HomeMy WebLinkAbout2015-08-24 City Council Minutes Approved City Council Study Session Minutes—August 24, 2015
At 7:36 p.m. Mayor Laurie Gere called the Anacortes City Council study session of August 24, 2015 to
order. Roll call found present City Councilmembers Eric Johnson, Ryan Walters, Erica Pickett, Brad
Adams, Liz Lovelett, John Archibald and Matt Miller.
Staff Feedback on City Council Meeting Start Time
Mayor Gere shared a summary of department head feedback on a potential change in the start time of City
Council meetings and a proposed Council committee meeting schedule to accommodate an earlier start
time. The mayor advised that this topic would come back to Council for action at the next regular meeting.
Mr. Walters stated that he was ready to move forward with an ordinance that would delete the start time
from the Anacortes Municipal Code and a resolution that would change the meeting start time to 6:00 p.m.
Retail Water Rate Presentation
Public Works Director Fred Buckenmeyer introduced Gordon Wilson and Tage Aaker from consultant FCS
Group to present the results of the retail water rate study. Mr. Buckenmeyer summarized the history of the
rate study which grew out of Council's December 2014 discussion of funding options for rehabilitating the
3MG water reservoir and subsequent discussion regarding projecting and funding capital projects for the
water utility.
Gordon Wilson, Project Manager at FCS, presented the results of the retail water rate study performed by
his firm. His presentation was added to the Council packet materials for the evening. Mr. Wilson explained
the purpose of the study: to determine a strategy to fund capital projects and ongoing operation of those
improvements. He enumerated the economic, policy and operating assumptions underlying the proposed
rate increases.
Mr. Wilson summarized the $15.3M capital reinvestment needed in the retail system over the next 7 years.
He then presented two scenarios to fund those capital projects. Scenario A involved more gradual rate
increases but also more borrowing so larger overall cost. Scenario B involved steeper, front loaded rate
increases but avoided $4M in borrowing and corresponding debt service expense. Mr. Wilson
demonstrated that both scenarios would essentially double the retail water rates by 2021 but with notable
differences in debt service costs and capital replacement in place by 2021.
Mr. Wilson then compared the Anacortes retail water rates to the rates in surrounding communities, both
present day and with the proposed increases. He pointed out that even after the full proposed rate
increases in place by 2021 Anacortes would still have lower rates than present day rates Skagit PUD,
Arlington, Seattle, Oak Harbor, La Conner and Lake Whatcom WSD and would be only slightly above
median rates in the state according to an AWC survey of 112 Washington cities. Mr. Wilson suggested
adopting Scenario B to leave the water utility in a stronger position with lower annual debt service. He
emphasized that Anacortes would still be a low cost provider of water service to its citizens.
Mr. Wilson concluded by suggesting considerations for rate setting after 2021. He recommended against
adopting tiered rates until after the proposed rate increase schedule was complete in 2021.
Mr. Walters asked about using tiered rates to moderate the rate increase impact for residential customers
with low consumption. Mr. Wilson discussed the different impact of block rates on residential and
commercial water customers. Mr. Walters asked how many cities have completely different rate structures
for residential and commercial water customers. Mr. Wilson said that is typical and described the
components of a cost of service study that would typically be used to develop such rate structures.
Mr. Miller observed that some of the 2015 water line replacements included in the capital calculation were
already being funded in the current year. He questioned Mr. Buckenmeyer regarding the longevity of the
new materials being used for pipeline replacements.
Mayor Gere invited members of the audience to comment. No one present wished to address Council.
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Mr. Walters suggested that the financial policies regarding the water utility should be included in the
preliminary budget with an explanation of the extent to which the budget was able to meet the targets.
Mr. Buckenmeyer suggested that he would bring back an ordinance adopting Scenario B for consideration
and action. Mr. Walters said he agreed on the need to raise rates but argued for a tiered pricing schedule
to lessen impact on small residential users and encourage water conservation. Mr. Adams warned that the
steeper rate increases under Scenario B should be considered in the context of other rate and tax
increases local residents would be experiencing. Ms. Lovelett supported tiered rates but agreed with Mr.
Adams that the steeper rate increases were a lot to take on all at once. Ms. Pickett supported Scenario B
because the increases would taper off after the first two years and the ratepayers would save significant
financing costs. Mayor Gere agreed. Mr. Archibald expressed his preference for Scenario B, observed that
conservation can be encouraged in many ways and suggested that the rate increase as presented might
encourage conservation. Mr. Wilson said the FCS Group study did not look at pricing elasticity to see how
the proposed rate increases might affect consumption.
Mayor Gere invited Mr. Buckenmeyer to schedule another study session to continue the rate discussion
and invited Mr. Walters to circulate his tiered rate proposal to staff and councilmembers.
There being no further business, at approximately 8:35 p.m. the Anacortes City Council study session of
August 24, 2015 adjourned.
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