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2003 08 05 WS MinutesMINUTES OF THE WORK SESSION OF THE CITY COUNCIL OF THE CITY OF BAYTOWN August 5, 2003 The City Council of the City of Baytown, Texas, met in work session on August 5, 2003, at 8:00 a.m. in the Hullum Conference Room of Baytown City Hall, 2401 Market Street, Baytown, Texas, with the following in attendance: Ronnie Anderson Coleman Godwin Calvin Mundinger Dots Murray Mercedes Renteria III Scott Sheley Pete C. Alfaro Gary M. Jackson Bob Leiper Gary W. Smith Council Member Council Member Council Member Council Member Council Member Council Member Mayor City Manager Assistant City Manager City Clerk The meeting was opened with a quorum present after which the following business was conducted: Discuss proposed budget for fiscal year 2003 -2004. Mayor Alfaro reviewed the rules for the meeting. Gary Jackson, City Manager, introduced Bob McLain, Maximus, the City's water and sewer rate consultant and gave an overview of the proposed budget for the Water and Sewer Fund. The priorities in the budget are Public Safety and Health, Employee compensation and benefits, Infrastructure and bond and capital projects, and Economic development. The water and sewer system is linked to economic development. An adequate and reliable system is necessary for growth and development. The budget includes a cost -share proposal with the Municipal Development District to upsize lines to new developments. The master plan for water and sewer will guide future utility infrastructure. Water and Sewer expenditures are financed by user charges. The total expenditures are $19,777,000 an increase of $1,500,000 and an increase of 8.2% over last year. The revenue is projected to be $310,000 below the revenues budgeted, due to the weather. Personnel costs are increased by $205,815. Supply costs are up by $36,447 to cover the increased costs of chemicals and treated water. The budget for maintenance programs is increased $94,240 and includes the large meter repair program. The budget for water line rehabilitation remains the same at $175,000. Page 2 of 4 Minutes of the Work Session — August 5, 2003 +►, The Water and Sewer Capital budget, year 3 of the Utility bond program will see the issuance of $16,524,000 in new debt. The debt service will increase $1,332,000 to $5,367,751. The 2004 certificates of obligation will include $10,772,000 mainly for wastewater rehabilitation, $400,000 for the design of the Northeast Wastewater Treatment Plant, and $5,352,000 for Utility System improvements ($252,000 for looped water lines and $5,100,000 for remote meter reading.) A rate study was performed to determine appropriate rates to fund the water and sewer system. Two alternates are proposed and staff can recommend either alternate. Other rate designs can be considered in the future, but to fully educate Council, more time is required than is available before the budget is required to be adopted. Council discussed alternate funding sources for the water and sewer system improvements. Fred Pack, Director of Public Works, explained that prior state and federal enforcement activity had focused on the expansion of the wastewater treatment plants. Therefore, the City had previously engaged in expanding the plants to meet regulatory requirements. The problem was in the collection system. The regulatory authorities are now emphasizing improvements to the collection system. Bob McLain, Maximus, Inc, explained the rate study. The objectives of the study were to identify revenues for the system over the planning period, consider alternative ways to recover revenue, and the impact of the proposed changes. The assumptions employed in the study included conservative growth projections, 2004 as the base year, a 3.5% annual increase in personnel costs, a 3% annual increase in other expenses, an increase of $1.3 million in Operation and Maintenance expenses when the new wastewater plant comes on line, an increase in the BAWA rate from $1.26 to $1.38 in 2007, bond covenants that require 1.25 times the actual and average annual debt service, and maintaining a working capital reserve of 60 -90 days. The impact in the plan is the debt issuance. Debt service increases from $1.5 million to $9.25 million. Operation and Maintenance increases at 2 -3% each year, except for the year with the BAWA rate increase and the year with the new plant coming on line. The average increase each year is 4% except for the year of the BAWA rate increase and the year the new plant goes on line. The key adequacy tests require that the working capital increase due to the increase in costs in Operations and Maintenance and debt. These factors should be reviewed each year to assure that the key adequacy tests are met. If growth occurs beyond expectations, or if other revenues are received, some of the reserves may be used to fund projects, rather than issue debt. The weather may help or hurt revenues. Council engaged in an extended discussion of the affect of the proposed action and alternate proposals. The rate design alternatives are as follows: Alternate 1 is an across the board increase and affects all customers equally. Alternative 2 increases the minimum bill to $9 per month and recovers the balance of the revenue from the volume charges. This alternative has less increase in volume charges than Alternate 1. Page 3 of 4 Minutes of the Work Session — August 5, 2003 The impact on the average consumer was displayed. The average residential customer currently pays $47.94 each month. With Alternate 1, this increases to $52.36 and to $52.80 with Alternate 2. A commercial customer with a 2" meter pays $750.66 per month. Under Alternate 1, the bill increases to $820.36 and to $795.20 under Alternate 2. The rates of other cities were compared to the current Baytown rate and the rate under each alternate. Baytown's rates tended to be in the high end of the rates, but they were not the highest rates. The impact of the proposed alternates on commercial, multifamily, residential and industries was reviewed. Mr. Jackson explained that he would like to eliminate the minimum bill and have a readiness to serve charge and charge for actual usage. Of the rate designs, he prefers Alternate 1 because it is across the board and has the least impact on any class or category of customer. All members of Council expressed a preference for Alternate 1. The meeting recessed at 9:37 a.m. The meeting reconvened at 9:47 a.m. Mr. Jackson reviewed the other proprietary funds. No increase is proposed for the Sanitation Fund. An increase may be required next year. The Storm Water Utility Fund will provide for a $1 per month charge per water and/or sewer customer. This will provide funding for a rate study. Mike Lester, Director of Health and EMS, explained that the program requires the hiring of an additional person, obtaining a permit, establishing an advisory committee, performing a rate study, and, eventually, the adoption of regulations, inspections and enforcement. Mr. Jackson expressed concern about the revenues in the Garage Fund. The revenues are not sufficient to pay for the operation. The consolidation of all the garage functions will be considered. The function may be appropriate for out - sourcing. The Warehouse operation may also be considered for out - sourcing. Discussions have been held with NAPA for an on -site operation, stocked with NAPA parts. Council Member Renteria expressed opposition to out- sourcing while other Council Members supported considering out - sourcing. Mr. Jackson listed the outstanding issues to be discussed at the meeting on Wednesday, August 6, at 4 p.m. The issues are adjusting the IDA revenues, adjusting the City share of health care costs, adjusting the Bright Star program, discussing the requested Library information, and reviewing the budget reduction summary. Council discussed funding of the Cinco de Mayo event and the preference for location of the parade to be decided by the community groups involved in the parade. Mr. Jackson explained that the CCPD transition fund is in its second of three years. The Council continued the sales tax to pay for the District's outstanding obligations. It appears that sufficient revenues will be received during the month of November to discharge the obligations. The Page 4 of 4 Minutes of the Work Session — August 5, 2003 �. collection of the sales tax must continue until the end of the quarter. It was explained that it would be difficult to apply any excess funding to offset the issues related to the IDA revenues, Bright Star and Library issues. The sales tax receipts have been too volatile to predict with certainty. It is more prudent to apply any additional receipts to a fourth year of CCPD transition funds. Mr. Jackson explained that no tax rate increase is proposed to pay the additional debt service for the new debt being issued in 2004. The additional debt service is proposed to be paid from the debt service fund balance. He proposed that Council meet soon after adoption of the budget to begin planning to locate opportunities to offset General Fund expenses. Adjourn. There being no further business, Council Member Sheley moved adjournment. Council Member Anderson seconded the motion. The vote follows: Aye: Council Members Anderson, Godwin, Mundinger, Murray, Renteria, and Sheley. Mayor Alftro Nay: None. The motion carried and the meeting adjourned at 10:49 a.m. i Gify W Smrt City Clerk