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HomeMy WebLinkAbout10-01-93October 1, 1993 Minutes of the special meeting of the Pulaski Town Council held October 1, 1993, at 7:30 a.m. in the Council Chambers in the Municipal Building. There were present: Gary C. Hancock, Mayor Council Members: J. R. Schrader, Jr., W. H. Schrader, Jr., Andrew L. Graham, E. G. Black, Jr., Alma H. Holston, Robert N. Glenn Also Present: Frank Terwilliger, Town Attorney Thomas M. Combiths, Town Manager Robert J. Lyons, Asst. Town Manager Ruth A. Harrell, Clerk 9333 Visitors: Dee Lindsey and Paul Dellinger, News Media Jerry Heath Tammy Warden The meeting was called to order by Mayor Hancock. ~~ U Councilman Black led the Pledge of Allegiance and Councilman Glenn gave the Invocation. The roll call was taken by the Clerk. WATER RATE INCREASE Mayor Hancock stated the special meeting was called to consider a proposal to increase water rates by 24%. A public hearing was held September 28 before Town Council. Mr. Lyons reported that Ernst & Young is expecting their final report to Council to be here by early November. The analysis of the rate structure has not been finished as yet, however, in looking at how much revenue is required to balance the Water Fund, we would be looking at an average increase of 36~ with an effective date of December 1st. Some customers may pay less than 36s and some customers may pay more than 36% due to potential adjustments to the rate structure. Mayor Hancock asked if there was no change to the rate structure, what would be the average increase be if we delayed the vote and made it effective December 1. Mr. Lyons stated that if the rate structure stayed the same, it would be 36°s. Councilman Graham did not understand that if we are only losing two months of revenue, how we are going up 11~. Mr. Lyons stated this would be an average increase of 36~ based on whatever adjustments to the rate structure that would be made. A December 1st rate increase would count as revenue beginning in January. The effective date of rate increase would be December 1st, billed 9334 October 1, 1993 in January, received in February and for accounting purposes it counts as revenue in January. So we would have six months of revenue in 1993- 94 as opposed to October 1st increase, we would have eight months of increased revenue. Councilman Graham stated we would not have to go up at all if rates had been increased a couple of years ago. He felt Council was not getting enough information. Mr. Lyons gave information on three options: Option I - 24 percent rate increase across the board effective October 1, 1993. Ernst & Young projected an increase to total revenue of 5% in 1994 and a 5 percent increase in 1995. Total projected increase, 36.71 percent (compounded). In the past, the Town's goal has been a reserve of 10 percent. Ernst & Young recommended a reserve of three months of operating cost and six months of debt service. Under Option I, we would have a reserve of 20% of total budget, however, it would be below what their recommended level would be. Option II, delay action until final report is received in November. An average increase of 36% is projected December 1, 1993 and a 2 percent increase to total revenue on July 1, 1994. This would get us to our recommended reserve level more quickly. Option III - would be to delay action until final report is received. The average 36% increase December 1, 1993, would put us at 22.5 percent of the total recommended reserve. Councilman Glenn asked if it was agreed that Option II and Option III would get us there sooner. Mr. Lyons reported that Option III would give us a larger reserve than Option I. Councilman Glenn further stated that not included in report are the considerations that were taken up at the public hearing on Tuesday night, such as some type of rate discount factor for the elderly or fixed income. Also, Mr. Glenn stated that the matter of County residents on Town water and the surcharge that they are currently paying is not addressed in the interim report. None of these factors will have a significant impact as far as percentage points go but all these are considerations. Councilman Glenn pointed out that the Council is still looking at the tier system and if the tier system is significantly changed, that will change all these figures so that the rate increase that we make, will not even have to be close to the 36%. Bottom line is without this information, if we do away with the two bottom tiers and move those two tiers up to the third from the bottom, we are going to generate a tremendous amount of money which could, theoretically, put the rate increase on the general public well below the 24%. Mayor Hancock stated it might be appropriate to take up the discount for the elderly when we take up the rate structure itself. Mr. Lyons reported that Tuesday night several comments were made saying that we want to take a look at some sort of benefit for low consumption or senior citizens. This will all be part of the final report. Councilman Glenn felt that citizens did not mind a rate increase if we can justify it. We talked about the rate increase as if it was a October 1, 1993 WATER RATE INCREASE, Cont. 9335 one-time one-period deal. It is not. It is a load that will last from the time it starts until whenever. We do not plan to amend it back to the old rates come July 1, 1994. The 24~ load or 36% load will be on those figures for the next five years. Vice Mayor Schrader stated that it depended upon how it was distributed. He felt the tier system is what will determine how that increase is distributed. He further stated he had not heard anything about doing away with the bottom two tiers, and he would not be in favor of this. Vice Mayor Schrader felt that we should give a break to the lower end. Mr. Lyons stated that effective July, Ernst & Young is projecting a 5% increase to total revenue. This 5~ may not be on everyone's bill. You may see some residential customers or low consumption customers may not have a rate increase. Vice Mayor Schrader stated that he had not heard anyone say that they did not mind an increase of 50~. From what he has heard, in his phone calls and at the public hearing, people want to keep the increase as small as possible and he felt this plan does this. Councilman Graham felt it should be kept as low as possible, but make it equitable, but let the rate be what it costs to produce the water. The rate structure that has been given to them does not address that point. We subsidize the large volume user. He was not trying to hurt the high volume user but just wanted the bare minimum cost. Mayor Hancock stated the rate structure was going to be a very complicated process and it is hoped Ernst & Young will look into this. If we give a discount to senior citizens, then that discount will have to be picked up somewhere else. He had understood that the new rate structure would not go into effect until the next fiscal year. Councilwoman Holston restated her desire to see a discount for the elderly who are in single households. She would like to see this in the new rate structure. Councilwoman Holston asked if when we receive the final report, can we amend the report to give these people a discount or will we have to wait until July 1st. Mr. Lyons stated he believed we could make an adjustment to the rate structure and have some flexibility on when the effective date of the new rates will be. Mr. Lyons stated that Ernst & Young recommends separating the general rate increase from adjustments to the rate structure because some of the customers were going to realize both increases. If we wait until July 1st, we may give some customers a little bit more time to plan for that. Mayor Hancock advised that Ernst & Young informed us that they feel that no water system such as ours should have a reserve less than three months of operating expense and six months of debt service in the event of some emergency in the water system. Councilman Glenn stated that we are not looking at the rate increase simply to balance the budget. It is actually to generate funds for the reserve. 9336 October 1, 1993 WATER RATE INCREASE, Cont. Vice Mayor Schrader advised that it would also do some capital projects this year that have not been scheduled. Mayor Hancock stated that if we have an emergency in the Water Fund, right now we do not have the money to meet that emergency. He felt the reserve as important as balancing the budget. Councilman Graham stated he could not imagine all of our pump station motors needing to be replaced at this date; that Town Administration had not brought this to Council's attention. He did not know if all that had been given him, that he was in agreement with. He was confused about it. Councilman Graham stated we did need a tremendous amount of work done to our system. Councilman Graham stated he would say what he said two years ago, to revise the water rates was not in the best interest of our citizens, and could create financial crisis in terms of operating, maintaining and paying out bonded indebtedness of our water department. The present rate structure is not it is so structured that the small water user subsidizes the high water volume user. It is not fair to our citizens and he would not be part of this. Mayor Hancock stated that a few weeks ago, he requested the Town Manager to talk to Ernst & Young to determine whether or not some of these projects that they were figuring into this 24~ increase could not be postponed to ease the initial burden and phase this rate structure in. He believed Ernst & Young did not recommend this. Ernst & Young felt we should address the crisis we face in our Water Fund as needing additional revenue and this was their recommendation as to how we would do this. Mayor Hancock wished we had had an across the board increase when we were doing our budget. Mayor Hancock felt that the question Mr. Graham had was an adjustment in the rate structure and that is the primary thing that Ernst & Young has to do. Vice Mayor Schrader so moved that reading of Ordinance No. 93-26 Setting Forth the Charges for Water Service on or After October 1, 1993, be waived, with the correction in date the special session was held. Motion seconded by Councilman Black. Councilman Graham stated he would like Ordinance to be read. Motion carried on the following recorded vote: Charles D. Crispin - Absent Andrew L. Graham - No J. R. Schrader, Jr. - Aye E. G. Black, Jr. - Aye Roy H. D'Ardenne - Absent Alma H. Holston - Aye W. H. Schrader, Jr. - Aye Robert N. Glenn - No (ORDINANCE Vice Mayor Schrader made a motion that Ordinance No. 93-26 be NO. 93-26 adopted, seconded by Councilman Black. Councilwoman Holston challenged Council to help her make changes in December to help the people who need this most. She wanted everyone to pay for what they used, no matter what tier. That the lowest one pays for what he uses and the the highest pay for what they use. October 1, 1993 9337 WATER RATES, Cont. Councilman J. R. Schrader stated that he had talked with older businessmen and they wanted Council to delay until they had the full report. Also, an engineer had requested this also. Councilman Schrader was concerned with not having the money, but also was concerned about the elderly and felt we should wait for a full report. Mayor Hancock stated that we have been hearing for sometime that we needed to increase the water rates and he wished we had done this a long while ago. He felt that when final report was received, it would be a very complicated decision for Council to make and he felt it would take several weeks before a decision could be reached. We will need to have a public hearing and understand the ramifications. When we change the rate structure that has been in place for many years, we will have to look at it very carefully and he felt it would not be an easy decision. Mayor Hancock stated that sewer rates were not affected at all. $1.53 would be the increase in cost for 3000 gallons of water per month. Councilman Graham stated that what we are doing today will be in effect on July 1st of next year. He did not believe that we would take this up December 1st and come back and change things in January or February. He did not know how our computer and out of town staff is going to administer all of these special rates that have come up. He did not know how it could be done. We have to have computers and personnel to administer. Motion then carried on the following recorded vote: ORDINANCE N0. 93-26 Charles D. Crispin - Absent Andrew L. Graham - No ADOPTED J. R. Schrader, Jr. - No E. G. Black, Jr. - Aye Roy H. D'Ardenne - Absent Alma H. Holston - Aye W. H. Schrader, Jr. - Aye Robert N. Glenn - No Mayor Hancock - Aye Mayor Hancock advised that Resolution No. 93-13 Amending the Water Fund Budget and Establishin g Water Fund Appropriations for the Town of Pulaski, Virginia, for the Fiscal Year Beginning July 1,1993, and Ending June 30, 1994 was before Co uncil for their consideration. Mr. Combiths advised that this amendment makes the appropriate adjustments in the appropriations for the Town budget pursuant to the action that Council has taken this morning on the Water Fund increase. This is on the revenue side, the expenditure side and also the impacts to the capital improvement plan. RESOLUTION Councilman J. R. Schrader so moved that reading of Resolution No. 93-13 be waived, seconded by Vice Mayor W. H. Schrader and carried. Councilman Graham voted no to this motion. Councilman Graham stated he felt that Council should talk about this more before we go off in the deep end and spend money foolishly like we have so many times in the past and he would like this delayed and the committee sit down and bring Council a proposal on this in depth. He felt the acts of proposal were written in concrete and we 933$ October 1, 1993 RESOLUTION BUDGET AMEND. cannot change them. Mayor Hancock advised this only amends the line items in the budget. Vice Mayor Schrader so moved that Resolution No. 93-13 be adopted, seconded by Councilman Black. Mr. Terwilliger stated this amendment does not in any way encroach upon Councils right to do projects; this is just a requirement of the State Code. RESOLUTION Motion then carried on the following recorded vote: ADOPTED WATER Charles D. Crispin - Absent Andrew L. Graham - No FUND J. R. Schrader, Jr. - Aye E. G. Black, Jr. - Aye BUDGET Roy H. D'Ardenne - Absent Alma H. Holston - Aye W. H. Schrader, Jr. - Aye Robert N, Glenn - Aye At 8:13 a.m., Councilma n J. R. Schrader made a motion that Council adjourn, seconded by Council man W. H. Schrader and carried. APPROVED: ~ ~~~ ayor Attest: ,-~ ~t Clerk of Council