|
Agenda Item: 19(b) |
Prepared By: Jeffrey E. Poteet, General Manager, Water & Sewer |
|
Business: City Council Item |
Department: Water & Sewer |
Subject:
Title
Water and Sewer Utility Rate Study - Review of Draft Scope of Work, Jeffrey E. Poteet, General Manager Water & Sewer
Body
BACKGROUND:
At its September 22, 2026, meeting, City Council directed staff to proceed with a comprehensive Water and Sewer Utility Rate Study to evaluate the financial sustainability of the City's Water and Sewer Utility and determine whether the existing rate structure continues to appropriately serve the needs of the utility and its customers.
The City's current water and wastewater rate structure has remained largely unchanged since 2006. During this period, the utility has experienced significant increases in operating costs, infrastructure rehabilitation and replacement needs, regulatory requirements, and capital investment obligations. A comprehensive rate study will provide an independent evaluation of the utility's financial requirements and establish a framework for maintaining reliable water and wastewater services while balancing long-term financial sustainability, equitable cost recovery, conservation objectives, and customer affordability.
The study will focus on three primary components:
1. Revenue Sufficiency: Evaluate whether existing rates generate adequate revenues to fund current and projected operating expenses, capital improvements, debt obligations, and appropriate reserves. This analysis will include a multi-year financial forecast and evaluation of alternative capital funding strategies.
2. Cost of Service: Evaluate the cost of providing water and wastewater services to the City's various customer classes and determine whether those costs are being allocated and recovered equitably, consistent with generally accepted utility rate-setting principles.
3. Rate Structure: Evaluate the City's existing water and wastewater rate structures and develop alternatives that appropriately balance revenue stability, cost recovery, water conservation, affordability, and customer equity.
In developing the attached draft Scope of Work, staff has identified several specific rate-related issues that warrant further evaluation. These include the City's existing property-size-based residential water conservation rate structure, the appropriateness of current water consumption allowances, the 6,000-gallon residential wastewater billing cap, and whether that cap should apply to individually metered condominium units whose water consumption characteristics may differ from those of single-family residences.
The proposed study will also examine the use of actual customer consumption data. Additional components include a review of miscellaneous utility fees and charges, comparisons with other Florida utilities, customer impact analyses, and development of a financial and rate model that City staff can maintain and update.
Importantly, the Scope of Work is intended to identify the issues to be evaluated, not predetermine the consultant's findings or recommendations. The selected consultant will be expected to provide an independent, technically supported assessment of the City's financial needs and rate structure alternatives.
Recognizing that rate-setting involves important policy considerations, the draft Scope of Work includes opportunities for City Council involvement throughout the study. The proposed base scope includes a City Council workshop to review preliminary findings and rate alternatives, followed by a final presentation of the consultant's recommendations. Because the number of additional workshops or public meetings Council may desire has not yet been determined, the RFP will require consultants to provide separate pricing for additional meetings, allowing the City flexibility as the study progresses.
Staff is presenting the draft Scope of Work to City Council at this time to solicit input before finalizing and advertising the Request for Proposals (RFP). Specifically, staff is seeking Council's feedback regarding the proposed scope, any additional financial or rate-related issues Council would like evaluated, and the desired level of Council and public involvement during the study.
Following Council's review and direction, staff will incorporate the appropriate revisions and proceed with finalizing the RFP for competitive solicitation.
The purpose of this agenda item is limited to reviewing the proposed scope of the study. No changes to water or wastewater rates are being proposed or requested at this time.
FUNDING SOURCE / FISCAL IMPACT: N / A
RECOMMENDATION:
Staff recommends that City Council review the attached draft Scope of Work for the Comprehensive Water and Sewer Utility Rate Study and provide comments and direction regarding the proposed study objectives, areas of evaluation, and anticipated workshops and public involvement. Staff will incorporate Council's feedback, as appropriate, before finalizing and advertising the RFP.
POTENTIAL MOTION:
“I Move to direct staff to finalize the Scope of Work for the Comprehensive Water and Sewer Utility Rate Study, incorporating City Council's comments and recommendations, and proceed with the competitive solicitation process for qualified utility rate consultants.”