HomeMy WebLinkAbout10-28-2024 City Council Work Session MinutesSTATE OF ALABAMA
COUNTY OF BALDWIN
) (
) (
The City Co un ci l m et in a Work Session
at 4:30 p.m., Fairhope Municipal Complex Council Chamber,
161 North Section Street, Fairhope , Alabama 36532,
on Monday, 28 October 2024.
Present were Counci l President Corey Martin, Councilmembers: Jack Burrell ,
Jimmy Conyers, Jay Robinson, and Kevin Boone, Mayor Sherry Sullivan, City
Attorney Marcus E. McDowell, Attorney Christopher S. Williams, and City Clerk Lisa
A. Hanks.
Counci l President Martin ca ll ed the meeting to order at 4:30 p.m.
The following topics were discussed:
• The first item on the Agenda was the Cost of Services Study Presentation and
Discussion by Jackson Thornton. Mayor Sullivan addressed the City Council and
introduced Jim Marshall with Jackson Thornton . Mr. Thornton presented the Power
Point Presentation titled , "City of Fairhope Electric , Water, Wastewater & Gas Cost of
Service Studies: 12 Months Ending September 2022 ." (See attached Presentation)
Councilmember Burrell questioned organic growth to I 00 percent. Mr. Marshall
explained we just want to break even; and wi ll work gradually to 100 percent. Mayor
Sul li van sa id we should do this study every two to three years .
• The next item on the Agenda was the Executive Session . At the request of the City
Attorney, Marcus E. McDowell , the C it y Council wi ll rise from the meeting to go into
Executive Session based on A labama Code § 36-25A-7(a)(3) to discuss pending and the
legal ramifications of and legal options for potential litigation . The approximate time to
be in Executive Session is 45 minutes . Councilm ember Burrell moved to go into
Executive Session. Seconded by Councilmember Robinson, motion passed
unanimously by voice vote .
Exited the dais at 5:00 p .m. Returned at 5:52 p.m.
• Water and Wastewater Sup e rintendent Daryl Morefield addressed the City Counci l
regarding Agenda Items No. 17 through No . 22 ; and answered any questions if needed.
He told the City Counci l that the Publix Liftstation on Highway 104 was up and
runnmg.
• Gas Superintendent Wes Boyett addressed the City Council and gave an update on the
Alabama Public Service Commission recent inspection ; and said they found no
vio lations and had no re commendations . He gave a shout out to two of his employees
who handled this inspection: Lewis Jones and Ty Northrop.
Councilmember Burrell commented last meeting about comp laints from citizens of their
lines being cut; and said the next day two Gas employees came to his home to let him
know a lin e had been cut. He said they were very professional.
• IT Director Jeff Montgomery addressed the City Council regarding Agenda Item No .
24 ; and answered any questions if needed .
M ond ay , 28 Octob er 2024
P ag e -2-
• Chi ef Steph an ie Hollin gh ead addressed the C it y Co un cil regardin g Age nd a Item No.23 ;
and an swered any qu es ti ons if needed .
• Ci t y Eng in ee r Ri chard John son addresse d th e C it y Co un cil rega rdi ng Agend a It ems No .
9, No . 10 , No. 11 , and No . 12 ; and answered any qu es ti ons if nee ded .
Th er e b ein g no fmih er bu sin ess to th e Ci ty Co un cil , th e meetin g
was dul y adjourn ed at 6 :02 p.m .
Corey M artin , Co un cil Pres id ent
~ City Cl erk
Typical Objectives of Rate Study
1. Revenue Stability and Sufficiency
2. Fairness and Equity
• Fair is related to cross subsidies
• Equity is related to Price=Cost
3. Ability to Pay
4. Simplicity (Admin & Cust Understanding)
5. Defensible
2
Overview of Process
1. Determine Revenue Requirements
• How much does the system need to operate?
2. Develop Revenue Requirements by Rate Class
• How much does the system need to recover by rate
class?
3. Develop COS Rates and Design Acceptable Rates
• How does the system best recover the needed
revenues?
4. Implement Rate Changes
3
Cash Method -All Systems Revenue Requirement
TOTAL REV. REQ. System Electric Gas Water Wastewater
Operations & Maintenance
Plus : Power Cost/Purchased Gas
Plus : Transfers
Plus : Debt Service
Plus : Rate Funded Capital Imp .
Total Revenue Requirement
Less : Other Revenue
Rate Requirement
Total Current Revenue
Current Recovery ($)
Current Recovery(%)
$ 16 ,693 ,399 $ 4 ,468 ,073 $ 3,712 ,753 $ 4 ,237 ,685 $ 4,274 ,887
$ 17,155 ,934 $ 13 ,394 ,653 $ 3,761 ,281
$ 1,679 ,192 $ 537 ,655 $ 401 ,644 $ 688 ,310 $ 51 ,583
$ 6,379 ,228 $ 43,730 $ 43 ,730 $ 2,839 ,846 $ 3,451 ,921
$ 14 ,710 ,635 $ 2,460 ,635 $ 3,000 ,000 $ 5,250 ,000 $ 4 ,000 ,000
"'$ 56 ,618 ,388 $ 20 ,904 ,747 $ 10 ,919 ,408 $ 13,015 ,842 $ 11 ,778 ,391
$ 1,986 ,492 $ 1,070 ,830 $ 316 ,692 $ 510 ,120 $ 88 ,850
$ 54 ,631 ,897 $ 19 ,833 ,916 $ 10 ,602 ,716 $ 12 ,505 ,722 $ 11 ,689 ,542
System Electric Gas Water Wastewater
$ 46 ,219,459 $ 21 ,002 ,340 $ 8,558 ,176 $ 9,322 ,407 $ 7,336 ,537
$ (10 ,398 ,929 ) $ 97 ,593 $ (2 ,361 ,232 ) $ (3,693 ,435) $ (4 ,441 ,854)
82 % 100% 78 % 72 % 62 %
4
Cash Method -All Systems Revenue Requirement
Recovery by System
120%
100%
80%
60%
40%
20%
0%
System Electric Gas Water Wastewate r
5
Water -Cash Method Revenue Requirement
TOTAL REV. REQ.
Operations & Maintenance $ 4 ,237 ,685
Plus: Transfers $ 688 ,310
Plus : Debt Service $ 2 ,839 ,846
Plus : Rate Funded Capital $ 5 ,250 ,000
Total Revenue Requirement $ 13 ,015 ,842
Less : Other Revenue $ 510 ,120
Rate Requirement $ 12 ,505 ,722
*Debt Service Includes $2,491 ,000 of annual payments that do not yet exist
6
Water -Components of Revenue Requirement
Rate Funded l
Capital
40%
REVENUE REQUIREMENT
Debt Service
22%
Operations &
Transfers
5%
7
Water -Revenue Requirement by Rate Class
Rev. Req. by Rate Class
$14,000,000
$12 ,000,000
$10,000,000
$8 ,000,000
$6,000,000
$4 ,000,000
$2,000,000
$-
Total Insi de Ou t side IRW1 IRW3
Operations & Mainten ance Transfers Debt Service Rate Funded Cap ita l
8
Water -Recovery by Class
Recovery by Rate Class
120%
100%
80 %
60%
40%
20 %
0%
Total Inside O utside IRW 1 IR W3
Total Inside Outside IRW1 IRW3
Total Revenue $ 9,322,407 $ 4,354 ,931 $ 3,523 ,866 $ 1,236 ,561 $ 207 ,049
Over/(Under) Recovery $ (3 ,693,435) $ (2 ,384 ,227) $ (619 ,094) $ (644 ,180) $ (45 ,935)
9
Water -Results & Recommendations, 1 of 3
• The water system is anticipated to under-recover by
approximately $3,700,000 on a total need of
$13,000,000.
• During our most recent work session held with staff on
September 16, 2024, it was decided to try and target a
90% recovery in two steps.
• This equals approximately $1,221,00 in additional
revenue each of the next two steps.
10
Water -Results & Recommendations, 2 of 3
Additional Revenue Needed
for 90% Recovery
Additional Revenue Needed
Each Year
Bills sent in FY 2022
Average Im pact per Bill per
Inside Outside IRW1 IRW3 Total
$ 1,737 ,895 $ 221 ,768 $ 461 ,843 $ 21 ,357 $ 2,442 ,863
$ 868 ,948 $ 110 ,884 $ 230 ,921 $ 10 ,678 $ 1,221,432
136 ,237 83 ,817 28 ,336 3 ,557 251 ,947
Step $ 6 .38 $ 1.32 $ 8.15 $ 3 .00 $ 4 .85
11
Water -Results & Recommendations, 3 of 3
• For all Inside City Limit customers, including irrigation,
consider the following rate action:
• Increase the monthly customer charge $0. 75
each of the next two steps. Total increase of
$1.50.
• Increase volumetric rate on all volumes by $1.00
each of the next two steps. Total increase of
$2.00 per kGal.
• For all Outside City Limit customers, including
irrigation, consider the following rate action:
• Increase volumetric rate on all volumes by $0.50
each of the next two steps. Total increase of
$1.00 per kGal.
12
Water -Inside City Rate Curve -Full Implementation
Cost of Service Current Rate Proposed Rate Difference
Customer Charge $ 20.30 $ 14.00 $ 15.50 $ 1.50
1,000-7,000 gal $ 4.76 $ 2.60 $ 4 .60 $ 2.00
All Additional Usage $ 3.60 $ 5.60 $ 2.00
INSIDE COST CURVE
--cos Total $/kGal
$30
---Current Rate $/kGal --Pr oposed Rate $/kGal
$25
$20
_J
<( $15 (.9
~ -$10 -v).
$5 ■ ■ ■ ■ ■ ■
$-
1 2 3 4 5 6 7 8 9 10
USAGE
13
Water -Inside City Rate Impact -Full Implementation
rvlonthly Current Proposed
Usage COS Rates Current Rates Proposed Rates Change Dail Change $/kGal $/kGal
1 $ 25 .06 $ 16.60 $ 20 .10 $ 3.50 $ 0.12 $ 16.60 $ 20 .10
2 $ 29 .82 $ 19.20 $ 24 .70 $ 5.50 $ 0.18 $ 9.60 $ 12.35
3 $ 34.58 $ 21.80 $ 29 .30 $ 7.50 $ 0.25 $ 7.27 $ 9.77
4 $ 39 .34 $ 24.40 $ 33 .90 $ 9.50 $ 0.32 $ 6.10 $ 8.48
5 $ 44.10 $ 27.00 $ 38 .50 $ 11.50 $ 0.38 $ 5.40 $ 7.70
6 48.86 29.60 I 43.10 $ 13.50 $ 0.45 $ 4.93 $ 7.18
7 $ 53 .62 $ 32 .20 $ 47 .70 $ 15.50 $ 0.52 $ 4.60 $ 6.81
8 $ 58 .38 $ 35.80 $ 53 .30 $ 17.50 $ 0.58 $ 4.48 $ 6.66
9 $ 63 .14 $ 39.40 $ 58 .90 $ 19.50 $ 0.65 $ 4.38 $ 6.54
10 $ 67.90 $ 43.00 $ 64 .50 $ 21 .50 $ 0.72 $ 4.30 $ 6.45
Avera e Usa e 5,700
14
Water -Projected Recovery -Full Implementation
Projected Recovery
120%
100%
80%
60%
40%
20%
0%
TOTAL INSIDE OUTSIDE IRWl IRW3
• Current ■ Proposed
15
Sewer -Cash Method Revenue Requirement
TOTAL REV. REQ.
Operations & Maintenance $ 4 ,274 ,887
Plus : Transfers $ 51 ,583
Plus : Debt Service $ 3 ,451 ,921
Plus : Rate Funded Capital $ 4 ,000,000
Total Revenue Requirement $ 11 ,778,391
Less : Other Revenue $ 88 ,850
Rate Requirement $ 11 ,689 ,542
*Debt Service Includes $2 ,058 ,000 of annual payments that do not yet exist
16
Sewer -Components of Revenue Requirement
Rate Funded
Capital
34%
REVENUE REQUIREMENT
Debt Service
29%
Operations &
36%
1%
17
Sewer -Revenue Requirement by Rate Class
Rev. Req. by Rate Class
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2 ,000,000
$-
Tot al
Operations & Maintenance
Insi d e
Transfers Debt Service
Outside
Rate Funded Capital
18
Sewer -Recovery by Class
Recovery by Rate Class
120%
100%
80%
60%
40%
20 %
0%
Total Inside Outside
Total Inside Outside
Total Revenue $ 7,336,537 $ 6,322,181 $ 1,014,356
Over/(Under) Recovery $ (4,441 ,854) $ (3 ,958,677) $ (483 ,177) 19
Sewer -Results & Recommendations, 1 of 3
• The sewer system is anticipated to under-recover by
approximately $4,442,000 on a total need of
$11,778,000.
• During our most recent work session held with staff on
September 16, 2024, it was decided to try and target a
90% recovery in two steps.
• This equals approximately $1,636,00 in additional
revenue each of the next two steps.
20
Sewer -Results & Recommendations, 2 of 3
Additional Revenue Needed
for 90% Recovery
Additional Revenue Needed
Each Year
Bills sent in FY 2022
Average Im pact per Bill per
Inside Outside Total
$ 2,938,527 $ 334,373 $ 3,272,900
$ 1,469 ,264 $ 167 ,186 $ 1,636,450
123,301 14 ,750 138 ,051
Step $ 11.92 $ 11.33 $ 11.85
21
Sewer -Results & Recommendations, 3 of 3
• For all customers consider the following rate action:
• Increase the monthly customer charge $4.00
each of the next two steps . Total increase of
$8.00.
• Increase volumetric rate on all volumes by $1.50
each of the next two steps . Total increase of
$3.00 per kGal.
22
Sewer -Inside City Rate Curve -Full Implementation
Customer Charge
All Usage
$50
$45
$40
$35
_.J
$30
<( $25
0 $20 ~ -$15 tA-
$10
$5
$0
Cost of Service Current Rate Pro osed Rate Difference
$
$
36.74 $
8.51 $
22.00 $
5 .30 $
INSIDE COST CURVE
30 .00 $
8.30 $
-+-COS Total $/kGal -+-Current Rate $/kGal ......,.Proposed Rate $/kGal
■ ■ ■ ■ ■ ■
2 3 4 5 6 7 8 9
USAGE
■
10
8 .00
3.00
23
Sewer -Inside City Rate Impact -Full Implementation
Proposed
Usage COS Rates Current Rates Proposed Rates Monthly Change Daily Change Current $/kGal $/kGal
1 $ 45.25 $ 27 .30 $ 38.30 $ 11 .00 $ 0.37 $ 27 .30 $ 38 .30
2 $ 53.77 $ 32 .60 $ 46 .60 $ 14.00 $ 0.47 $ 16.30 $ 23 .30
3 $ 62.28 $ 37.90 $ 54 .90 $ 17 .00 $ 0.57 $ 12 .63 $ 18 .30
4 $ 70 .80 $ 43 .20 $ 63 .20 $ 20.00 $ 0.67 $ 10.80 $ 15 .80
5 $ 79.31 $ 48.50 $ 71.50 $ 23.00 $ o.n $ 9.70 $ 14.30
6 $ 87 .83 $ 53 .80 79.80 $ 26.00 $ 0.87 $ 8.97 $ 13.30
7 $ 96 .34 $ 59 .10 $ 88 .10 $ 29 .00 $ 0.97 $ 8.44 $ 12.59
8 $ 104 .86 $ 64.40 $ 96.40 $ 32 .00 $ 1.07 $ 8.05 $ 12.05
9 $ 113.37 $ 69 .70 $ 104.70 $ 35 .00 $ 1.17 $ 7.74 $ 11 .63
10 $ 121 .89 $ 75 .00 $ 113.00 $ 38 .00 $ 1.27 $ 7.50 $ 11 .30
Average Usage 5,402
24
Sewer -Projected Recovery -Full Implementation
Projected Recovery
120%
100% 96%
80%
60%
40%
20%
0%
TOTAL INSIDE OUTSIDE
■ Current ■ Proposed
25