Utilities CommitteeCouncil Present:
December 7, 2010
11:00 a.m. – 12:05 p.m.
Virgil Clarkson, Andy RyderStaff Present:
Scott Spence, Scott Egger, Troy Woo, Peter Brooks, Doug Christenson, Erin Keith, Peri Edmonds DEPUTY MAYOR CLARKSON MOVED TO AMEND THE AGENDA BY CHANGING THE ORDER OF THE AGENDA ITEMS TO (1) ASSISTANCE FOR LOW INCOME WATER CUSTOMERS, (2) SOUTH SOUND GREEN ENERGY, AND (3) STORMWATER COMPREHENSIVE PLAN.
COUNCILMEMBER RYDER MOVED TO ADOPT AN AMENDED AGENDA TO INCLUDE THE NLC SERVICE LINE WARRANTY PROGRAM. DEPUTY MAYOR CLARKSON SECONDED. MOTION CARRIED.
Assistance for Low Income Water Customers
Troy Woo, Finance Director, presented the Committee with assistance options that are currently available and options that will be available in the near future for low income water customers. Currently there are a number of areas that disadvantaged utility customers may seek assistance. First, there is a City discount program available for low-income senior citizens and low-income disabled citizens. Second, low-income customers currently may seek assistance from organizations including the Salvation Army, Sacred Heart Catholic Church, St. Vincent de Paul, and Community Action Council. City staff does direct customers to these organizations. Finally, staff has been developing a utility assistance program for low-income customers that will be administered by the Community Action Council.
The existing City discount program is available for low-income senior citizens and low-income disabled customers. Qualified customers under this program receive 50 percent discounts on their water, wastewater, and stormwater bills. Customers may qualify as low-income if the qualifying income is less the U.S. Department of Housing and Urban Development (HUD) 50 percent of median income level. For example, the 2010 qualifying income level for a family of four is $35,950. This discount program is codified in the Lacey Municipal Code (LMC) sections 13.16.065 (Sewer), 13.32.032 (Water), and 13.70.037 (Stormwater). Approximately 230 customers are currently utilizing the program.
To improve the awareness of the discount program, it is currently being highlighted on our monthly utility bills. In addition, Parks and Recreation Director Lori Flemm presented the program at a recent Senior Center lunch and the application forms have been made available at the Senior Center.
Troy provided examples of other Washington cities similar in size to Lacey who offer the same types of discounts. In addition, there are a number of non-profit organizations who offer assistance. Some of these include the Salvation Army, Sacred Heart Catholic Church, St. Vincent de Paul, and Community Action Council. These organizations do not follow any guidelines established by the City, so the assistance is provided completely separate from any City policy or program. Staff simply refers customers to these organizations. It is not known how much funding is available or what qualifications have been established by the organizations, but income level is likely a factor. Assistance is received frequently. Typically, financial pledges are received from these organizations on a weekly basis and are less than $75. The community is fortunate to have these generous organizations that help those in need.
Troy reported that at the July 6, 2010, Utilities Committee meeting, a utilities assistance program proposal was presented and forwarded to the full City Council. Subsequently, the City Council authorized the City Manager to sign a professional services agreement with the Community Action Council to implement a utility assistance program and authorized $7,500 of startup funds for the program. The City of Lacey will collect and remit the donations to the Community Action Council (CAC) through its utility billing system. The CAC will fully administer the utility assistance program. The CAC will assist recipients through the screening process and determine eligibility based criteria established by the professional services agreement. The City Council authorized assistance up to $75 if funding is available based on the following criteria:
- Total household gross income must be less than $30,000/year (equal to 125% of the poverty level for a family of 4).
- The customer’s account must be past due.
- The customer must not have received assistance two times in the current calendar year.
During December, staff will run program tests, and expects the program will be operating in February.
Troy stated that past City Council and Committee discussions relating to reducing utility rates have focused on water conservation impacts and low-income customers. Establishing different rate classifications for both water conservation and low-income customers is allowed by the Revised Code of Washington (RCW). Rates must be uniform for the same class of customers or service provided.
The City has adopted a tiered rate structure to promote water conservation, implemented a discounted rate program for low-income senior citizens and low-income disabled customers, and adopted different rates for customers who are located outside of the city limits. There appears to be a fair amount of flexibility when establishing customer classifications.
There are two main factors that should be considered before implementing a new customer classification or rate structure. Any change to the rate structure or classifications could have a significant impact to city staff. As an example, the income verification for a low-income rate classification would create additional workload. This is the reason the partnership with CAC was attractive. City staff would need to develop an understanding of a wide range of income verification information and documents such as IRS tax returns, bank statements, pension annuities, retirement benefits, Social Security benefits, life insurance benefits, interest earnings, capital gains, gift income, bonuses, and tip income. Income will need to be verified at the initial application phase and annually to ensure income levels have not changed. The CAC already has this level of expertise due to its numerous assistance programs.
The other main consideration relates to the basic rate setting process and fixed nature of the utility expenses. One of the first steps in rate setting is determining how much service will be provided and how much it will cost to deliver that service. The next step is to determine how those costs will be recovered and how many customers will be charged for the cost recovery. Assuming the expenses are fixed, a reduction to one area of the rate base will cause an increase to other areas within the base. For example, if an additional low-income classification is established with a lower utility rate, the other classifications would have to pay more in order to meet the expenditure requirements. Unfortunately, the ramifications of changing rate classifications can’t be fully predicted. However, the timing for this type of consideration is good because the City’s water rate consultant is still developing a multi-year rate recommendation. The consultant is analyzing the City’s current rate classifications and would have a good basis for projecting the impacts of developing new classifications. Flexibility within rate classifications exists, but determining the impacts is difficult. The City is positioned well to have this type of discussion now as it can direct its water rate consultant to develop different rate scenarios for consideration. There is some room in the existing contract, but anything elaborate may require a change of scope.
Deputy Mayor Virgil Clarkson reported that the CAC has received $3 million from Puget Sound Energy to be used for energy assistance in three counties, including Thurston County. He questioned how the customers who use direct deposit will learn about the new program. Troy noted less than 5% of customers use direct deposit, and the City’s website will feature the new program and forms.
Councilmember Andy Ryder expressed his concern with the water rate increase for low income, disabled, and senior citizens. Although he understands a new rate structure or classification could have a significant impact on City staff, other cities are able to do it and noted that the National League of Cities offers programs to assist with best practices. He suggested that the City give citizens an opportunity to decide whether to expand the program by letting them know the cost to do so and what programs would be affected.
Troy said once the program begins in February, staff will be able to gauge the interest and utilization of the program with the CAC.
The Committee agreed not to revise the water rate consultant’s scope of work, and asked staff to provide an update of the new program in April 2011. South Sound Green IGA
Erin Keith, Water Resources Specialist, briefed the Committee on the renewal of an Intergovernmental Agreement (IGA) with Thurston Conservation District and the cities of Olympia and Tumwater for the South Sound GREEN program. The program provides opportunities for students to explore, investigate, and take action to improve their local streams, rivers, lakes, wetlands, and shorelines of South Puget Sound by conducting school presentations/demonstrations, student fieldtrips, and water quality monitoring by the students. Erin noted she plays a large part in this program by working with 5th grade students. The City’s annual support is $12,000, and they anticipate signing the renewal before the contract expiration of December 31, 2010.
Councilmember Andy Ryder asked whether there is grant funding available for this program. Erin responded that the Thurston Conservation District applies for several grants throughout the year, and noted the City receives a portion of their overall funding.
The Committee asked staff to provide a presentation of this program to the full Council. Stormwater Comprehensive Plan
Doug Christenson, Utility Engineer, reported that Lacey Water Resources has initiated a project to create a comprehensive plan for the Storm and Surface Water Utility, which does not currently have such a plan. The Stormwater Comprehensive Plan (SCP) will serve as a guidance document to organize and direct stormwater-related activities, plan for improvements, and ensure efficient use of resources.
During June and July 2010, an interdepartmental committee selected the consultant team of Herrera Environmental Consultants, Inc. and FCS Group to provide technical assistance in the development of the SCP. Consultant fees were originally anticipated to be in the $250,000 range for this project, over two years. In the City’s 2010 adopted budget, $125,000 was approved to initiate the project. Staff negotiated a favorable scope of work and consultant fee with budget constraints in mind, with the final version proposed with a total consultant fee of $182,193. During the negotiation period, Water Resources secured grant funding in the amount of $176,079 from the Washington Department of Ecology. The Municipal Stormwater Capacity Grant is intended for stormwater program development, including stormwater comprehensive planning. The SCP project is grant-eligible, so the grant funds will substantially offset the consultant fee. Professional Services Agreement Contract Number PW 2010-15 was signed this week, allowing the project to move ahead with consultant services.
The Stormwater Comprehensive Plan project was envisioned to address three main topic areas relevant to the Storm and Surface Water Utility: (1) compliance with regulatory mandates, particularly the NPDES Phase II Municipal Stormwater Permit; (2) stormwater facilities operation, maintenance, improvements and construction; and (3) financial analysis of stormwater utility rates, revenues and expenditures.
The Scope of Work is based on these three broad topics. The Phase II Permit governs the City’s overall Stormwater Management Program (SWMP), so Tasks 1 and 4 will evaluate our current SWMP and determine where we need to focus our resources to remain in compliance. The City’s stormwater facilities and infrastructure are evaluated in Task 3, with recommendations, priorities, and cost estimates incorporated into a Capital Improvement Plan, developed in Task 5. The financial analysis and recommendations for stormwater utility rates and fee structure are addressed in Task 6.
Of the remaining tasks, Task 2 involves the City’s interdepartmental advisory group and the communication of issues and information. Task 8 defines the public involvement aspect of the project, and preparation of the draft and final versions of the Stormwater Comprehensive Plan are accomplished in Tasks 7 and 9, respectively.
The project is expected to take about 18 months, with a projected completion date of June 30, 2012. Staff will continue to update the Committee as they move through the process.
Deputy Mayor Virgil Clarkson noted that the agricultural building uses a new design for capturing stormwater runoff. Doug stated there are quite a few places around the City that are using the new design elements, and the current Stormwater Manual has a variety of approaches that can be used.
NLC Service Line Warranty Program
Councilmember Andy Ryder reported on the National League of Cities conference he attended last week where he learned of a new program being launched. The Service Line Warranty program provides residents with an affordable home protection solution to repair broken or leaking water or sewer lines for a low monthly fee. There is no cost to the City to participate in the program, plus the City would receive a share of the revenues collected. Customers would work directly with NLC and receive repair service from licensed plumbers.
Scott Egger, Public Works Director, stated he recently received information on this new program. Although staff felt it had a lot of merit, it won’t be available in our area until 2012.