CITY OF DEERFIELD BEACH REGULAR CITY COMMISSION MEETING MINUTES Tuesday, February 19, 2008 at 7:00

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1 CITY OF DEERFIELD BEACH REGULAR CITY COMMISSION MEETING MINUTES Tuesday, February 19, 2008 at 7:00 The meeting was called to order at 7:05 p.m. by Mayor Capellini, on the above date in the Commission Chambers, City Hall. Roll Call: Present: Also Present: Absent: Commissioner Steve Gonot Commissioner Pam Militello Commissioner Sylvia Poitier Vice Mayor Marty Popelsky Mayor Albert Capellini Michael Mahaney, City Manager Andrew Maurodis, City Attorney Ada Graham-Johnson, CMC, City Clerk None INVOCATION AND PLEDGE OF ALLEGIANCE The invocation was offered by Mayor Capellini followed by the pledge of allegiance. APPROVAL OF THE MINUTES Regular City Commission Meeting Minutes of February 5, 2008, City Commission Workshop Meeting Minutes of February 7, January 29, 2008 and October 30, 2007 (Tabled from November 20, 2007, December 18, 2007, and January 8, January 22, and February 5, 2008) MOTION was made by Commissioner Pam Militello and seconded by Commissioner Steve Gonot to approve the Regular City Commission Meeting Minutes of February 5, 2008, City Commission Workshop Meeting Minutes of February 7, January 29, 2008 and October 30, 2007 as submitted. Voice Vote: YEAS: Commissioner Steve Gonot, Commissioner Pam Militello, Commissioner Sylvia Poitier, Vice Mayor Marty Popelsky, and Mayor Albert Capellini. NAYS: None ACKNOWLEDGEMENT OF BOARD MINUTES 1) Non-Uniform Employees Retirement Minutes - November 19, ) Code Enforcement Board Minutes - December 10, 2007 The Board minutes were acknowledged by Commissioner Militello. 1

2 APPROVAL OF THE AGENDA February 19, 2008 MOTION was made by Commissioner Steve Gonot and seconded by Commissioner Pam Militello to approve February 19, 2008 agenda as amended, tabling Item 11 until March 18, Voice Vote: YEAS: Commissioner Steve Gonot, Commissioner Pam Militello, Commissioner Sylvia Poitier, Vice Mayor Marty Popelsky, and Mayor Albert Capellini. NAYS: None WRITTEN REQUESTS 1) Barbara Miranda, 160 Ventnor J, Deerfield Beach, wishes to address the Commission concerning the separation of church and state and the Iraq War. Barbara Miranda, 160 Ventnor J, Deerfield Beach, said that the separation of church and state is a political issue and should not be made a religious one. She said that it was not handled diplomatically by the City Commission at its September 18, 2007 meeting. She said that Caryl Berner came before the Commission and requested that clergy led prayer be removed because she is offended by the name Jesus Christ; but is the same one that brags about having a menorah put up. She said that the City of Deerfield Beach is a multicultural community with people of many religions, free thinkers, and atheists. She said that the issue is not about Christians versus Jews but about the separation of church and state. Continuing, Ms. Miranda expressed opposition to the City Commission acting on the item without placing the matter on the agenda. She further commented that it was strange that the City Manager Mike Mahaney just happened to have a generic prayer in his wallet. She said that the process that took place was counter democracy. Although, Mayor Capellini said that this matter has been going on for 2½ years, does not excuse the fact that the public did not know that this vote was going to take place. Ms. Miranda concluded that we are striving for a city that is inclusive and believes in freedom and justice for all. Furthermore, she suggested that there be a moment of silence; which is the appropriate choice. She also asked the Commission to vote for a straw ballot for the immediate end to the occupation of Iraq and to bring the troops home now. She asked that this be placed on the November ballot. Mayor Capellini asked that the speakers not mention peoples names or to take this personally. 2

3 WRITTEN REQUESTS - CONTINUED 2) Caryl Berner, Century Village, Deerfield Beach, wishes to address the Commission concerning signs and menorahs. Caryl Berner, Century Village, said that she and the Rabbi have had a conflict over the sign for approximately four (4) years. And that she has requested that the sign be placed in the grass, rather than desecrating the menorah because it speaks for itself. She said that she is responsible for the menorah and suggested that the Rabbi as the contact person. However, she now realizes that this is an advertisement because the Rabbi puts his cabals name on it with his telephone number. Ms. Berner requested that the City Manager have Code Enforcement review the matter. She further asked that the Commission take the Rabbi s name off as the contact person and list her. She said that she thought that the menorah would be better served in a Synagogue in Century Village than in her storage. Mayor directed the matter to the City Manager. 3) Various residents wish to address the Commission concerning the invocation at City Commission Meetings. * Christine Hawkins, 2241 SW 15th Street, Deerfield Beach * Marshelle Grover, 81 N. Deerfield Avenue, Deerfield Beach * Hannah Swinton-Parish, 176 SW 5th Court, Deerfield Beach * Lavaughn Lewis, 81 N. Deerfield Avenue #3, Deerfield Beach * Patricia Coleman, 81 NE Deerfield Avenue, Deerfield Beach *Nancy Albert, 733 SE 11th Avenue, Deerfield Beach *Pastor Tony Guadagnino, Christian Love Fellowship Church, 747 S. Federal Highway, Deerfield Beach *Josiah Stephan, 4401 Crystal Lake Drive, #106, Deerfield Beach Mayor Capellini recommended that this item be taken out of order if there is no objection by the Commission. He said that only one (1) individual has requested to speak to represent the Church. Pastor Tony Guadagnino, Christian Love Fellowship Church, 747 S. Federal Highway, said that they are not asking for the name of Jesus to be praised, nor are they asking for all prayers to be in the name of Jesus; but for clergy led prayer to be placed back on the agenda for the City Commission meetings. This includes all clergies in the City not just the ones that pray in the name of Jesus. He said that they do not want to exclude anyone from praying in their faith, but to allow everyone to pray their conviction and beliefs without persecution. Pastor Guadagnino said that at the request of the Commission, they have contacted Liberty Counsel, and passed the information to the City Attorney to contact them to consider free legal counsel to reinstate clergy led prayer; which is a perfectly 3

4 WRITTEN REQUESTS - CONTINUED legal practice here in the United States of America. He asked that the Commission reinstate clergy led prayer. Commissioner Poitier said that she received a copy of the information regarding Liberty Counsel, but has not had the opportunity to speak with the City Attorney regarding this matter. She said that mostly what Liberty Counsel has indicated, the City is already aware of. However, Pastor Guadagnino has indicated that they are not asking that the prayers end in or neither include Jesus Christ. She said that was the City Commission s only problem. Continuing, Commissioner Poitier said that the Commission did not have a problem with clergy led or Rabbi led prayer. The offensive portion of it was Jesus Christ. She said that she spoke to the ministerial alliance who said they prayed to Jesus Christ. She said that if the prayers were non sectarian no one would have a problem and the City would not lose in court. It would be a win, win situation. She said that if the Commission passed a motion, she asked Pastor Guadagnino to ask the clergies to refrain from using the name Jesus Christ. Mr. Maurodis stated that at the February 5 th meeting as a result of the request, the Commission asked that he make contact with Liberty counsels. He said that they provided him with a package regarding their policy of defending cities; which would be forwarded to the Commission on tomorrow. CONSENT AGENDA ITEM: 1 TAPE 1, COUNT 403 Resolution 2008/030 - A Resolution of the City Commission of the City of Deerfield Beach approving the first amendment to the Fire Protection and Emergency Medical Services Agreement between the Sheriff s Office of Broward County, Florida, and the City of Deerfield Beach. Mayor Capellini asked that everyone find a seat. ITEM: 2 TAPE 1, COUNT 405 Resolution 2008/031 - A Resolution of the City Commission of the City of Deerfield Beach authorizing the proper City officials to execute an agreement with the School Board of Broward County for the use of school buses. 4

5 CONSENT AGENDA - CONTINUED ITEM: 3 TAPE 1, COUNT 408 Resolution 2008/032 - A Resolution of the City Commission of the City of Deerfield Beach authorizing the Mayor to enter into an Interlocal Agreement with the Town of Hillsboro Beach providing for Fire and Emergency Medical Services by the City of Deerfield Beach within the municipal boundaries of the Town of Hillsboro Beach. ITEM: 4 TAPE 1, COUNT 410 Resolution 2008/033 - A Resolution of the City Commission of the City of Deerfield Beach authorizing the purchase from Prism Systems, Inc. of an access control security systems for City Hall, the Engineering/Utilities Building, Public Works Administration and Employee Buildings, for a total cost not to exceed $54, (Funds provided under various accounts for each department) There was no discussion on Consent Items 1-4. MOTION was made by Commissioner Steve Gonot and seconded by Vice Mayor Marty Popelsky to approve Consent Items 1-4. Voice Vote: YEAS: Commissioner Steve Gonot, Commissioner Pam Militello, Commissioner Sylvia Poitier, Vice Mayor Marty Popelsky, and Mayor Albert Capellini. NAYS: None. PUBLIC HEARINGS - 2ND READING ITEM: 5 TAPE 1, COUNT 419 Ordinance 2008/003 - AN ORDINANCE OF THE CITY COMMISSION OF THE CITY OF DEERFIELD BEACH AMENDING SECTIONS AND OF THE CITY CODE TO PROVIDE FOR AN INCREASE FOR WATER AND WASTEWATER RATES FOR ALL CITY WATER ACCOUNTS TO BE EFFECTIVE FOR BILLINGS RENDERED AFTER MARCH 1, 2008; CONTAINING A PROVISION FOR INCLUSION IN THE CITY CODE; CONTAINING A SEVERABILITY CLAUSE; CONTAINING AN EFFECTIVE DATE The Ordinance was read by title only. Andrew Maurodis, City Attorney, said that all of the CDM studies, which are on file, will be a part of the legislature record as well as the minutes from all the workshops and hearings held by the City Commission. 5

6 PUBLIC HEARINGS - 2ND READING - CONTINUED Mayor Capellini requested that a representative from CDM present the issue to clarify the matter to the general public. Dan Anderson, CDM, said that this rate increase is driven primarily by the need for water conservation. The fact that we are now in Phase 3 restrictions and have a high potential of going to Phase 4 restrictions causes the maturity of the increases in the rates. A question was posed as to how much of the rate increase of the $15.00 base charge relates to the debt service associated with the capital improvements projects. Mr. Anderson said approximately $.60 of the $15.00 base charge for single family residents relates to the debt service in FY2008. In FY2009 that will increase to over $1.00; however, the vast majority of the rate adjustment is necessitated by the water conservation is expected to be in place for quite sometime. Commissioner Gonot asked if the $.60 and $1.00 increases after that? Mr. Anderson replied yes. He said that the first year will be about $.60 of that $15.00 base charge. In year 2009, it will be approximately $1.05 and will increase somewhat after that, but not significantly. He said that it is a relatively minor component of total rate increase. He further stated that 2/3 of the total revenues right now are generated by volume charges, only 1/3 is generated from base monthly charges. If we go into Phase 4 restrictions, which will have a total usage cut back of 50 to 60%, we are losing half of the 2/3 s revenue; which is losing 1/3 of the revenues. This is forcing primarily the needs for the increases in the rate. Continuing, Mr. Anderson said when we develop the recommended rates they included in the higher blocks, the Phase 4 revenue requirements; however, they have not included those in the base monthly charge or the first block. He said that they have developed a rate schedule that has the least impact on the low volume users. The more you use, the greater your percentage increase in your monthly bill. It is a progressive rate structure; it is driven by two needs. One, to have revenue stability and to off set the losses that are resulting from the water conservation. He said that water conservation is a fact that the City is being forced to deal with by the SFWMD; and as the rate consultant, he is responsible for making sure that the City sustains the financial integrity of its water and waste enterprise fund. Therefore, they balance the needs for revenue stability along with the need for conservation; which results in a very progressive rate structure and some of the large volume uses will experience very high dollar percentage increases in their monthly bills. He further stated that irrigation customers will experience large increases in their bills. In addition, discussion has been held regarding a recommended system of penalties if irrigation users exceed the amount of water that is required for their lawn. 6

7 PUBLIC HEARINGS - 2ND READING - CONTINUED Vice Mayor Popelsky said that there has been previous discussion regarding a $500,000 shortfall during the first five months of this fiscal year; he asked if no action is taken, will there be a $1.2 million shortfall based $100, a month. Mr. Anderson replied that he is not certain if the numbers are exactly correct; however, if we continue without a rate adjustment there will be a greater deficit. Eventually, the City will no longer meet its debt covenants or debt service coverage. Currently, the plan is that the City will be going out for additional debt through the Florida Municipal Loan Council. Mr. Anderson said they have been advised that it is absolutely vital that the City maintains its debt service coverage at or above its agreed level through the state revolving loan fund. He said that will demonstrate the City s financial wherewithal and ability to continue to meet its financial obligation. Vice Mayor Popelsky said that if we do not have rate increases are not approved, there is a possibility that we will not be able to get bond if we require it because we will not meet the debt. He also asked how much money is expected with the increase. Mr. Anderson said that in reviewing the total revenue requirements in the City s adopted budget for FY2008, there is approximately $21.5 million, however, they have reduced by extending some of the City s expenditures to about $20.8 million. Approximately a $700, difference for which they are setting the rates. Vice Mayor Popelsky said that CDM is making a recommendation on a certain amount of dollars that we want to increase; if that amount is increased, it will pay the first five months which is the $500, shortfall in this fiscal year. He asked how much is expected to increase and what will be the total amount of dollars we will be receiving on October 1, Mr. Anderson replied that if the City does not take any action, it will be approximately 20% below the budgeted amount; approximately $4 million. Vice Mayor Popelsky asked if the proposed increase is approximately $4 million. Mr. Anderson replied that the amount is based on the fact that the billable volume to date is significantly lower than it was for As of January 15 th, it has dropped another 15% notch, and expects that in March or April it will drop even further another 15%. So not only are they attempting to make up the shortfall at the billable volume levels that they have had, but they are also anticipating that the water use restrictions will impact the volume of billing even further. 7

8 PUBLIC HEARINGS 2ND READING CONTINUED Vice Mayor Popelsky said that based on the total dollars being proposed is about $100 a year, which equates to approximately $7 million. He said that if there is a shortfall of $1.2 million; he requested justification of the remaining $4.8 million. Mr. Anderson replied that they have provided their best estimate as to what the billable volumes of water will be. Vice Mayor Popelsky said that the residents have been asked to conserve now that they have, they will be penalized by increasing the water rates. Mr. Anderson replied that is true, but it is a no win situation. He said that they are being forced to conserve and as a result of that the billable volume, 2/3 of the City s revenues is based upon the billable volume, water that passes through the meter. Because the residents are being socially conscious and are conserving as directed, the billable volume goes away and so does the revenue associated with it. He said that the problem is that the cost structure of a utility system has a high percentage of fixed cost. He said that there is very little in the way of variable cost associated with the water and wastewater system. There is electricity, chemicals and some sludge management costs that varies directly with the volume of water produced. He explained that when you cut back on the total million gallons produced you lose 2/3s of the revenue associated with that, and reduce the cost very minimally. Additionally, Mr. Anderson said that because of the SFWMD s mandate for water use restrictions, the citizens have adhered to the mandate; and the City is forced into having increases in rates. Nonetheless, they have attempted to make the rates progressive so that it will foster water conservation, while at the same time generating revenue sufficiency. He said that the low volume user, 0 1,000 gallons a month, will see an increase in their monthly bill of approximately 20%. The 7,000 gallons per month single family customer will experience an increase in their monthly bill of about 38%. The more water that is used the higher percentage increase will be, because most of the rate increases are on the volume charges. He said that for the commercial customer class they have added another rate block and set it at the highest tier used for residential for two reasons: One, to foster water conservation by the commercial and general services account customers and secondly, to prove for revenue proficiency. Vice Mayor Popelsky asked if the Commission approves the rate now, will there be another request in October. Mr. Anderson recommended that the second and third rate watches for the residential customers class be setup at Phase 4 water restrictions, the highest level that the District could impose, that may go into effect March or April. The first block they have not recommended an increase to 8

9 Phase 4. However, as such times as the District that the City implement Phase 4 restrictions, they recommended that the City immediately adopt an increase in the volume charges for the first rate block of the residential customers and for all of the wastewater charges between $0.74 on water and $0.82 on wastewater. Mr. Anderson reiterated that if the District imposes Phase 4 restrictions they will strongly recommend that the City adopt the surcharges immediately. Ultimately, they do not know how much the citizens will be able to conserve, which is why they recommended adoption of the Phase 4 volume charges on the second and third blocks for residential and both blocks for general service customers. Vice Mayor Popelsky said if the rate is approved, said funds go towards acquiring bonds of approximately $30 million for the purpose of retrofitting the West Station and digging additional wells. Mr. Anderson said that the bonds will not be $30 million; however, the capital improvement projects are approximately $30 million, although they have identified cost savings that they are recommending be pursued. One is the elimination of $2 million for the booster pump station; another $1 million elimination of sodium hypo chloride; $5 million defer of plant improvements. He said that they will also use up all of the connection fees on hand before the City issues debt. He further stated that they are trying to minimize the amount of debt the City has to issue. They also looked at deferring 1.5 million gallons per day of the water treatment plant expansion. He said instead, one 3 million gallons per day expansion, splitting it between 1 1/2 and 1 ½ later; which will result in approximately a $1 million savings; totaling approximately $73, a year; principle and interest deferred, equates to about $0.90 a month; $15.00 based charge so the savings are minimum. Vice Mayor Popelsky asked if the proposed Ordinance is adopted, would the SFWMD look favorable at bonds. Mr. Anderson said that the SFWMD is happy at any measures the City takes to foster water conservation. He said that the rate structure that they are recommending is a very strong placing signal to foster water conservation with the planning block structure. He said that the District will view said action favorably. Vice Mayor Popelsky said that it was his understanding that water rates and bond issues would be considered separately; however, it now appears that they are both being considered as one issue. He said that if approved, it would automatically be favorable towards the bond issue, if we say no, that means no water rate and no bond issue. He asked how the SFWMD would view said action. 9

10 John Mulligan, SFWMD, replied that if the Commission does not take any action on the proposed Ordinance and commitment to finance and build the facility in a timely fashion, it would be problematic. He said that there would be concerns if the City has additional delays in bringing the facilities that are needed to meet today s demand on line. They had hoped originally that the plant would be built and on line September 2007; which is reflected in the City s permit. He said that additional delays would be of great concern to them. Commissioner Gonot said that if the SFWMD was expecting the plant to be on line in September 2007, how long construction was expected to take. Mr. Anderson replied 24 months. Commissioner Gonot asked if staff had given a commitment to have it completed in September Mr. Mulligan replied yes, that is reflected in the City s permit. He explained that they do understand that there have been some complications in the planning of the plant; therefore, they will not at this point panic that the plant is not on line. Commissioner Gonot said that in order for the City to be on line in September 2007 we should have started roughly September Mr. Mulligan replied that is correct. He said that is what was anticipated when the City s permit was issued in He further stated that they have continued working with City staff since 2004 to assist in dealing with other regulatory agencies that have caused some other issues. Commissioner Gonot said that he had requested all the minutes regarding the water plant, restrictions, and CDM. He referenced the June 2006 Workshop minutes in which discussion was held with Mr. Adam, CDM; regarding the projected rate increases through At which time CDM recommended a 7% increase for two (2) years; in which this Commission broke up into 3 ½ percent over four (4) years and was told that would be sufficient. He said that they went over the five (5) year forecast and five (5) year capital expenditures. Commissioner Gonot said we are now adding more bond dollars; however, we did not discuss $30 million for bond but approximately $12 million. Continuing, Commissioner Gonot reiterated that at the June 2006 Workshop Meeting the Commission addressed these issues that the SFWMD is talking about. Now, the Commission is being advised that because of lack of demand, and a fallen revenue, we must make up in seven (7) months what we did not collect in the previous five (5) months. He said that it appears that we have addressed this five (5) year program and there should have been dollars based 10

11 on CDM s recommendation. He further said if the Commission does not wish to address this in seven (7) months, to blend it out; moreover, this is a surcharge that we are asking the residents to pay, and there is no sunset to this. He said that this could be moved out a little longer and those items are not addressed. Mr. Anderson said that they have worked with City staff reviewing the capital improvement program and have identified the opportunities for either deferring beyond the five year rate study, beyond 2012 or altogether eliminating some of those capital improvement costs. He said that they have identified approximately $8 millions in savings that could be achieved. Granted, most of the capital improvements in the 5 year CIP now constituted are for this fiscal year and the next couple of fiscal years. The line shared of the debt issue would be 2008 and FY 2009 to fund the projects. Notwithstanding, Mr. Anderson said that when he met with the City s finance director in September 2007, she had included in the budget of revenues for FY2008, the 3.5% rate increase. The water revenues were going to be on the order of $13.5 million. He said that based on the actual shortfall and the volume that was billed from July through September, last quarter of the year, the City s revenues were, on an annual basis, about 18% less. He said that what are really driving the need for the 20% rate increase on the lowest block predominately the water use losses, is the billable volumes; which is why they are recommending going from a 3 ½ % to 20%. Commissioner Gonot advised the SFWMD that in June 2006 the Commission discussed this matter, and addressed the City s commitments based on the recommendations by CDM and the five (5) year CIP Program. He said that there is a failure of a large proportion; and if the Commission is being informed that this is because of the water restriction and must make up for the loss revenue; he is not certain if this has to be done over five months, but can be drawn out a little. Nevertheless, it is a surcharge and asked if we will revert back to a more appropriate rate; perhaps it would be ½ of this in FY2009. Mr. Anderson said that their projections are that a minimum increase will be needed, 1% in water next fiscal year; none would be required for wastewater. He explained their performance projection. Over the 5 year study period, they are drawing down the balance of the renewing and replacement fund to counteract water conservation. They are letting the balance dwindle down. He said that in fiscal year 2010, they are recommending an increase on the wastewater rates to get funding for the renewal and replacement system. Commissioner Gonot reiterated that in June 2006 the Commission addressed this issue, revenues that was needed, and the rate increases that were needed. He said that he can understand that the anticipated revenues have dropped, that 11

12 would explain a surcharge needed to make up the shortfall. But, what CDM is asking for is fundamentally a 38% increase to water rates, which some of that is to get service, which was addressed 18 months ago. Mr. Anderson said that the increase is driven by the water use restrictions; which have impacted the revenue loss. Commissioner Gonot said we are getting less demand and this is to improve our production of water. As was shown it is a 25% reduction in demand and going further. He said that the Commission addressed the issue but realizes that there is a change in where we are getting the water and is more brackish and a different treatment, but that is what was discussed in June 2006 by CDM. He further said that we discussed the reverse osmosis treatment plant which is why the 14% increase was put in to address said concerns. He asked what is driving this, is the loss of revenue based on asking the residents to conserve and they did, and now we are going to reward them by giving the a 38% increase that we do not expect to sunset. He said that CDM has advised that the City will make up the shortfall for the first five (5) months in a 7 month period; which he objects to. Mr. Anderson said that he recognizes that the existing rates can be burdensome; and the monthly bills are being asked to be increased by 20%. However, they have put forth their best to a balance between revenue sufficiencies, fostering water conservation and meeting the continued financial integrity of the City s system. Regarding the difference between the 2006 and the current capital improvement program, he said that he does not understand the details of those capital projects and deferred the matter to his colleagues. Mayor Capellini said that CDM has predicted as best as they can. He said that this item was mentioned in 2004, but was tabled, and discussed two (2) years later, He said that the City did not have a shortage last year or the year before in revenue. He said that this phenomenon occurred where we had a drought and salt water intrusion in the wells and asked the people to cut back; however, the Commission is not rewarding or punishing them for conserving. The City is attempting to cover the bills that must be paid on the water plant. He said that it is not a pleasant thing to approve rate increases. Vice Mayor Popelsky said that we understand that the water rates may increase and may not. Unfortunately, there is a $7.1 million shortfall because the State mandates that must also be addressed. So, if approved the water rates are now, how would the shortfall be addressed later. He suggested that the timing should be closer to the budget period to allow all issues to be combined. 12

13 PUBLIC HEARINGS 2ND READING CONTINUED Commissioner Poitier said that the Commission was advised in the last workshop that the City has already paid $10,000 in fines to the SFWMD, in December She said that the Commission was also advised that a grant is available for $418,000. She said that in the event that a surcharge is required, and later determined that it is not needed, it is unlikely that it will be reimbursed especially in government. She asked who has the figures for the renewal and replacement fund. Mr. Anderson said that the City is not required to have a renewal and replacement fund because the City s series 1992 bonds were completely paid off this past year, that eliminated the requirements for an R&R Fund. However, current utility management practice dictates the City to have an R&R Fund. Therefore, in working with Mrs. Siegel, they identified available funds in the operating fund of about $2.5 million; that is the balance that should start in the R&R Fund as of October They also looked at how much money must be contributed to the R&R Fund from water rates and sewer rates and how much must be taken each year for the renewal and replacement for the lines and other facilities, etc. Moreover, Mr. Anderson said that they looked at the cash flow and over the five (5) year period, the City s starting balance goes from $2.5 million down to approximately $1 million. He said that he would like to see it remain at $2.5 million or higher as the value of the assets increase. However, to accomplish such, the rates will have to be raised even more, but he has recognized the impact this would be on the citizens; therefore, he did not want to add additional burden. He recommended that the Commission wait a couple of fiscal years and closely monitor financial performance, and then around 2010, review the balance of the R&R Funds to see if the wastewater rates should be increased to assure the cushion is in the R&R Fund; that is important in maintaining the existing assets and service. Commissioner Poitier asked if the City received revenue when the City took over the pipes and water in Century Village. Mr. Anderson replied actually, the base charges for Century Village were adjusted upward to recognize the cost burden that would be borne by the City. He said that there was a rate adjustment in 2005 or 2006 timeframe. Discussion pursued regarding the City takeover of the Century Village water and sewer. Mayor Capellini said that before the City took over the lines in Century Village, they had to bring them up to the City s standard, so they had to repair the lines. 13

14 He said that the City repaired them in some cases, and billed them. He said that they also had a rate increase. Vice Mayor Popelsky said that it was in Commissioner Poitier asked what the actual cost for the RO Plant is. Michael Mahaney, City Manager, replied approximately $12 million. In response to Commissioner Militello s question, Mr. Mahaney replied that the RO will be for 3.5 million gallons. Mayor Capellini opened the public hearing. James McGeary, 1442 SE 6th Street, stated that the Commission is addressing fixed costs with variable rates, and will not get this in balance, because as your variable costs increase with volume going down, those people getting a 38% increase this year, if the volume goes down it will increase again. He said that the surcharges make a lot of sense; regardless of volume. A base increase must be established. Base increase means variable rates changes; from period to period would be less significant. He explained a scenario of base increase, variable, and fixed costs. Jean Robb, 380 SE 2 Avenue, stated in order to understand the reason for the creation of the community service category for Century Village it is necessary to know the history, she gave a brief history of the issue. She also outlined the ordinance and read from a prepared statement. She said that in 2003, when the City took over the maintenance of water and sewer lines, the only features that differentiated Century Village from every other multi-family unit were eliminated; therefore, they should be paying the same base rate as every other multi-family unit in the City. This would add another $456, in revenue for the City. She further said the question is not the amount of water use, but rather every multifamily user should pay the same base rate. She listed several developments and the usage of gallons per unit. Continuing Ms. Robb outlined Ordinance 2003/044 and Ordinance 2006/041. She further said if the Commission that sat in 2003 had made Century Village pay the same base rate as every other multi-family unit, from 2004 to 2007, the City would have earned an additional $1,811, She said that this Commission has the opportunity to correct this inequity by eliminating the community service category and treating all multi-family users the same with the same base rates. She said that the formula that is being offered by the consultant to charge multi-family the same rate as Century Village if merely an attempt to validate the special base fees for Century Village. The only equitable 14

15 answer is to charge all multi-family units the same base rate. She urged the Commission not to approve the rates that are before them tonight until a change is made in the base rate. Bett Willet, 2646 Emerald Way Circle, stated that she does not understand why the blocks are so large. She suggested that the blocks start at 3,000 and up from there, instead of 6,000. She further stated that there are a lot of elderly residents that are not well off, that could conserve to the 3,000 mark and not be impacted by the increase. She said that many of the elderly use less water and cannot pay the cost that is currently being recommended. Ms. Willet said that in California they have done erroneous things with conservation such that they do not need to drill down to their aquifers. She also commented on the measures that Central Florida has taken which has resulted in a bunch of sink holes. She said that if the rates are set as suggested, the people would have an incentive to conserve even more. Will Panella, Oakridge Q, Century Village, said that it is not fair for the City to ask Century Village to subsidize others. She said that there are 8,500 units, 4,000 are not here 8 months a year, yet you want them to subsidize you. She said that they are not here using water, but yet they are being asked to pay for you. Ms. Panella further stated that they do not have many meters, they would have had to install 8,500 meters; but they connected the units to 3 meters. The senior citizens are paying their fair share, they have gotten their increase; and are the biggest conservers you could find. Robert Lowed, 1373 SW 28 th Avenue, urged the Commission to end this discrimination and charge Century Village the same as other multi-family units and do not increase the rates for anybody else. Mayor Capellini closed the public hearing. Mr. Anderson entertained the questions by the general public. He said that the City s existing system of water and wastewater rates have a base monthly charge and volume charges. He said that there are a number of goals in this rate study. In theory, every customer ought to have their own system of rates depending on the demand pattern that they put on the system. However, it is a practical matter, and cannot be done. The other alternative is to have all your costs recovered through base monthly charges. He said that 2/3s of the City s revenues are generated from volume charges as 1/3 are generated from charges. If the City wanted to generate all the revenue charges from the base charges, they would have been increased by 200%; instead of $12.50 monthly base charge it would be three (3) times said amount, $

16 PUBLIC HEARINGS 2ND READING CONTINUED Continuing, Mr. Anderson said that low volume users would be unjustly affected by paying $37.50 a month for maybe using 1,000 gallon. He further stated that they have looked at the volume of water that will no longer be billed in Phases 3 and 4. They have done an estimate of what the volume charge would need to be to make up for the shortfall of revenues and have plugged that into the rate; so why the 7,000 a month customer have to have a 38% rate increase will not have to have a 38% rate increase next year, as well. He said that it has been taken into account and the revenue generated from base charges and volume charges and they have set the balance that they think is appropriate based on the guidelines of the City. Continuing, Mr. Anderson said that in 2003 a representative from Century Village worked with City staff and provided the historical case information relating to the water and wastewater. He said that they worked very closely with Ms. Siegel to obtain the historical usage for the single family customer class, the multi family customer class and Century Village, which at the time was the only customer with in the community service class. He said based on the actual usage demands patterns that the different residential customer class based on the system, there is in fact a distinct difference, in the demand that Century Village places on the system lower than the average of all the multi family customer classes. He said there is a distinct difference from multi family customer accounts compared to single family customer accounts, that analysis validate the reasonable and the appropriateness of having a single family customer class. Mayor Capellini asked how the different classes were determined. Mr. Anderson said that they obtained the historical monthly meter readings, billed water usage. They looked at Century Village as a community service, and then reviewed all other multi family customers grouped together; however, they did not single out or sort out any of them and ranked them. He said that they looked at multi family as an aggregated and single family as an aggregated, looked at the maximum monthly demands which reflects the cost of service being provided. And the based monthly charges that they developed reflected the differentials in the maximum monthly demands of three different customer classes both on the water system and the wastewater system. Moreover, Mr. Anderson said that he is convinced that Century Village has a lower demand than the average aggregate of multi family customers and appropriately have lower base monthly charges. He said that they have also looked at some individual multi family customers accounts and some of them actually assert demands on the system that are more similar to Century Village than they are the aggregate of multi family customer accounts. Therefore, it is appropriate if the Commission adopts the proposed ordinance as a policy to reclassify them if they remain closer to Century Village. 16

17 Additionally, Mr. Anderson said that they anticipate significant reductions and usages from all customer classes. However, Century Village has the least opportunity for additional conservation because they irrigates from the canals so all of their portable water use is internal domestic. Multi family customer class and aggregate, they expect over time with the pricing signals the conservation that is being fostered by the SFWMD to come closer as a group to what Century Village is. So the differential between the two now is going to narrow down. He said that there maybe a lot more multi-family customers that look like Century Village. Mr. Anderson recommended that once a year they perform an analysis as to what multi-family accounts should be reclassified; if that is a policy of the Commission. However, he does not want to make it administratively burdensome to the Finance Director. He further said that if the Commission considers reclassifying three of the four multi family accounts from multi family to community service, it would result in a loss of revenue of approximately $165,000 a year; and will have to be generated elsewhere, possibly by distributing amongst everyone. Mayor Capellini said that Ms. Willet recommended lowering the block usage from 6,000 to 3,000 and asked how the revenue generates from there. Mr. Anderson said that Century Village uses 3,000 gallons a month very regularly. Mr. Anderson outlined a table with the recommended rates, and how does the increases go on a single family. He said that having the rate structure that they recommended does in fact have a progressive increase where every thousand gallons you use, results in a higher percentage increase in your monthly bill. Commissioner Poitier commented on the percentage rate. She asked what the base rate, whether you turn on a faucet or not. Mr. Anderson replied that the rate schedule that they are recommending effectively increases; the more you use the higher percentage rate increase you have as well as absolute increase. However, Mr. Anderson said that there has not been any discussion as to how to mitigate the monthly billing impacts on the low volume user. Mayor Capellini said that the base rate is for the plant, the lines being in front of the house, and the ability to be able to turn on the water any time they want. He asked what document the rate structure is guided by. Mr. Anderson replied that the rate structure is guided by a number of documents; the AWWA Rate Manual that recommends recovery of cost, the fixed charges referred to as a readiness to serve component. 17

18 Mayor Capellini said that there is a lot of misinformation out there, and the purpose of this meeting s to show that the Commission is not voting on or denying a rate increase without having proper information. He said that the plant is there to support the demand and the City must plan for the future. Commissioner Militello said that there were comments regarding increasing the base rate significantly instead of having a variable rate with the amount of water; however, as a Commission, this was discussed and one of the reasons chosen not to proceed was because the burden that it could place on people with a higher base rate. Currently, a single family dwelling is $12.57 and will increase to $ She provided other scenarios; and said that every month could be a burden to people. She further stated that with it being a variable, there is not a set source of revenue so you can get into the situation again. However, from the Commission s perspective, if the base rate is increased it will always be there. She further said that conservation is something that must be done regardless of the rate because it is being mandated and the City will probably put in further water restriction. She said that it is an ongoing issue for the future. Mr. McGeary said that he is not suggesting the 38% increase be a base number, but a mark some where between the current base rate and this extraordinary rate, there would be a base increase. He said that the 38% is falling on the average homeowner; but there is a compromise there somewhere. Mr. Anderson said that the base charges are only increasing, both water and wastewater by $4.45 a month. He said that it is the volume charges that are going up that would then cause the 38% for a 700,000 per month per customer. He provided a scenario of a reduction in usage which would result in a cost reduction. Mayor Capellini said that the more people conserve, the less revenue the City will receive and another increase proposed. He said that Commissioner Gonot mentioned that is the fear that we will have to adjust the rates again. Mr. Anderson said in setting the volume charges for the second and third blocks of the residential, they have looked at Phase 4 restrictions and expect that they have a cushion until Phase 4 is declared. If Phase 4 is declared the Commission must adopt additional surcharges to meet the revenue loss on the volume charges. Mayor Capellini said that Commissioner Poitier mentioned that there was an additional $2.50 for R&R, renewal and replacement, that was found and asked if said monies can be transferred to cover the drought period where we have negative revenue. He said that out of the $15.00 of the rate increase, only $

19 is for the plant, the other $14.00 is for making up the loss in revenue and the projected loss in revenue due to the conservation. Mr. Anderson said that this relates to the heart of the City s outstanding indebtedness; the City has state revolving fund loans through the State of Florida, which includes a rate covering. He said that the Commission agreed when the FRS loans were taken out to set rate fees and charges efficiently high so that in each year, a year by year calculation, sufficient revenues are generated from the charges; actually money is coming so that when you subtract the operating expenses, your net operating revenues equal 115% of the principle and interest payment. He said that the City is constrained by that and is not allowed to use monies on hand to meet that coverage test. Previously, with the Series 1992 Bonds, the City had some flexibility with the rate stabilization fund; however, the City no longer has that flexibility. He said that it is standard in the industry that you have a rate covenant test. Commissioner Gonot asked what the rates on the connection fees are. Mr. Anderson replied that currently it is $1, for water per unit; $ wastewater per unit. He said that they have recommended in a study that the water be increased from $1, to $2, for each new water connection, and for the wastewater it will be increased from $ to $ He further stated that the new statute that took effect requires a 90 day notice, which expires on April 15, 2008; the increase for the connection fees can go into affect that day. He said those increase will cause the cost of capacity expansion required by any growth of the system and there is not that much. He said this would minimize any impact on the existing customer base for rate increases for future growth. Also on hand today in the Water Wastewater Enterprise Fund s, over $5 million in water connection fees that would be applied to the capital improvement projects to reduce the amount of debt the City has to issue and a little more than $2 million on the wastewater side that will be used to fund some projects that would provide increased capacity to the wastewater collection system. Mr. Anderson said that they are maximizing the use of connection fees both that are on hand today and that will be collected to minimize on the existing customer base. Commissioner Gonot asked what is the amount of debt anticipated that we have to incur. Mr. Anderson replied that it is his understanding that the first bond issue that is being considered is approximately $16 or $7 million in debt; which is a net of the $5 million water impact fees on hand. Commissioner Gonot asked what would be the subsequent of the bond. 19

20 Mr. Anderson replied that in minimizing the additional expenditures of pushing them beyond 2012, it could be as low as $5 million or less than $10 million for the additional debt issue. Commissioner Gonot asked if a future rate increase is needed to address the additional debt service. Mr. Anderson replied that they are considering an additional 5% increase, two (2) years from now on the water system. He said that they will perform a close monitoring month to month with Ms. Siegel to determine how much water conservation has happened to see the affects of price elasticity, because they are not certain of the revenue generating capability at this time with the volume that will be billed. He reiterated that they are not certain what the volumes are going to be. Commissioner Gonot asked if the 37% or 38% rate increase will be in effect for 18 months or so and then another 5%. Mr. Anderson replied yes something along those lines, but they are not certain. Mayor Capellini said that it was previously mentioned that the cash on hand would be used rather than increasing the debt service; however, the debt service is such a small impact on the community, and asked why use the cash on hand to build the plant when you can get the debt service at a much lower, 10 to 1. Mr. Anderson replied that the reason the debt service is lower is because they are planning on using the money on hand. Mayor Capellini suggested mingling it into the shortfall to reduce that rate. Mr. Anderson said that one of the things that they are looking at with FMLC and issuing the City s additional bonds to see if they would allow an application of connection fees to payment of principle and interest to what is called the capacity expansion percentage of the City s capital improvement program. This will enhance the cash flow; the minimization of rate if passed. Mayor Capellini asked if the rates should be adopted this evening or wait until the information is received. Mr. Anderson recommended that the Commission adopt the recommended rates. Tim Como, Oakridge Q, stated that Commissioner Gonot commented that making this rate increase of 38% might be premature. He said that it appears 20