17 - 2016 WATER & WASTEWATER COST OF SERVICE STUDYItem No. 17
memorandum
TO: City Council
John Godwin, City Manager
FROM: Gene Anderson, Finance Director
SUBJECT: 2016 WATER & WASTEWATER COST OF SERVICE STUDY
DATE: April 8, 2016
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 2016 study has been completed. The contract rates determined by the
study automatically become effective June 1" 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 final cost has not been determined but is expected to be approximately
$25,000. 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.