City approves SAWS rate bump
After a sometimes heated three-hour discussion Thursday, City Council approved, by an 8-3 vote, a request by the San Antonio Water System for an 8.4-percent rate hike and adjustments to the city’s drought management plan.
North Side council members Carlton Soules and Elisa Chan were joined by West Side Councilman David Medina on the dissenting side.
SAWS leaders argued that the rate increase was essential to reduce sewer-line spills, and get the city’s sewer system in compliance with Environmental Protection Agency mandates.
The council was in agreement that the sewer-line problems needed to be addressed, and would require a rate hike. But Soules made the case that the water utility could be run more efficiently, and said that $5 million in savings — including a salary freeze for SAWS executive — could save utility customers 2 percent on their bills.
Soules proposed an alternative to the SAWS request, a more modest 6.4-percent increase. He and Chan were the only council members to vote for his proposal.
Mayor Julián Castro said “nobody ever likes a rate increase,” but added that he considered SAWS’ request to be reasonable and essential.
The rate hike takes effect on March 1.
CITY OF SAN ANTONIO
Request for Council Action
Agenda Item # 4
Council Meeting Date: 2/7/2013
RFCA Tracking No: R-10075
DEPARTMENT HEAD: Troy Elliott
COUNCIL DISTRICT(S) IMPACTED:
SAWS Proposed Rate Adjustments and Drought Management Updates
The proposed ordinances authorize the approval of adjustments to the San Antonio Water System’s (SAWS) water supply and wastewater rates respectively, which collectively equate to an overall system wide increase of 8.4%, and authorize the approval of various adjustments to the Drought Management Ordinance.
The San Antonio Water System (SAWS) had proposed adjustments to its water supply fee and wastewater rates which are equivalent to an overall 11.3% system-wide increase. Of this overall 11.3% system-wide increase, the majority, or 20.2% was to be applied to the Wastewater Core with the remaining 8.4% applied to the Water Supply Core Business. Briefings on the proposed rate adjustments were held on November 14th, December 6th, and December 12th and covered topics such as revenue requirements, operations and maintenance budget, capital improvements program, wastewater sanitary sewer overflow (SSO) program, customer bill impacts, financial projections and proposed updates to the Drought Management Plan.
The Public Utilities Staff (“Staff”) of the City’s Finance Department and SAWS staff reviewed potential adjustments to the original rate request of 11.3%. Based on these reviews, adjustments are recommended to the original request which are summarized below resulting in lowering the overall system-wide increase from 11.3% to 8.4%:
Original Rate Request
Updated Revenue Projections
Inclusion of LCRA Payment
Capital Outlay – Fleet
Reduce Operations & Maintenance
Reserve Fund Adjustment
Proposed Revised Request
The Public Utilities Staff of the Finance Department conducted a comprehensive review of the proposed rate adjustments. Staff was involved in the process as SAWS was developing its revenue requirements and rate models. The review included areas such as the Economic/Rate Model; Key Financial Targets; Revenue Requirements; Proposed Capital Plan; Operations and Maintenance Budget; Financing Plan; Affordability Programs; and Credit Considerations.
During B-Session on January 16th, City Staff provided their recommendations on its comprehensive review of the proposed rate adjustments and recommended support of the overall 8.4% system wide increase which would become effective March 1, 2013. A detailed report (copy attached) from Staff was distributed on January 17th. The following summarizes other recommendations made in the report:
Þ Concur with the proposed updates to the Drought Management Plan incorporating such changes as the revisions to irrigation times for Stages Two – Four, allowing home car washing on Saturday and Sunday, revising restrictions on fountains and other revisions;
Þ Redirect a position(s) to a formal efficiency function, similar to the City’s Innovation and Reform Group that would focus on identifying efficiencies and making recommendations;
Þ Develop and plan and begin to review level of resources and service delivery in areas such as the following to identify potential efficiencies and improvements; results of reviews undertaken must be presented to the City in conjunction with the submission of a rate request for 2014;
o Public Affairs Department
o Engineering Department
o Customer Service Department
o Fleet Replacement and Maintenance
Þ Continue to comprehensively evaluate pension, health, and other benefits programs: include a potential audit of the eligibility of health plan dependents; provide recommendations with 2014 budget to address long-term strategy for managing these costs;
Þ Implement accountability procedures for the SSO Program to include the following:
o Establish a cost center to track all costs including operations and maintenance expenses and capital improvements
o Provide quarterly written progress reports which outline performance on the program to include operational statistics such as miles of lines cleaned and televised and financial information
Þ Resume briefings to City Council every other month; agenda to be managed by the City and should be focused on financial performance and key policy issues; key policy issues include items such as water supply projects (Request for Competitive Sealed Proposal process), drought management plan, conservation initiatives, and rate structure; these key issues should be aligned from a policy perspective;
Þ As part of rate structure review for future rate proposals, SAWS anticipates to begin a rate review with the Rates Advisory Committee in calendar year 2013; recommend inclusion of a policy discussion with City Council at the beginning of the process to provide input on various options; periodic updates to City Council on the rate structure review
The proposed ordinances authorize the approval of adjustments to the San Antonio Water System’s (SAWS) water supply and wastewater rates respectively, which collectively result in an overall system wide increase of 8.4% and authorize the approval of various adjustments to the Drought Management Ordinance.
The proposed rate adjustments could not be approved, however, financial pressure driven by increased operations, maintenance and capital improvement costs to include costs associated with addressing Sanitary Sewer Overflows would negatively impact the System.
The City receives 2.7% of gross revenues from SAWS. If the new rates become effective March 1, 2013, additional revenue of approximately $447,906 will be generated for the remainder of the City’s FY 2012-2013. On an annual basis, City payment would increase by approximately $767,838 beginning in FY 2013-2014.
The City’s utility expenses would also increase for FY 2012-2013 in the amount of approximately $67,000. On an annual basis, the City’s utility expenses will increase by approximately $115,000 beginning in FY 2013-2014.
Based on the analysis outlined above, Staff’s professional recommendation is for approval of the overall 8.4% system wide increase with an effective date of March 1, 2013 and the proposed adjustments to the Drought Management Ordinance. Staff also made additional recommendations outlined above.
File Description File Name
City Staff Recommendation Memo City Staff Recommendation Memo.pdf
Chapter 34 of the City Code Proposed Drought Management Plan Draft Ch 34 Drought.pdf
Draft Ordinance A SAWS – 2013 Rate Ordinance 012813.pdf
Draft Ordinance B 260148.pdf
DEPARTMENT HEAD AUTHORIZATIONS:
Marion Gee Assistant Director Finance
APPROVED FOR COUNCIL CONSIDERATION:
Ben Gorzell Chief Financial Officer