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Approve Proposed Water Rate Increase Effective with the Bill Due and Payable May 15, 2006 and Establishment of a Basic Cable/Digital Video Recorder Rate:
- Water Rate Increase
At the February 21, 2006 Board Meeting, Staff requested approval of Notice of Public Hearing and on March 21, 2006 a Public Hearing was held covering the referenced changes in rates. Specifically, Staff is recommending a 14% increase to residential, commercial/industrial water rates within city limits and also outside city limits. Wholesale water rates are not proposed to be adjusted at this time, pending the results of a “Cost-of-Service” Study being conducted by R.W. Beck. The 14% rate increase is required in response to the unbudgeted, extraordinary expenses associated with multiple pump failures at the Water Plant intake station, increasing chemical costs, failure of an aerial transmission pipeline crossing, and historical decline in the Water Department’s financial reserve level.
- Establishment of a Basic Cable/Digital Video Recorder (DVR) Rate
When the DVR rate was established in 2004, Staff initially intended to offer the service to customers that subscribed to digital cable as a prerequisite. It isn’t technically necessary to provide the service in that way. Making the DVR service available to any basic cable customers offers more choice and flexibility. By setting the basic only/DVR monthly rate at $15, there is an incentive to also upgrade to digital cable/DVR because it’s only an additional $2 a month.
A Public Hearing was conducted on March 21, 2006 for the purpose of receiving oral or written comments on the referenced proposed rates. The following individuals were in attendance at the public hearing and addressed the Board: Jill Robinson, Vicki Pettus and Michael Davenport. Their comments/questions and Staff responses follow. There were no written comments received as a result of the proposed rate changes and associated public hearing.
The following comments/questions were asked:
Ms. Jill Robinson
- Better notification to the community and news media regarding Board Meetings, Public Hearings, etc.
Staff’s Response:
Current Procedures
The Plant Board complies with the notification requirements outlined in the Open Meetings Act. We currently notify the local newspaper and Clear Channel RadioStation via mail of regularly scheduled monthly board meetings and special board meetings. This notice is mailed approximately one week to two weeks prior to the Board Meeting. The Plant Board does not pay an advertising fee for the publication of this information and the media may elect not to include the notice in their coverage. The Plant Board pays advertisement fees for the publication of public hearing notices to the State Journal newspaper. A faxed sheet of information regarding public hearings is sent to Clear Channel Radio Station. This generally occurs the following day after a regularly scheduled Tuesday Board Meeting and is published in that Sunday’s edition of the paper.
Proposed Procedures
In the future, the Plant Board will follow the attached process to better notify the community and news media of all Plant Board Meetings:
- Pay advertisement fees to the local newspaper to publicize all Board Meetings including, regular, special, budget and public hearings. This advertisement will be in the Sunday edition prior to the Tuesday Board Meeting.
- Continue to provide notification of all Board Meetings to Clear Channel Radio Station.
- Advertisement of all Board Meetings will be posted on Cable’s Channel 10 and will air at various times beginning on the Friday before the Tuesday Board Meeting.
- The notice of all Board Meetings and the Executive Digest of a regular meeting will be posted on our Website (www.fpb.cc) the Friday before a Tuesday Board Meeting.
- 2. Consider televising Board Meetings, Public Hearings, etc. on Cable 10.
Staff’s Response:
The Open Meetings Act does not mandate that public meetings be televised. Unlike city, county and state government, FPB offers services that are subject to competition. Staff believes that our meetings and the discussions regarding FPB’s business plans and operations should never be subject to television coverage.
This issue will be further evaluated and discussed as part of Agenda Item #5 in the Board Meeting.
Ms. Vicki Pettus
1. Why is such a large rate increase needed, why did the Board not see this coming sooner and why can’t this rate increase be phased in multiple smaller increases?
Staff’s Response:
The proposed rate increase is required in response to extraordinary, unbudgeted expenses associated with multiple pump failures, increasing chemical costs, failure of an aerial transmission pipeline crossing, and a historical decline in the Water Department’s financial reserve level. The decline in the reserve level is due, in part, to poor water sales caused by unfavorable weather conditions which were also not budgeted for since the budget is typically based on average years.
In years past, the Electric Department’s reserves have been sufficient to cover the Bond Sinking Fund requirements if the Water Department’s reserve level could not. In the early months of this fiscal year, Electric’s reserve level began to drastically decline, primarily due to fuel adjustment fees charged by Kentucky Utilities. The extraordinary expenses in the Water Department and the significant changes in KU’s fuel adjustment fees could not be anticipated. As a result, the Board saw the need to establish minimum reserve levels for each department. The Board adopted a minimum reserve level for the Water Department equal to one month’s average expenditures plus the requirements of the Bond Sinking Fund to be obtained by the end of a five year period ending in June, 2010. Staff has projected the number to be $2.2 million at that time. The proposed rate increase of 14% is the rate needed to achieve the necessary reserve level for the Water Department. Phasing in the necessary rate increase would not enable the Board to achieve the minimum reserve level requirements in a timely manner.
2. Why are emergencies/contingencies not budgeted for?
Staff’s Response:
Emergencies and Contingencies are not a line item in our five year budget plan. The Plant Board utilizes its reserves to address emergencies and unbudgeted needs.
3. Consider televising Board Meetings, Public Hearings, etc. on Cable 10.
Staff’s Response:
The Open Meetings Act does not mandate that public meetings be televised. Unlike city, county and state government, FPB offers services that are subject to competition. Staff believes that our meetings and the discussions regarding FPB’s business plans and operations should never be subject to television coverage.
This issue will be further evaluated and discussed as part of Agenda Item #5 in the Board Meeting.
4. Change time of Board Meetings to the evening hours.
Staff’s Response:
When FPB held its meetings after work or late in the afternoon, there was little public involvement or interest.
Afternoon Board Meetings were changed to lunch meetings to better accommodate Board Members’ schedules. Staff can attend Board Meetings as directed.
This issue will be further discussed as part of Agenda Item #5 in this Board Meeting.
Mr. Michael Davenport
1. How much have the rates gone up during the past ten years and is there any correlation of those increases as to the income increases of the citizens of Frankfort?
During the past 10 years, there have been five water rate increases. A tabulation of those rates follows:
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-
| Year |
|
Within
City Limits
|
|
Outside
City Limits
|
|
Wholesale |
|
|
|
|
|
|
|
|
1995
|
|
5%
|
|
5%
|
|
5%
|
|
|
|
|
|
|
|
|
1996
|
|
15%
|
|
0%
|
|
20%
|
|
|
|
|
|
|
|
|
1998
|
|
14%
|
|
0%
|
|
5%
|
|
|
|
|
|
|
|
|
2002
|
|
12%
|
|
7%
|
|
8%
|
|
|
|
|
|
|
|
|
2005
|
|
8.5%
|
|
8.5%
|
|
8.5%
|
The Plant Board does not have access to salaries of Frankfort residents and cannot comment as to correlation of water rate increases. However, for your information, below is the Consumer Price Index (inflation rate) as determined by the U.S. Department of Labor for years 1995 thru 2005. The Plant Board utilizes this index to adjust Plant Board salaries to reflect cost-of-living increases.
-
|
Year
|
|
Annual
|
|
|
|
|
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005 |
|
2.8%
3.0%
2.3%
1.6%
2.2%
3.4%
2.8%
1.6%
2.3%
2.7%
3.4%
|
2. Why is there a difference in water rates for City and County?
Staff’s Response:
The water rate differential between the City and County water rates have existed
probably since FPB started providing water service in the county.
In those days, FPB was primarily providing water service to the City; however,
the demand for service expanded to the County. At that time, Staff believes the reason for the differential in rates was because the City had a greater concentration of customers per mile than the County, and therefore, a City and County rate was established because the cost of water extensions was not as economically feasible as more populated City areas.
It should be noted that in R. W. Beck’s 1996 “Cost-of-Service” Study, a convergence of the City and County rates was recommended. As a matter of course, water rates within the City limits were increased in 1996 and 1998 while the County rates were not adjusted. Revenue requirements in recent years has necessitated the adjustment
to both City and County rates. Currently, County customers pay approximately 45% more for water than City customers.
3. Why should business water rates be higher than residential rates?
Staff’s Response:
The rate structure for residential and commercial customers is the same.
4. Could another water source (such as the regional water supply concept) have helped the Plant Board during the pump failure?
Staff’s Response:
An alternative potable water supply would have been beneficial to the Plant Board and its customers during this past year’s emergencies associated with the intake pump failures. A supplemental potable water supply would have allowed customers to use water at their discretion instead of having to comply with the imposed water restrictions required by the Plant Board during the emergency.
5. Consider televising Board Meetings, Public Hearings, etc. on Cable 10.
Staff’s Response:
The Open Meetings Act does not mandate that public meetings be televised. Unlike city, county and state government, FPB offers services that are subject to competition. Staff believes that our meetings and the discussions regarding FPB’s business plans and operations should never be subject to television coverage.
This issue will be further evaluated and discussed as part of Agenda Item #5 in the
Board Meeting.
Conclusion
Staff recommends approval of the 14% water rate increase and establishment of a basic cable/digital video recorder rate.
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