18 - 2017 WATER AND WASTEWATER COST OF SERVICE STUDY

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Item No. 18 memorandum TO: City Council John Godwin, City Manager FROM: Gene Anderson, Finance Director SUBJECT: 2017 WATER & WASTEWATER COST OF SERVICE STUDY DATE: May 3, 2017 BACKGROUND: The City of Paris currently has treated water contracts with four local industries (Campbell Soup, PGEN (Paris Generation, LP), Lamar County Water Supply District, and Daisy Farms). One of the requirements of these contracts is that the City has an independent rate consultant conduct a cost of service study each year. The study determines what the contract customer water rates should be according to the contract terms. A by- product of the study is that water and wastewater rates are also determined for all other water and sewer customer classes (residential, commercial, and industrial customers). This study is the basis for any non - contract rates changes recommended to the City Council. The study is an important financial tool enabling the City to maintain the financial integrity of the Water & Sewer Fund. The fact that the study is performed annually is looked upon favorably by Moody's and other credit rating agencies when the City is attempting to issue bond debt. STATUS OF ISSUE: The 2017 study has been completed. The contract rates determined by the study automatically become effective June 1 St per the contract terms. The current water and sewer rates for non - contract customers (adopted October 1, 2014) were determined to be sufficient to generate the revenue required to operate the system. The last water rate increase previous to the 2014 increase was in June 2011 and the last sewer rate increase previous to the 2014 increase was in June 2012. A representative from NewGen Strategies & Solutions, LLC has a brief presentation to make and will answer any questions you may have. BUDGET: The rate study cost is $27,500. This is a similar cost to previous years. The funds are budgeted for this project in the Water Billing Office budget. RECOMMENDATION: No motion required. Information item only.