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19 - Water & Wastewater Cost of Service Study
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19 - Water & Wastewater Cost of Service Study
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$306,445 from reserves used to implement Scenario 2 will have to be recaptured in future rate <br />increases as a new debt issue would trigger a larger debt service coverage amount, a new interest <br />& sinking fund, and a larger reserve fund, all of which is required per our Policy. The amounts of <br />these increases are directly tied to the amount of debt issued. For example, $60 million in debt sold <br />in the open market with a 30 year payback would cause the debt service coverage amount to <br />increase by $306,000, result in an annual principal & interest payment of $3,060,000, and require <br />the reserve to likewise increase by $3,060,000. This increase to the reserve could be accumulated <br />over a period of 5 years without adversely affecting our bond rating. If we were able to go through <br />the Texas Water Development Board to issue the bonds, the debt service coverage amount would <br />drop to $250,000, the annual principal & interest payment would drop to $2,500,000, and the <br />reserve increase to be accumulated over 5 years would also be $2,500,000. Scenario 2 would <br />impact this slightly, requiring us to rebuild what we would be giving up today in order to then <br />proceed to this new required amount in the near future. <br />To assist the Council in understanding the scope of what the Water and Wastewater Rates cover, <br />the following is a list of the departments supported by the rates: <br />1. Warehouse <br />2. Water Billing & Collection <br />3. Water Treatment Plant <br />4. Water Distribution (replacement, extension, repair) <br />5. Wastewater Collection <br />6. Wastewater Treatment Plant <br />7. Lift Stations <br />These seven departments have 72.5 full time equivalent employees which is 2.5 more employees <br />than they had ten years ago. The 39 employees that work at the treatment plants keep it manned <br />and operating 24 hours a day. The other departments operate a standard 8 hour day shift unless <br />called out on emergencies. These departments are critical to providing, treating, servicing, <br />replacing, extending, and responding to the Water and Wastewater System from source to water <br />facility to distribution system to house, to collection system and ultimately to wastewater facility. <br />In addition to personnel, there are primary costs associated with the water and wastewater system. <br />For example, chemical costs. Nine different treatment chemicals are bid annually to obtain the <br />most competitive prices possible. Electricity was bid out in 2018 through the Texas Coalition for <br />Affordable Power (TCAP) and through 2022 the City is only paying 3.18 cents per kWh for <br />electricity. We strive to hold costs down where possible. The current 2019-20 operating budget for <br />the system is $11,266,001. Five years ago the 2015-16 operating budget was $10,816,708. The <br />difference in those budgets is $449,293 or 4.15% over the five year period. <br />But there are factors that impact residential, commercial, and industrial rates that are beyond our <br />control. Examples are rainfall amounts, reduced consumption by customers, and how much each <br />customer class uses of the system as a whole. In this year's study, you would find that all of our <br />contract customers utilized less of the system than they used last year thereby shifting some fixed <br />system costs away from them and to the other customer classes pressuring their rates upward. <br />Looking forward to the Wastewater Treatment Plant, the City Manager, Utility Director, and <br />Finance Director spoke with Garver Engineering and NewGen on Thursday, June 18th regarding <br />potential Wastewater Rate scenarios to cover our operations as well as a new facility. It is strongly <br />
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