Title
Incorporated County of Los alamos Code Ordinance No. 02-294; An Ordinance Amending Chapter 40, Article III, Sections 40-171, 40-173 and 40-175 of the Code of the Incorporated County of Los Alamos Pertaining to Potable and Non-Potable Water Rates and Bulk Delivery Rates
Recommended Action
I move that the Board of Public Utilities approve Incorporated County of Los alamos Code Ordinance No. 02-294; An Ordinance Amending Chapter 40, Article III, Sections 40-171, 40-173 and 40-175 of the Code of the Incorporated County of Los Alamos Pertaining to Potable and Non-Potable Water Rates and Bulk Delivery Rates, and forward to Council for adoption.
Staff Recommendation
Staff recommends approval of the motion as presented.
Body
This proposed water rate adjustment is in accordance with the long-range financial sustainability plan for the water utility that has been under discussion for the past two years and was presented in detail and discussed by the Board at its regular meeting in January 2019. The following staff report is a representation of the details presented at that preliminary discussion. As requested, the attachments have been updated to include affordability assessments for Los Alamos average household income, and New Mexico average household income as well.
The ten-year forecast for the water utility presented with the FY2019/20 budget includes a series of incremental rate increases to generate revenues needed for current operations and to build cash reserves necessary for future infrastructure needs. Over the course of several meetings of the Board of Public Utilities in the fall of 2016 several alternative scenarios were considered. After discussion, “scenario 40” was selected as the most reasonable balance between increased rates and necessary system expenditures, and was the foundation upon which the ten-year budgetary projection was based. A 6.25% increase in both retail and wholesale sales is proposed, plus an increase from $2.50 per 1000 gallons to $2.66 per 1000 gallons for non-potable water sales. The increase for water distribution was included in the FY2019 budget. Although included in “Scenario 40”, the increases proposed for water production and non-potable were not initially included in the 2019 budget. An 8% increase previously proposed for water production was never implemented, however, so it is proposed here to include Production and Non-Potable sub funds in the increase. The increases are proposed for implementation effective with our customer’s first billing period beginning after April 1st, 2019. The ten-year projections for Water Distribution and Water Production are provided as attachments B1 and B2, respectively.
The proposed ordinance is provided as Attachment A.
This and future proposed rate actions should restore cash flow to an acceptable level. It will take some time to reach our target levels in the Water Utility overall, but this plan will provide adequate funding for necessary repairs and replacements and continuing operations and provide for movement toward our long-term cash reserve goals.
While we have seen some significant rate increases in recent years, and additional more modest increases are projected in the long-range plan, Los Alamos remains affordable and competitive. Attachment C1 shows a comparison of Los Alamos’ projected annual residential water bill with those of nearby communities, using 6,000 gallons as a representative consumption quantity. Attachment C2 shows a comparison of monthly bills with the same communities, but at various consumption quantities. Both show that after the proposed increase Los Alamos remains competitive with its neighboring communities.
Attachment D1 shows the longer-term rate projections included in the first ten years of “scenario 40” and includes the dollar amount of the projected annual increase per household. Total utilities costs is another important measure, and is displayed for the same time frame in attachment D2.
Alternatives
Several alternative financial scenarios were presented and discussed by the Board in 2016. In addition, Jack Richardson, Deputy Manager of Water Production and Distribution, has updated some of the information previously presented and will be presenting updated alternative financial scenarios at a future meeting. Any of those paths forward could be considered as an alternative to the proposal presented here. As noted above, in all the scenarios discussed a series of rate increases are going to be needed to fund necessary operations and replacement of facilities through rates. Other scenarios could be considered with more significant rate increases being implemented to fund more rapid system upgrades. The Board could also work with Council to identify potential other funding alternatives. If no action is taken, we would have to continue to curtail maintenance and replacements and system reliability would eventually suffer.
Fiscal and Staff Impact/Planned Item
The budgeted 6.25% increase is expected to generate $254,829 additional revenue in DW, $79,233 additional revenue for wholesale sales to external parties, and $14,464 additional Non-Potable revenue annually.
Attachments
A - Code Ordinance 02-294: Water Rates
B - FY2019 Budget ten-year budget projections
B1 - Water Distribution
B2 - Water Production and Non-Potable
C - FY2019 Comparison to similar neighboring communities
C1 - Annual, using 6,000 gallons average monthly consumption
C2 - Monthly at various consumption quantities
D - Projected impact on Residential customers
D1 - Annual impact on average residential customer for water only
D2 - Projected average residential total utilities cost projections
E - Notice of Public Hearing