08.01 - Request for Proposals for Water/Sewer Rate Study

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Bonne Terre,Missouri,December 21,2006,Page 2 of 5 Notable asumptions include these: • Bonne Terre's sewer lines allow a high rate of I/I (28 percent) and this should be addressed. • The proposed rate scenario is based on a growth rate of 0.4 percent annually for new sewer connections.This is the rate at which you made new connections to the system last year. • The state prison accounts for 39 percent of the sewer system's flow and 45 percent of current revenues.At the projected rates the prison's rate revenue percentage contribution will drop to 38 percent. Here is the reason. It is my understanding that the city has an agreement with the State that confines rate adjustments.The city can adjust the prison's unit charges as it adjusts its other customers'unit charges. However,the minimum charge and usage allowance may not be adjusted without renegotiation of the contract. For this analysis I have assumed that you will not renegotiate that contract soon and; therefore, only the prison's unit rates will be adjusted initially. Because the prison seldom exceeds its usage allowance, the prison is projected to generate no additional rate revenues even though its unit rate has been increased. Action Items not Related to the Analysis Results I suggest the city consider taking the following actions: 1. Start charging all high-strength wastewater contributors, notably the prison, surcharges for such wastes. Surcharges could markedly reduce the need to raise general customers' rates in the future. 2. Prepare a thorough equipment replacement schedule, set up replacement reserves to pay for those expenses and use those reserves only for those purposes. Chart 3,the Replacement Schedule of this analysis contains assumed replacements.You may want to use this schedule as a template for your own tailored schedule. 3. If they do not already do so, all your staff should track their time and expenditures, associating those costs with the activity involved. Use separate categories for service to the water system, service to the sewer system and service to each of the other main functions city staff serve.The goal is to be able to determine at any time what the city is investing in each system or service.This will enable city management to determine if each system is on track with its budget and it will enable the city to set rates that correctly recover fees to pay for each system.While accounting for time and other investments in the various city operations is important, do not make the process onerous. For many functions you likely can have a supervisor regularly estimate time spent by their staff on various activities. 4. Investigate and begin using management strategies that are included in what is most commonly called"advanced asset management."These strategies can yield better service and reduced costs for water and sewer systems, especially those with older facilities and those looking to build new facilities soon. Bonne Terre fits both of those descriptions. Visit my Web site at http:/Zcarlbrownconsulting.com/for more information on this endeavor. Doing this rate analysis,preparing a detailed replacement schedule and preparing a detailed capital improvements plan are several good first steps in this process.Call me to discuss how Bonne Terre might adopt additional asset management strategies. 5. Before you officially propose or adopt new rate language,you may mail or e-mail the rate chart or ordinance to me and, as a part of this project, I will verify that your language will effectuate the intended rate adjustments. 6. Track your volume usage,incomes and expenses on a monthly basis so the data and information you generate will more easily support future rate adjustments that create and maintain equitable and adequate rates.