 District budget with no rate increase for FY2014. Thus,
water and wastewater user rates have remained unchanged for the last three fiscal years.
On June 10, 2014, the Board approved the water, wastewater, and IQ rate study prepared by PRMG
(Exhibit 2 and 3) and directed the County Manger or designee to prepare a rate resolution to bring to the
Board for approval to advertise. Schedules One and Two reflect these recommended rate adjustments.
FISCAL IMPACT: The additional rate revenue anticipated to be generated by the recommended water
and wastewater fees over the next three years is -
Water = $21,066,500
Wastewater = $24,376,100
IQ Water = $ 1,239,500
$46,682,100
The water, sewer and IQ rate adjustments are anticipated to provide approximately $9.1 million in
incremental revenue in FYI in the Collier County Water -Sewer District Operating Fund (408).
LEGAL CONSIDERATIONS: This item is approved as to form and legality, and requires majority vote
for Board approval. —SRT
GROWTH MANAGEMENT IMPACT: The proposed water, wastewater and IQ water user rates are
designed to provide funding for operation and maintenance, repair and replacement expenditures and debt
service costs. These rates also provide funding for water, wastewater and IQ capital improvements
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7/8/2014 16.C.11.
identified in the 2014 Water, Wastewater and IQ Water Master Plan, which will be presented to the Board
at a subsequent meeting.
RECOMMENDATION: That the Board of County Commissioners, Ex- officio the Governing Board of
the Collier County Water -Sewer District, direct the County Manager or his designee to advertise a
resolution amending schedules One and Two of Appendix A to Section Four of Collier County Ordinance
No. 2001 -73, as amended, titled the Collier County Water -Sewer District Uniform Billing, Operating, and
Regulatory Standards Ordinance. This amendment includes proposed rates for -
1. Collier County Water and Wastewater user rates, Schedule One, with effective dates of
October 1, 2014, October 1, 2015 and October 1, 2016.
2. Irrigation Quality water user rates Schedule Two, with effective dates of October 1, 2014,
October 1, 2015, and October 1, 2016.
PREPARED BY: Laura Zautcke, Senior Management and Budget Analyst, Public Utilities Division -
Operations
Attachments
Exhibit l - Resolution
Exhibit 2 — PRMG Letter
Exhibit 3 — PRMG Executive Summary
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7/8/2014 16.C.11.
COLLIER COUNTY
Board of County Commissioners
Item Number: 16.16.C.16.C.11.
Item Summary: Recommendation to direct the County Manager or his designee to
advertise a resolution amending schedules One through Two of Appendix A to Section Four of
Collier County Ordinance No. 2001 -73, as amended, titled the Collier County Water -Sewer
District Uniform Billing, Operating, and Regulatory Standards Ordinance, to include proposed
rates for water, wastewater, and irrigation quality water services with effective dates of
October 1, 2014, October 1, 2015 and October 1, 2016 for schedules One and Two.
Meeting Date: 7/8/2014
Prepared By
Name: ZautckeLaura
Title: Management/Budget Analyst, Senior, Utilities Finance Operations
6/17/2014 12:09:47 PM
Submitted by
Title: Management/Budget Analyst, Senior, Utilities Finance Operations
Name: ZautckeLaura
6/17/2014 12:09:48 PM
Approved By
Name: HapkeMargie
Title: Recycling Coordinator, Solid & Hazardous Waste Management
Date: 6/17/2014 2:1 1:37 PM
Name: Joseph Bellone
Title: Director - Operations Support, Utilities Finance Operations
Date: 6/17/2014 3:19:10 PM
Name: Steve Messner
Title: Director - Water, Water
Date: 6/18/2014 8:55:02 AM
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7/8/2014 16.C.11.
Name: JohnssenBeth
Title: Director - Wastewater, Wastewater
Date: 6/18/2014 9:46:23 AM
Name: ChmelikTom
Title: Director - Public Utilities Engineering, Public Utilities Engineering
Date: 6/19/2014 4:11:54 PM
Name: TeachScott
Title: Deputy County Attorney, County Attorney
Date: 6/23/2014 12:01:02 PM
Name: YilmazGeorge
Title: Administrator - Public Utilities, Public Utilities Division
Date: 6/23/2014 4:40:23 PM
Name: FinnEd
Title: Management/Budget Analyst, Senior, Transportation Engineering & Construction Management
Date: 6/25/2014 9:41:01 AM
Name: KlatzkowJeff
Title: County Attorney,
Date: 6/26/2014 5:24:22 PM
Name: OchsLeo
Title: County Manager, County Managers Office
Date: 7/1/2014 10:42:24 AM
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7/8/2014 16.C.11.
RESOLUTION NO. 2014 -
A RESOLUTION OF THE BOARD OF COUNTY COMMISSIONERS OF
COLLIER COUNTY, FLORIDA, AS THE GOVERNING BODY OF
COLLIER COUNTY AND EX OFFICIO THE GOVERNING BOARD OF
THE COLLIER COUNTY WATER SEWER DISTRICT, AMENDING
SCHEDULES ONE AND TWO OF APPENDIX A TO SECTION FOUR OF
THE COLLIER COUNTY ORDINANCE NO. 2001 -73, AS AMENDED,
TITLED THE COLLIER COUNTY WATER -SEWER DISTRICT
UNIFORM BILLING, OPERATING AND REGULATORY STANDARDS
ORDINANCE; AMENDING PROPOSED RATES FOR WATER AND
WASTEWATER SERVICES WITH EFFECTIVE DATES OF OCTOBER
1, 2014, OCTOBER 1, 2015, AND OCTOBER 1, 2016, FOR SCHEDULES
ONE AND TWO.
WHEREAS, Collier County uses water and sewer user rates to recover system operation,
maintenance, renewal, enhancement, replacement and debt service costs from system users
within the boundaries of the Collier County Water -Sewer District (District); and
WHEREAS, Collier County has retained Public Resources Management Group, Inc.,
(Consultant) to review the existing water and sewer user rates and to recommend appropriate
changes to those rates — the Consultant has recommended an increase of 9 percent effective
October 1, 2014; 5 percent effective October, 1, 2015; and, 5 percent effective October 1, 2016,
for Fiscal Years 2015, 2016, and 2017, respectively; and
WHEREAS, Collier County has retained the Consultant to review the existing Irrigation
Quality (IQ) water user rates and to recommend appropriate changes to those rates — the
Consultant has recommended an increase of 9 percent effective October 1, 2014; 5 percent
effective October 1, 2015; and, 5 percent effective October 1, 2016, for Fiscal Years 2015, 2016,
and 2017, respectively; and
WHEREAS, staff has thoroughly reviewed the Consultant's findings and
recommendations and concurs with the recommended changes for water and sewer rates; and
WHEREAS, the Consultant has recommended price indexing rate adjustment in the mid -
cycle years when there is no rate study by applying 100 percent of the percentage change in the
Miami -Fort Lauderdale Consumer Price Index (CPI) for all urban consumers as reported by the
Bureau of Labor Statistics from January 1 through December 31 of the previous calendar year to
the monthly service base and volumetric charges, but not less than 0 percent. For the price
indexing rate adjustment to become effective, the Board of County Commissioners would
approve such rate adjustment as part of the budget policy and any change would be subject to
final budget approval; and
WHEREAS, the Board of County Commissioners finds that it is in the interest of the
health, safety and welfare of the customers of the District to accept the recommendations of the
Consultant and from staff;
NOW, THEREFORE BE IT RESOLVED BY THE BOARD OF COUNTY
COMMISSIONERS OF COLLIER COUNTY, FLORIDA, AS THE GOVERNING BODY
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7/8/2014 16.C.11.
OF COLLIER COUNTY AND EX OFFICIO THE GOVERNING BOARD OF THE
COLLIER COUNTY WATER SEWER DISTRICT, THAT:
The Board of County Commissioners, after an advertised public hearing,
1. Accepts the Consultant and staff's recommendation and proclaims the water and
sewer user rates and Irrigation Quality rates, as set forth in the amended Schedule One and Two
to Appendix A of Ordinance No. 2001 -73, as amended, titled the Collier County Water -Sewer
District Uniform Billing, Operating and Regulatory Standards Ordinance, which amended
Schedule is incorporated herein. These revised rates for the attached Schedules One and Two
will take effect at 12:01 a.m. Wednesday, October 1, 2014, for Fiscal Year 2015; at 12:01 a.m.
Thursday, October 1, 2015, for Fiscal Year 2016; at 12:01 a.m. Saturday, October, 1 2016, for
Fiscal Year 2017.
2. Proclaims the price indexing rate adjustment in the mid -cycle years when there is
no rate study by applying 100 percent of the percentage change in the Miami -Fort Lauderdale
Consumer Price Index (CPI) for all urban consumers as reported by the Bureau of Labor
statistics from January 1 through December 31 of the previous calendar year, to the monthly
service base and volumetric charges, but no less than 0 percent. This indexing rate adjustment
will go into effect on October 1 of each mid -cycle year when there is no rate study. For the price
indexing rate adjustment to become effective, the Board of County Commissioners would
approve such rate adjustment as part of the budget policy and any changes would be subject to
final budget approval.
THIS RESOLUTION ADOPTED after motion, second, and majority vote favoring
adoption this day , 2014.
ATTEST:
DWIGHT E. BROCK, CLERK
WE
Approval as to form
and legality:
cott R. Teach
Deputy County Attorney
, Deputy Clerk
BOARD OF COUNTY COMMISSIONERS
OF COLLIER COUNTY, FLORIDA, AS
THE GOVERNING BODY OF COLLIER
COUNTY AND AS EX OFFICIO THE
GOVERNING BOARD OF THE COLLIER
COUNTY WATER SEWER DISTRICT
TOM HENNING, CHAIRMAN
2
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7/8/2014 16.C.11. -
PUBLIC UTILITIES DIVISION
COLLIER COUNTY WATER -SEWER DISTRICT
UNIFORM BILLING, OPERATING AND REGULATORY STANDARDS ORDINANCE
APPENDIX A - FEES, RATES AND CHARGES
SCHEDULE 1 - DISTRICT -WIDE WATER AND WASTEWATER RATES Page 1 of 3
1. WATER
Existing
Monthly Rates 111
Proposal
Monthly Rates 121
Effective
Effective
Effective
Effective
October 1, 2012
October 1, 2014
October 1, 2015
October 1, 2016
WATER SERVICE BASE CHARGES
(Residential, Multifamily, Commercial,
and Irrigation Only)
Meter S '
518"
537.63
51932
$20.18
$21.19
314"
17.63
1932
20.18
21.19
1"
38.92
42.42
44.54
46.77
1.114"
4938
53.72
56AI
5923
1 -112"
7430
80.88
84.92
89.17
2"
116.48
126.%
13331
13998
3"
21532
234.70
246.44
258.76
4"
356.45
38833
407.%
42836
6"
709.27
773.10
811.76
85235
8"
1,132.64
1,234.58
1,29631
1,361.13
10"
2,14994
2,234.43
2,34CIS
2,463A6
12"
2,76&73
3,017.92
3,168.82
3 ,32726
VOLUME CHARGE PER 190M GALLONS
(Residential, Multifamily, Commercial
and Irrigation Only)
Block 1
52.42
$2.64
S2.77
5291
Block 2
3.64
3.97
4.17
438
Block 3
4.84
518
5.54
5.82
Block 4
6,05
639
692
727
Block 5
725
7.90
830
8.72
Block 6
9.67
10 -W
11.07
11.62
BLOCK RATE STRUCTURE
(Residential, Meltifamily, Commercial
and Irrigation Only)
Consumption Block (Thousands
of Gallons)
Meter Siu
Block 1
Mock 2
Block 3
Block 4
Block 5
Block 6
5)811
0 to 5
6 to 10
11 to 20
21 to 30
31 to 50
Over 50
3/4"
0 to 5
6 to 10
11 1o20
21 to 30
31 to 50
Over 50
1"
0 to 12
13 l0 25
26 to 50
51 to 75
76 to 120
0- 120
1 -1/4"
0 to 20
211o,00
41 to 80
81 to 120
121 to 210
Over 20D
1 -1151•
0 to 25
26 to SO
51 to IOD
101 90150
151 to 250
Over 250
2"
0 to 40
41 to 80
81 to 160
161 to 240
241 to 400
Over 400
3"
01080
81 to 160
161 to 320
321 to 480
481 to 800
Over 000
4"
0 to 120
121 to 250
251 to 500
501 to Sao
801 to 1,200
Over 1,2011
6"
0 to 250
251 to Soo
501 to 1,000
1,001 to Ism
1,501 to 2,508
Over 2,500
8"
0 to 450
451 to 900
901 to 1,800
1,801 to 2,700
2,701 to 4 SW
Over 4,500
10"
0 to 700
701 to 1,450
1,451 to 2,980
2,901 to 4,300
4,301 to 7,000
Over 7,000
12"
0 to 1,075
1.676 to 2050
2,151 to 4,300
4,301 to fi,450
6,451 to 11,000
Over 11,000
Ill Adopted by Resolution No, 2011 -30.
121 hates to become effective with the first fall billing cycle for service rendered on and after October 1st of each fiscal year indicated.
Cg
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7/8/2014 16.C.11. -
PUBLIC UTILITIES DIVISION
COLLIER COUNTY WATER -SEWER DISTRICT
UNIFORM BILLING, OPERATING AND REGULATORY STANDARDS ORDINANCE
APPENDIX A - FEES, RATES AND CHARGES
SCHEDULE 1- DISTRICT -WIDE WATER AND WASTEWATER RATES Page 2 of 3l
2. WASTEWATER
Existing
Monthly Run [1)
Proposed
Monthly Rata [2)
Effective
Effective
Effective
Effective
October 1, 2012
October 1, 2014
October 1, 2015
October 1, 2016
WASTEWATER SERVICE BASE CHARGES
( Resideotial, Multifamily, and Commercial)
Meter Size
526.94
$2936
530.83
532.37
3/4"
26.94
2936
30.83
32.37
1"
6115
66.76
70.10
73.61
1 -114"
7852
85.59
89.87
9436
1 -ta"
118.51
129.18
135.64
142.42
2"
18726
204.11
21432
225.04
3"
347.60
378.88
397.82
417.71
4"
576.40
62818
659.69
692.67
6"
1,14&69
1,252.07
1,314.67
1,380.40
8"
1,835.65
2,000.86
2,100.90
2,205.95
10"
3,291.09
3587.29
3,766.65
3,954.98
12"
4,877.93
551694
5,582.79
5,861.93
VOLUME CHARGE PER 1,000 GALLONS
(Residential, Multifamily, and Commercial)
All Usare 131
13.79
54.13
$434
54.56
[1) Adopted by Resolution No. 2011 -30.
[2) Rats to become effective with the fast full billing cycle for service rendered on and after October 1st of each fieeal year indicated.
[3) Monthly individually metered residential usage charges are capped at 15,000 gallons.
GO.
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7/8/2014 16.C.11.
PUBLIC UTILITIES DIVISION
COLLIER COUNTY WATER -SEWER DISTRICT
UNIFORM BILLING, OPERATING AND REGULATORY STANDARDS ORDINANCE
APPENDIX A - FEES, RATES AND CHARGES
SCHEDULE 1- DISTRICT -WIDE WATER AND WASTEWATER RATES Page 3 of 3
3. Fire Systems (Dedicated and Compound):
(a) Fire Meter
(i) Fire Service meter size will refer to the largest diameter meter register
installed for fire protection.
(ii) Fire Service meter connections that have consumption of 6,000 gallons or
more in any one billing period are deemed to have provided domestic or
other water usage and shall be billed according to regular water monthly
base and usage charges as described herein.
(b) Volume Charge
(i) Per 1,000 gallons
4. Water Restriction Surcharge:
Percent Reduction Goal Flow Charge Rate
Water Shortage Phase* In Overall Demand Adjustment Percentage
Phase 2 - Severe 30% 15%
Phase 3 - Extreme 45% 30%
Phase 4 - Critical 60% 40%
* Per the South Florida Water Management District (SFWMD) Water Shortage Plan
Pursuant to Chapter 40E-21 of the Florida Administrative Code (FAQ
The surcharge will be applicable to the volume charge for all single family and multi-
family residential accounts for all consumption greater than Block 2, to non - residential
accounts for all consumption greater than Block 1, and to irrigation accounts only for all
consumption. The Block Structures are specified in Section One above. The surcharge is
not assessed against the service base charge.
The water restriction surcharge will start on the first billing cycle of the month following
the imposition of the restrictions. The surcharge will cease on the first billing cycle of the
month following the revocation or lifting of the restrictions.
G
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PUBLIC UTILITIES DIVISION
COLLIER COUNTY WATER -SEWER DISTRICT
UNIFORM BILLING, OPERATING, AND REGULATORY STANDARDS ORDINANCE
APPENDIX A - FEES, RATES AND CHARGES
SCHEDULE 2 - IRRIGATION QUALITY WATER RATES Page 1 of 1
Existing
Monthly Rates 111 Proposed Monthly Rates 121
Effective Effective Effective Effective
10/1/2012 10/1/2014 1011/2015 10/1/2016
SERVICE BASE CHARGE
Meter Size
5/8"
3/4"
1"
1 -1/2"
2"
3"
4"
6"
8"
10"
12"
VOLUMETRIC CHARGE PER 1,000 GALLONS
Customer Type:
Bulk
Pressurized
Pressurized and Distributed
$5.90
$6.43
$6.75
$7.09
5.90
6.43
6.75
7.09
12.89
14.05
14.75
15.49
26.97
29.40
30.87
32.41
53.84
58.69
61.62
64.70
106.58
116.17
121.98
128.08
213.16
232.34
243.96
256.16
405.14
441.60
463.68
486.86
73537
801.55
841.63
883.71
1,176.82
1,282.73
1,346.87
1,414.21
1,752.92
1,910.68
2,006.21
2,106.52
$0.35 $0.38 $0.40 $0.42
0.45 0.49 0.51 0.54
0.88 0.96 1.01 1.06
[11 Adopted by Resolution 2011 -30.
[21 Rates to become effective with the first full billing cycle for service rendered on and after October 1st of each
fiscal year indicated.
CA
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AV AV
AD IV M6 W AS
Ir xty
Lm
1 115 ;bI.A'JAJoI!;IiI "Rml
May 21, 2014
IBPublic Resources Management Group, Inc.
Utility, Rate, Financial and Management Consultants
Packet Page -1342-
Public Resources Management Group, Inc.
Utility, Rate, Financial and Management Consultants
May 21, 2014
Honorable Chairman and Members of the
Board of County Commissioners
Collier County
3299 Tamiami Trail East, Suite 303
Naples, FL 34112
7/8/2014 16.C.11.
Subject: Water, Wastewater, Irrigation Quality Water, and Bulk Potable Water User
Rate Study for Collier County Water -Sewer District
Ladies and Gentlemen:
Public Resources Management Group, Inc. (PRMG) has completed our review of the water,
wastewater, irrigation quality (IQ) water and bulk potable water user rates for the Collier County
(the "County") Water -Sewer District (the "District ") utility system (the "System "), and has
summarized the results of our analyses, assumptions, and conclusions in this report which is
submitted for your consideration. The analysis encompassed a financial evaluation of the
operations and expenditure needs of the System for the six fiscal year period of October 1, 2013
through September 30, 2019 (the "Forecast Period ") and the evaluation of the sufficiency of the
user rate revenues to meet such needs.
Based on the assumptions relied upon in the development of the System expenditure
requirements and discussions with County staff, PRMG is recommending water, wastewater and
IQ water user rate adjustments for the System. The water and wastewater user rates have not
been increased since Fiscal Year 2011. Since that time, System operating expenses have
increased due to System repair / maintenance expenditures and inflation.
The user rate adjustments are primarily needed to enable the District to: i) address critical
infrastructure rehabilitation needs; and ii) maintain the sustainability of the utility given recent
and anticipated increases in the costs to provide service (e.g., increased System repair costs,
increases due to regulatory requirements, increases due to inflation, etc.). As previously
communicated by the utility staff to the Board of County Commissioners, portions of the aging
utility asset base have been identified as being at high risk for breakdowns, service interruptions
and spills. The multi -year capital program developed by the District and its consulting engineers
as part of the master planning process has been structured to mitigate and manage the System
risks.
The District's user rates are anticipated to remain competitive with the rates of neighboring
utility systems throughout the Forecast Period. It recommended that the County reevaluate the
sufficiency of the District's user rates on an ongoing basis. Following this letter, we have
provided an executive summary which briefly summarizes the results of our study and outlines
Ul 125- 311Report \User Rate ReporfTY 2014 User Rate Report. doe
341 NORTH MAITL.AND AVENUE -SUITE 300 - MAITLAND. FL 32751
TELEPHONE: (407) 628 -2600 • FAX: 01071 629 -2610 • EMAIL: PRMGC.PRMGinc.coln
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7/8/2014 16.C.11.
Honorable Chairman and Members of the
Board of County Commissioners
Collier County
May 21, 2014
Page 2
our recommendations and conclusions. The accompanying sections of the report provide
additional details regarding the rate and financial analysis conducted on behalf of the District.
We appreciate the opportunity to be of service to the County and would like to thank the County
staff for their assistance and cooperation during the course of this study.
Respectfully submitted,
Public Resources Management Group, Inc.
Robert J. Ori
President
i ✓y I --
Bryan A. Mantz, CMC, CGFM
Supervising Consultant
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7/8/2014 16.C.11.
EXECTTIVE SUMMARY
AND RECOMMENDATIONS
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7/8/2014 16.C.11.
EXECUTIVE SUMMARY
AND RECOMMENDATIONS
The Collier County (the "County ") Water -Sewer District (the "District ") water, wastewater and
irrigation quality (IQ) water system (the "System ") provides an essential service 24 hours per day
and 365 days per year. The utility operates in a highly - regulated environment. Regulatory
agencies for the District include the United States Environmental Protection Agency (EPA),
Florida Department of Environmental Protection (FDEP) and South Florida Water Management
District (SFWMD). Permits issued to the utility by these regulatory agencies require satisfactory
performance. If the utility does not comply with all applicable regulations, the County could
possibly face future consent orders or fines from the regulatory agencies.
The District System is established as a utility enterprise fund. General accounting policies and
prudent utility management recommend that the System have revenues (financial resources) at
least equal to the costs of providing services by the System. As such, the County should
establish rates sufficient to meet the cost of operating, maintaining, and repairing the system and
financing the ongoing capital improvements of the System in order to continue to provide a safe
and reliable service to the County's water, wastewater and IQ water customers.
Because of the County's need to ensure that utility revenues will be sufficient to meet System
operating and capital needs as well as comply with the rate covenant provisions of the utility's
current Bond Resolution and outstanding State Revolving Fund (SRF) loans, Public Resources
Management Group, Inc. (PRMG) was retained to perform a review of the user rates of the
System to evaluate the ability of System revenues to meet operating and capital needs.
During the course of the current rate study, the utility administration and PRMG determined that
certain guidelines should be followed while evaluating the sufficiency of the user rates. These
guidelines included:
The user rates should be sufficient to recover the costs of providing service. The cost of
service includes System operating costs and debt service along with the accrual of funds for
working capital and for pay -as- you -go capital financing that is anticipated in future years.
The user rates should maintain the overall financial creditworthiness of the System. This
guideline entails the following:
a. Maintenance of adequate operating reserves consistent with the County's reserve
policies.
b. Compliance with the rate covenants outlined in both the Bond Resolution which
authorized the issuance of the outstanding senior lien bonds and the existing Loan
Agreements with the Florida Department of Environmental Protection (i.e., State
Revolving Fund loan program), which are considered as subordinate lien bonds of the
System.
ES -1
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7/8/2014 16.C.11.
c. Maintenance of strong financial position consistent with performance criteria used by
rating agencies and the utility industry.
3. The proposed rates should promote the continued conservation of water resources.
4. The proposed user rates should be competitive with those of neighboring utility systems.
Based on the assumptions relied upon in the development of the System expenditure
requirements and discussions with County staff, PRMG is recommending the following revenue
adjustments for the System:
Summary of Proposed Water, Wastewater and IQ Water Revenue Adjustments
[1] The actual adjustment is recommended to be 100% ofthe change in the Miami -
Fort Lauderdale Consumer Price Index (all urban consumers), but not less than 0 %.
The primary reasons for the identified revenue adjustments are to:
Provide sufficient revenues and cash flow to fund the six -year capital improvement
program (CIP) of the District. The projects in the CIP are considered by the utility staff to
be critical in order to provide long -term reliable and sustainable utility service to System
customers. As previously communicated by the utility staff to the Board of County
Commissioners, portions of the aging utility asset base have been identified as being at
high risk for breakdowns, service interruptions and spills. The multi -year capital program
developed by the District and its consulting engineers as part of the master planning
process has been structured to mitigate and manage the System risks. Since the CIP is
considered by the utility staff to primarily consist of projects representing ongoing
renewals and replacements of assets that are reaching the end of their service lives or
operational effectiveness, these projects are recognized in the financial forecast as being
funded through annual deposits from system revenues to the District's capital - related funds
(i.e., pay -as- you -go funding). This approach provides the District with increased flexibility
in the funding of the capital program and promotes rate sustainability.
2. Continue to fund the costs of operations. Since the last time that the water and wastewater
user rates were increased for the Fiscal Year 2011, inflation has continued to affect System
operating margins. The following table indicates recent inflationary trends as reported by
ES -2
Packet Page -1347-
Fiscal Year Ending September 30,
Water
Wastewater
IQ Water
Combined
Effective Date
System
System
System
System
October 1, 2014
9.00%
9.00%
9.00%
9.00%
October 1, 2015
5.00%
5.00%
5.00%
5.00%
October 1, 2016
5.00%
5.00%
5.00%
5.00%
October 1, 2017 [1]
2.40%
2.40%
2.40%
2.40%
October 1, 2018 [1]
2.40%
2.40%
2.40%
2.40%
[1] The actual adjustment is recommended to be 100% ofthe change in the Miami -
Fort Lauderdale Consumer Price Index (all urban consumers), but not less than 0 %.
The primary reasons for the identified revenue adjustments are to:
Provide sufficient revenues and cash flow to fund the six -year capital improvement
program (CIP) of the District. The projects in the CIP are considered by the utility staff to
be critical in order to provide long -term reliable and sustainable utility service to System
customers. As previously communicated by the utility staff to the Board of County
Commissioners, portions of the aging utility asset base have been identified as being at
high risk for breakdowns, service interruptions and spills. The multi -year capital program
developed by the District and its consulting engineers as part of the master planning
process has been structured to mitigate and manage the System risks. Since the CIP is
considered by the utility staff to primarily consist of projects representing ongoing
renewals and replacements of assets that are reaching the end of their service lives or
operational effectiveness, these projects are recognized in the financial forecast as being
funded through annual deposits from system revenues to the District's capital - related funds
(i.e., pay -as- you -go funding). This approach provides the District with increased flexibility
in the funding of the capital program and promotes rate sustainability.
2. Continue to fund the costs of operations. Since the last time that the water and wastewater
user rates were increased for the Fiscal Year 2011, inflation has continued to affect System
operating margins. The following table indicates recent inflationary trends as reported by
ES -2
Packet Page -1347-
ENGINEERING NEWS - RECORD
Construction Cost Index 2.80% 2.71% 3.34% 2.99%
AMERICAN CITY AND COUNTY
Municipal Cost Index 2.11% 2.71% 3.24% 2.71%
The costs of operations are projected to continue to increase during the Forecast Period due
to, among other things, the following:
a. Inflationary effects on the costs of electricity, chemicals, fuel and other major
expenditures for the utility;
b. Labor costs, including incremental increases in staffing as a result of System growth
and the capital program identified by the District;
c. Increased costs due to regulatory requirements from the EPA, FDEP and SFWMD; and
d. Economic recovery has increased bid prices on contractual services (e.g., more
competition for limited resources).
3. Continue to fund the District's payment -in- lieu -of -taxes (PILT) to the General Fund. Since
the last user rate study, the County changed its transfer methodology from one based on
utility assets (e.g., property tax equivalent) to the current transfer policy of 5% of gross
receipts. This policy change has resulted in a higher PILT than what was projected in the
user rate study completed in 2011 (the "2011 Rate Study "), as shown in the following table:
Fiscal Year 2014 PILT: Comparison of 2011 Rate Study Projections -Aith Actual Results
2011 Rate Study
Description Projections Actual Difference
Payment -In -Lieu of -Taxes (PILT) $4,205,700 $5,121,300 $915,600
PRMG has assumed that the current policy would remain in effect throughout the Forecast
Period.
4. Maintain compliance with System rate covenants which include debt service coverage
margins and the maintenance of certain funds and accounts.
ES -3
Packet Page -1348-
7/8/2014 16.C.11.
the United States Bureau of Labor Statistics,
Engineering News - Record and American City
and County:
Historical Inflationary Trends
Historical Annual Compound Growth Rate
Items I -Year Change 5 -Year Change 10 -Year Change 20 -Year Change
BUREAU OF LABOR STATISTICS
CPI - U.S. City Average
1.10% 103% 2.33% 2.39%
Electricity - U.S. City Average
3.84% 1.19% 3.91% 2.49%
Fuel 0a- U.S. C ity Average
2.94% 11.71% 10.86% 7.92%
Water and Sewerage Maintenance Index - U.S. City Average
3.64% 5.96% 5.80% 4.58%
ENGINEERING NEWS - RECORD
Construction Cost Index 2.80% 2.71% 3.34% 2.99%
AMERICAN CITY AND COUNTY
Municipal Cost Index 2.11% 2.71% 3.24% 2.71%
The costs of operations are projected to continue to increase during the Forecast Period due
to, among other things, the following:
a. Inflationary effects on the costs of electricity, chemicals, fuel and other major
expenditures for the utility;
b. Labor costs, including incremental increases in staffing as a result of System growth
and the capital program identified by the District;
c. Increased costs due to regulatory requirements from the EPA, FDEP and SFWMD; and
d. Economic recovery has increased bid prices on contractual services (e.g., more
competition for limited resources).
3. Continue to fund the District's payment -in- lieu -of -taxes (PILT) to the General Fund. Since
the last user rate study, the County changed its transfer methodology from one based on
utility assets (e.g., property tax equivalent) to the current transfer policy of 5% of gross
receipts. This policy change has resulted in a higher PILT than what was projected in the
user rate study completed in 2011 (the "2011 Rate Study "), as shown in the following table:
Fiscal Year 2014 PILT: Comparison of 2011 Rate Study Projections -Aith Actual Results
2011 Rate Study
Description Projections Actual Difference
Payment -In -Lieu of -Taxes (PILT) $4,205,700 $5,121,300 $915,600
PRMG has assumed that the current policy would remain in effect throughout the Forecast
Period.
4. Maintain compliance with System rate covenants which include debt service coverage
margins and the maintenance of certain funds and accounts.
ES -3
Packet Page -1348-
7/8/2014 16.C.11.
Maintain adequate operating reserves and margins consistent with County policies to ensure
the continued creditworthiness of the System and to provide funds for emergencies
(e.g., hurricane preparedness) and other purposes.
6. Offset the loss of Allowance for Funds Prudently Invested (AFPI) fees that were charged
on a per Equivalent Residential Connection (ERC) basis to new growth. These fees, which
were first adopted in 2006, recovered the carrying cost for "holding" capacity until it is
reserved by development. The County stopped collecting these fees in Fiscal Year 2013
due to a sunset provision in the rate ordinance authorizing the fees, and it was assumed that
the fees would not be reinstated during the forecast period. During the Fiscal Year 2012,
the last full year of AFPI fee collections, the District collected $1,829,186 in AFPI revenue.
The rate study completed in 2011 assumed that collection of these fees would continue.
The financial evaluation contained in this study included the six fiscal year period ending
September 30, 2019 (the "Forecast Period "). The existing and proposed monthly water,
wastewater and IQ user rates are shown in Tables ES -1, ES -2 and ES -3, respectively, at the end
of this section.
Table ES -4 at the end of this section provides a financial overview of forecasted System
operations. This table indicates the following for all projected fiscal years:
Overall annual debt service coverage [net revenues divided by the annual debt service
requirement (senior lien)] of at least 150% after the Fiscal Year 2014. As discussed herein,
and based on bond rating agencies, a financial target for the debt service coverage ratio of
150% is recommended. According to the Utility Revenue Bond Rating Guidelines
published by Fitch Ratings (a rating agency which evaluates creditworthiness):
"For utilities in the most stable operating environments with a suitably diverse and healthy
service area economy, I..ix annual coverage, with consistently maintained unrestricted
financial liquidity of at least 90 days of operating revenues, could be suff cient for 'AA-'or
higher ratings. For utilities with substantial growth, compliance demands, or significant
annual volatility in revenues or expenditures, greater financial flexibility may be
necessary."
The District's utility system is currently rated AA+ with a positive outlook.
2. Maintenance of adequate operating reserves consistent with levels recognized in the
County's reserve policies.
3. Full utilization of internal funding sources (e.g., operating reserves, capacity charge
collections) as the first or primary source of capital before use of external debt financing to
fund the System capital improvement program.
Based on the assumptions relied upon in the preparation of the financial forecast, the utility
should remain in good financial position throughout the Forecast Period identified in this report.
ES -4
Packet Page -1349-
7/8/2014 16.C.11.
FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
Based on our studies, assumptions, considerations, and analyses, PRMG offers the following
observations and opinions for consideration by the Board of County Commissioners:
1. The District's water and wastewater user rates have not been adjusted since the Fiscal Year
2011.
2. The District's existing monthly user rates for water, wastewater and IQ water service are
not anticipated to recover the District's projected water, wastewater and IQ water revenue
requirements for the fiscal years ending September 30, 2014 through 2019.
3. The County should consider adopting the Fiscal Years 2015 through 2017 water,
wastewater and IQ water system user rate adjustments as outlined in this report. These
adjustments are anticipated to generate the following increases in revenue:
Estimated Increase in System Revenue
Water Wastewater IQ Water Combined
Effective Date System System System System
October 1, 2014 9.00% 9.00% 9.00% 9.00%
October 1, 2015 5.00% 5.00% 5.00% 5.00%
October 1, 2016 5.00% 5.00% 5.00% 5.00%
4. The County should consider adopting a price indexing rate adjustment clause in its existing
rate ordinance to enable the utility to automatically adjust monthly rates for water,
wastewater and IQ water service — without a formal rate hearing or analysis — for
inflationary effects on the costs of operations. Based on discussions with County staff,
PRMG recommends that the annual index adjustment be calculated by applying one -
hundred- percent (100 %) of the percentage change in the Miami -Fort Lauderdale Consumer
Price Index (all urban consumers) as reported by the Bureau of Labor Statistics from
January 1st through December 31st of the previous calendar year to the monthly base
charges and consumption / volumetric charges, but not less than 0 %. Although the District
performs rate studies on a regular basis, having a price indexing rate adjustment clause may
benefit the District when its senior lien revenue bonds (new or already- issued) are reviewed
by bond rating agencies. Such a clause would help to assure the rating agencies that the
District's rates would keep up with inflation and, hence, there would be less implied risk
that the District would default on any debt service payments. The first annual indexing
adjustment is recommended to be implemented on October 1, 2017 unless superseded by
another rate study recommendation.
Such price indexing rate adjustment clauses are common among utilities in the State of
Florida.
5. The proposed water and wastewater user rates for the Fiscal Year 2015 are comparable
with the rates charged by "neighboring" utility systems. At an average monthly usage level
ES -5
Packet Page -1350-
7/8/2014 16.C.11.
of 6,000 gallons, the typical usage of a single family residential customer of the System,
bills for combined water and wastewater service under the proposed rates are lower than
the average bill charged by eighteen surveyed utilities for similar service. Moreover, at
least twelve of the eighteen surveyed utilities: i) are involved in a rate study; ii) are
planning to conduct a rate study; or iii) plan to implement a rate revision within the next
twelve months. This comparison is shown in Figure ES -1 at the end of this section. As
shown in Figure ES -1, the increase in the monthly bill for a user of 6,000 gallons under the
proposed rates would be $7.48.
6. The proposed IQ water user rates for the Fiscal Year 2015 are comparable with the rates
charged by "neighboring" utility systems.
7. The District should consider increasing the wholesale or bulk water service rate to $3.75
per 1,000 gallons effective October 1, 2014, $3.82 per 1,000 gallons effective October 1,
2015 and $3.85 per 1,000 gallons effective October 1, 2016.
8. The County is currently securing major user agreements reflecting revised take -or -pay IQ
water allocations with its major users. The revised IQ water allocations become effective
October 1, 2015 (next year). PRMG recommends that the District consider performing an
IQ water rate study next year to possibly redesign the IQ water rates for each customer
class based on cost of service principles.
9. The utility is currently performing an audit of its fire protection system. Once the audit
results are finalized, PRMG recommends that the District consider a review of its fire
protection charges.
10. The actual results achieved during the Forecast Period reflected in this report may vary
from those projected, and such variations may be material. For example:
a. Actual customer growth and usage may be higher or lower than projected.
b. The District's capital needs may be higher or lower than those projected and assumed
in this report.
C. The cost of goods and services (e.g., fuel and oil -based products) may be higher than
projected which may directly affect the operating margins of the utility and the long-
term ability to fund capital improvements.
PRMG recommends that the District reevaluate the sufficiency of its water, wastewater and
IQ water user rates on at least an annual basis to reconcile actual results with those
projected herein and to validate the overall financial forecast for ongoing strategic planning
purposes.
11. The proposed rates, when implemented as assumed in this report, are anticipated to be
sufficient to meet the rate covenants of the Bond Resolution and Florida Department of
Environmental Protection loan agreements.
ES -6
Packet Page -1351-
7/8/2014 16.C.11.
The ability of the System to meet the debt service requirements and comply with the rate
covenants of the Bond Resolution which authorized the issuance of the outstanding System debt
is subject to assumptions and considerations identified in this report and information obtained
during preparation of the report regarding the System. As such, this report should be read in its
entirety relative to such assumptions and considerations and the projections contained herein.
(Remainder of page intentionally left blank)
ES -7
Packet Page -1352-
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