MARCO ISLAND — Rationales for determining new water and sewer rates dominated Marco Island’s City Council workshop Wednesday. First steps for the workshop included creating criteria for allocating utility debt by establishing a basis for that decision.
Council boiled it down to three alternatives for distributing debt: on peak usage demand, on the design intent of utilities, or spread equally among all users. Councilors could not come to a clear consensus on which to choose.
The city’s water and sewer facilities have two debt allocations: acquisition debt and expansion debt. Andy Burnham of Burton & Associates, used template calculations from an earlier M-54 Cost of Services Rate Study to predict rates. During the meeting he was able to alter that study based on parameters requested by city councilors.
The M-54 study divided debt payment by peak usage based on the month of April 2011 when the island hit peak demand. Payback was weighted more heavily toward larger consumers. Single-family homes with individual pools and irrigation systems received a greater portion of debt service than multi-family units where one pool and one irrigation system were shared by all.
Council used the debt percentage altering exercise to show how each alternative debt distribution could affect customer classes. Classes were divided by single-family homes, multi-family units and businesses. Assumptions were overlaid on the M-54 consumption rate calculations. In all cases, rate increases were calculated to provide enough income to cover debt and operating needs for the city’s utilities.
Council Vice Chairman Larry Magel advocated rate policies based on design intent. Using a historic document from Southern States Utilities, a previous owner of the city’s facilities, Magel said original estimations for usage were designed into the systems to supply enough water by class of user at island build-out.
That decision sealed acquisition debt at the place and time when it was declared, he contended. Non-acquisition debt should be distributed based on usage, he added, since money was spent to expand the facility after purchase.
Councilor Trotter felt debt service should be based on availability. Since each user has an expectation of service, then each has an equal stake in covering debt costs. It’s a ready to serve change, he said.
Trotter suggested the fallacy in using the original design option rested in the fact the facilities were dilapidated when purchased. Expansion costs were not a matter of new costumers but a need to repair and upgrade an older system. Both debts, he said, made the facilities serviceable and therefore necessary to each user equally.
A presentation by Gerald Hartman of GAI Consultants confirmed city utilities were in good shape. In comparables with similar facilities, he said, Marco Island had good personnel that was close to optimization and good total end costs. On the downside, the system’s debt is two times the norm and line breaks in the system are double what would customarily take place, he said.
Hartman suggested the city consider a public-private partnership conceding operations to an investor while continuing ownership of land and facilities. Operations would be controlled on a contractual basis. He estimated the city could reduce its debt by half using the partnership.
Council agreed it was something to explore and asked the city manager to place it on a future agenda.
In lieu of another workshop to discuss rates, council scheduled a special meeting for 1:30 p.m. on Monday, March 19, to continue rate discussions. Unlike a workshop where council cannot vote on issues, a specially called meeting allows council to make decisions and approve or deny motions.
Items left to decide prior to setting actual rates are the model to be used for setting rates, debt allocation, pricing of reused water, the sewer cap and whether to change the current block tier rate structure.
Council will discuss a resolution to reduce the utility surcharge rate for road resurfacing and ERC buy down at its regularly scheduled meeting at 5:30 p.m. on Monday, March 19. A study by Burton & Associates indicated the surcharges could be safely reduced without negatively impacting operations.
The workshop and council meeting will be held in the city’s Community Room, 51 Bald Eagle Drive.