11 - 2023 Water & Wastewater Cost of Service Study (2)

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Item No. 11 TO: Mayor, Mayor Pro -Tem & City Council Grayson Path, City Manager FROM: Gene Anderson, Finance Director SUBJECT: 2023 WATER & WASTEWATER COST OF SERVICE STUDY DATE: June 12, 2023 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 for the City to have 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 wastewater customer classes (residential, commercial, and industrial customers). This study is the basis for any non -contract rate 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 (Wastewater) Fund. This annual rate study and the City's rate maintenance policy are looked upon favorably by Moody's and other credit rating agencies when the City is attempting to issue bonded indebtedness. Adjusting the rates in accordance with our 2010 Policy is also critical in attempting to fulfill the basic care and maintenance to our Water and Wastewater system needed for the citizens and businesses of Paris. STATUS OF ISSUE: The 2023 study has been completed. The contract rates determined by the study automatically became effective June 1St per the contract terms — therefore no action is necessary by the City Council on those four specific accounts. The current water rates for non -contract customers were water rates is needed. The current multi-year wastewater rats as adopted ted b system. City Council in be sufficient to generate the revenue required the incre i determined ..—p y n January 2023 are sufficient to generate the revenue required to operate that portion of the system. No increase in the to schedule is needed. The only rate adjustment needed at thistime is i the area of treating excess strength sewer. The City tests sewage strength to determine if a surcharge is warranted on industrial or commercial users. It has been three years since these rates were increased. A representative from NewGen Strategies & Solutions, LLC has a brief presentation to make and will answer any questions you may have.