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Home My WebLink AboutFC Minutes 02/23/2017mmtart 11'"Wpw FINANCE COMMITTEE Minutes of the Meeting February 23, 2017 Emergency Operations Center 1720 W. Central Road CALL TO ORDER — ROLL CALL The meeting was called to order at 7:03 p.m. by Chairman John Kellerhals. Commissioners present included Pam Bazan, Trisha Chokshi, Vince Grochocinski, Don Ocwieja, Thomas Pekras and Mary Rath. Staff present included Finance Director David Erb, Public Works Director Sean Dorsey, Public Works Deputy Director Jason Leib and Administrative Analyst Alexander Bertolucci. Also, representatives from Burns & McDonnell were present: Project Manager Randy Patchett and Rate Study Lead Dave Naumann. II. APPROVAL MINUTES a. January 25, 2017 — Motion made by Commissioner Pekras seconded by Commissioner Grochocinski. Minutes were approved. III. CITIZENS TO BE HEARD None IV. OLD BUSINESS None V. NEW BUSINESS Water Rate Study Discussion Public Works Director Sean Dorsey reviewed the existing water and sewer cost drivers that include loss of Special Service Area (SSA) #5, accelerated lead service line and water main replacement, reduced consumption, tighter water loss rules, 1% annual replacement of water and sewers mains per best practices, and general system improvements (i.e. hydrologic models and addressing high/low water pressures). The following responses from staff and representatives from Burns & McDonnell were provided to questions from the Finance Commission: • Existing water mains are abandoned in place and replacement pipes are installed in a new place. For example, the existing water main could be under the street and the new water main would be installed under the sidewalk. The Village's experience with installing new water mains with directional drilling has been positive and is essentially cost neutral compared to traditional dig up and replace method since it damages fewer number of driveways, sideways, and parkways. • The difference between PVC and ductile iron pipes were provided. • SSA#5 expires this year. The levy was held at the original percentage and did not increase over time. The Village is still in debt to Northwest Suburban Municipal Joint Action Water Agency (NSMJAWA); however, it is for recent projects and not the original bonds. • Mount Prospect's population growth was at its peak between 1945 and 1980. • Previous water loss standards provided a credit allotment of 250,000 gallons per day based on infrastructure. New rules limit measured water loss (pumped vs Finance Commission Page 1 of 4 02/23/17 billed) to less than 10% in 2016. Only a few communities are below the new water loss standards and the Village is one of those communities with measured water loss of 6.7%. • Criteria used to evaluate water main condition were reviewed. Standard water main size is 8" and older 6" mains are thinner walled and experience more frequent brakes. The Village averages 80 breaks per year. Pipe between 60 and 70 years old experience more breaks. Burns & McDonnell, Project Manager, Randy Patchett, P.E., reviewed the characteristics and status of Mount Prospect's water & sewer infrastructure. 30% of the system is 61 to 70 years old and approximately 42% of the water system is 6 inch pipe when today's minimum standard is 8 inch pipe. He stated the renewal and replacement programs of water and wastewater is an industry challenge with $1 trillion spent nationwide on water/sewer infrastructure annually. He also reviewed water and sewer system challenges and recommended improvements. The study outlines in future years the construction of a 2nd elevated tank to mitigate pressure and conveyance issues south of NW Highway & railroad tracks. The Village has lined 30% of its sewer pipes which is ahead of most communities, however, improvements should continue at the current pace to ensure compliance with Metropolitan Water Reclamation District of Greater Chicago Infiltration/Inflow Control Program and the Capacity, Management, Operation and Maintenance (CMOM) Program in accordance with the Environmental Protection Agency. The following responses from staff and representatives from Burns & McDonnell were provided to questions from the Finance Commission: • The Village maintains a system of five deep wells for back up in the event of an emergency. Staff is exploring other water supply connections and different strategies going forward. • Every NSMJAWA community maintains their prior well infrastructure for emergency backup. • Mount Prospect's reservoirs is only enough to provide water for a few days if the water main from Chicago was shutdown. • Combine sewers are designed to convey rain water unlike sewer mains in a separate sanitary sewer system. • Large pipe storage for storm water is very expensive. • The study does not include water or sewer main improvements to recently annexed properties since the infrastructure is owned by Illinois American or Elk Grove Township. Burns & McDonnell, Rate Study Lead, Dave Naumann presented the financial factors and recommended rate changes from the Water and Sewer Rate Study. He stated that nationally utility rate increases are rapidly outpacing inflation (Average Water & Sewer Index increase: 5.5%, Average Consumer Price Index Increase: 1.5%). The factors contributing to rising utility rates includes reduced growth & consumption leading to lower revenues for many utilities, increasing regulations and aging facilities require renewal and replacement. He reviewed the financial planning principles and core assumptions applied to the study. Three scenarios were created and Scenario 1 with levelized rate increases was reviewed in detail. He presented financial projections for revenues, operating and maintenance expenses, capital improvements and available Finance Commission Page 2 of 4 02/23/17 funding for these improvements from 2016 through 2025. Revenues under existing rates are not sufficient to fund anticipated operating and maintenance and capital costs. Mr. Naumann emphasized that the study does not recommend adopting a long term series of rates adjustments; however, instead adopting one to three years and re- evaluating for changes in conditions. Mr. Naumann reviewed the existing water and sewer rate structure, regional water rate best practices and recommended water and sewer rate changes. The study concluded that if rates are not adjusted going forward then revenues will not support increasing costs and regulatory pressure for infrastructure improvements creating an unsustainable outcome. Scenario 1 will require an additional 3-5% rate increase to existing programmed increases to achieve the renewal/replacement and capital programs. He stated the study also recommends considering a three year rate plan and re-evaluation cycle. The following responses from staff and representatives from Burns & McDonnell were provided to questions from the Finance Commission: • Interest rates are favorable to issue bonds and the Village had a good experience when issuing bonds for the Isabella Sewer Project. • Most revenue bonds have to be spent in one or two years from them being issued. • A fixed fee would be utilized to stabilize revenue to cover operation costs. • There was general discussion regarding fixed fees and fee graduation based on meter size. • There was also discussion on the pros and cons of paying for infrastructure with cash on hand or through debt. The Village has a more aggressive cash funding practice than other municipalities. • Another Special Service Area could be created; however, eventually that Special Service Area will expire too and then the Village would need to make up the revenue again like in the case of Special Service Area #5 expiring this year. • When revenues are in a single fund it permits for better tracking of costs. • This proposal keeps the current volume rate per thousand. • The State plumbing code requires water meter sizes to match construction types. Comments from the Finance Commission include: • Concerned with requiring residential properties to increase water main size due to additions or construction when water usage has not increased. • Normalize residential fix fees and do not base fees on meter size. • Concerned if property owners are unaware of the size of their water meters. • Breakdown the water meter count per each meter size and who would that impact (residential vs commercial) to better determine impact Finance Commission supports the concept of a fixed rate component and a volume rate. The Commission agreed that further review of the proposed rate increases would be necessary. Finance Commission Page 3 of 4 02/23/17 Finance Director David Erb provided next steps: Finance Commission develops a recommendation and presents the recommendation at the April 25 First Quarter Financial Planning Joint Workshop. The Commission can use the regular March meeting to further discuss the Water Rate Study and staff will provide information in regard to the Commission's request for additional information. VI. ANY OTHER BUSINESS None VII. CHAIRMAN'S REPORT None VIII. FINANCE DIRECTOR'S REPORT None IX. NEXT MEETING Thursday, March 23, 2017 at 7:00 p.m. in 1St Floor Community Center, Village Hall, 50 S. Emerson Street. X. ADJOURNMENT Motion made by Commissioner Grochocinski seconded by Commissioner Chokshi. The meeting adjourned at 9:55 p.m. Alexander Bertolucci Administrative Analyst Finance Commission Page 4 of 4 02/23/17