Memorandum

City of Lawrence                                                        

Utilities Department

TO:	David L. Corliss – City Manager Diane Stoddard - Assistant City Manager Cynthia Wagner - Assistant City Manager
FROM: CC:	Dave Wagner – Director of Utilities Mike Lawless – Asst. Director of Utilities
	Philip Ciesielski – Asst. Director of Utilities Beth Frailey Krishtalka – Assistant to Director
Date:	June 10, 2011
RE:	Utilities 2012 Water and Wastewater Revenue Recommendations

The current water and wastewater rates became effective January 1, 2010 with no rate increase implemented for 2011. The Utilities Department recommends a 2% increase in water revenues and a 2% increase to wastewater revenues for 2012. Staff has earlier provided a memo highlighting cost efficiencies and attention to infrastructure. 

This revenue increase funds the 2012 Operations & Maintenance Budget and a limited Capital Improvement Program (CIP) that maintains existing infrastructure. The proposed 2012 CIP does not provide funding for future growth or regulatory projects beyond a small amount of funding towards the Wakarusa Wastewater Treatment Facility. Future CIPs will include recommended growth, regulatory, and rehabilitation and replacement projects, as the master plans are completed in the early fall.

A list of the major projects proposed for the 2012 CIP include:

· Kaw WTP Raw Water Intake

· Oread Water Tank Replacement

· Water Main Replacement

· Large Valve Replacement

· Concrete Watermain Field Assessment

· Kaw WTP Structural Concrete Assessment and Repair

· Wakarusa WWTP Conveyance Corridor, Pump Station Location, and Easement Acquisition

· Cured-In-Place-Pipe – CIPP Project PowerPoint & Video

Debt financing will fund the majority of the projects. Attached is a complete list of the proposed 2012 CIP projects.

Increasing water and wastewater revenues by 2% each affect all customer classes differently. The average residential utility bill for water and wastewater charges will increase by a total of approximately 3.7%. On an average monthly bill, this would be $1.40. The residential utility bill comparison chart prepared for the May 17 Study Session has been updated to include the proposed 2012 rates. The attached table provides a comparison of the existing rates to the proposed rates for water, wastewater, and system development charges (SDCs). SDCs are collected to pay part of the capacity costs associated with growth. SDCs partially allocate the cost of growth to new water and wastewater connections associated with growth of the utility system.

To provide a comparison of typical monthly charges for each customer class under existing and proposed water and wastewater rates, the following table is included. The wholesale water customer class would not have a water rate change. The wholesale customers with new long-term contracts would see a decrease based on the terms of the agreement.

Efforts are underway by surrounding communities and utilities to review, propose, and/or adopt rates for 2012 and beyond. Below is an update to the most recent developments.

• Johnson County Wastewater is requesting an 8% to 10% revenue increase, and anticipates passage somewhere in the range of 4% to 7.5%.
• In 2011, Olathe increased their rates 6% for water and 7.4% for wastewater services. For 2012, they are requesting increases of 4% for water and 7% for wastewater.
• Manhattan recently increased wastewater rates by 20% and second tier water rates by 6%
• Independence has increased wastewater rates by 4.5% annually until 2015 and is requesting an increase in water rates by 9% for the next three years. They also have an additional special charge for their consent order with the EPA.
• KCMO is notifying wholesale customers to plan on 15% annual wastewater increases for the foreseeable future to pay for work required to comply with an EPA consent order.

Current Lawrence revenues, as with many of the utilities highlighted above, are not keeping pace with the increasing cost of commodities such as fuel and energy. Operating with the same water and wastewater rates will not fund large capital projects such as the Kaw Raw Water Intake and may require us to defer smaller capital projects and maintenance funded by the Operations & Maintenance Budget. We request your favorable consideration of the of the 2% revenue increase for both water and wastewater customers.