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.
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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.
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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
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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