Annual Review

2010 Rate & Fee Study Reclaim Tank Rehabilitation

The City of Flagstaff annually reviews the revenue requirements for the upcoming year by analyzing projected revenues under existing rates. The City of Flagstaff Utilities and finance staff, in conjunction with an independent rate consultant has prepared the following rate and fee study.

For a pdf copy of the Final report of the Flagstaff Rate and Fee Study, click on the link. A hard copy of the report is on file and available from the City Clerk's office.

You can view the current 2013 rates.

Water Sewer, and Reclaimed Water Rate Study
The City of Flagstaff, Utilities Department hired Willdan, Inc. to prepare an economic model, a complete analysis, and resulting recommendations for its rate and charges for water, wastewater, and reclaimed water and utilities development impact fees. The goal of the analysis was to develop a rate and impact fee structure that ensured sufficient revenues to cover the costs of services and meet the City’s debt coverage requirements and working capital guidelines.

Specifically, the City of Flagstaff Utilities Department, Finance staff, in conjunction with Willdan Financial services;

• Determined the revenue requirements for the upcoming year by analyzing projected revenues under existing rates. This was then compared against the revenue needed to properly operate, maintain and repair the infrastructure during the same period.
• Forecast non-water revenues such as buy-in capacity fees, meter installation fees, service charges, and other revenues that are collected from individual customers but not directly generated through water sales. The costs related to water distribution among customer classes are then allocated to potable and reclaim water systems.
• A rate structure is established for various customer classes, ensuring the costs allocated to that group are recovered equitably.
• A community group, Flagstaff Water Commission, provides oversight and helps develop recommendations for rate adjustments that are then forwarded to the Mayor and Council.

The City of Flagstaff has approximately 19,000 water service connections and maintains 416 miles of potable water main on twelve major reservoirs operating on three distinct pressure zones. There are two wastewater treatment plants that serve a combined population of approximately 65,000 residents. The City maintains 270 miles of gravity flow sanitary sewer. Additionally the Department maintains about 24 miles of Class A reclaimed water main.

The City is has completed a major upgrade to the Wildcat hill WWTP from Class B to Class A quality reclaimed water. Escalating capital and operation and maintenance costs for the reclaim system exceed the current revenue stream produced by the reclaimed water. Major capital projects include two new wells within the next ten years, future water acquisition projects, ongoing annual replacement of 2.5 miles of waterline and 1 mile of sewer line each year. It also includes replacement of aging and undersized utility lines in the Southside, Old Town and Sunnyside neighborhoods in town.

The City desires rates that fully fund operations, maintenance, and present and future capital costs for plant expansions; distribution systems; and collection system capacity infrastructure rehabilitation, enhancements, or expansion.

Why is the Rate Increase Necessary?
First why is the increase needed.

During the years 1995-2008 the City was experiencing growth and increases in O&M costs for energy and chemicals and the Utility rates were not keeping pace. This chart shows the Consumer Price Index over the past 18 years with respect to our Utility rate increases. While Inflation, Energy and Construction costs have been rising, our Rates have not kept up.

Spent Reserves - The Utility spent 16 Million in reserves to complete the Wildcat Hill Wastewater Treatment Plant Upgrade. This upgrade was necessary due to the facility's age and necessary replacement of equipment in order to maintain operation of the wastewater treatment plant.







Aging water and Sewer Infrastructure
One of the major factors requiring the Rate increase is the rehabilitation and replacement of our aging infrastructure. Pipes are underground and out of sight, but they do not last forever.

So how much old pipe does Flagstaff have?
In Flagstaff, 6% of all Water pipes have reached their useful life. We have a total of 416 miles of waterline, of which approx 25 miles is from 60 to 100 years old. When you're not replacing your old pipe, you experience an increase in line breaks like we have had the past few years. The problems are already coming to the surface.

Failing infrastructure costs local businesses money. Flagstaff experienced breaks in a 60-year-old water pipeline that resulted in water and mud gushing onto the streets and homes near the Summit Center and forced the Summit Center to cancel 60 surgeries. When large water pipeline systems break under pavement, they can cause large sinkholes and/or destruction of buildings. This can result in multi-million dollar claims against the city.

Schedule for Rate Increase Adoption – 2009/2010

Date	Meeting
September 17	Water Commission
October 1	Water Commission
October 15	Water Commission
November 19	Water Commission
December 17	Water Commission
March 18	Open House - Public Presentation on Rates and Capacity fees
April 13	Council Work Session
April 20	Original Notice of Intent
May 13	Top 10 Users
June 16	Chamber of Commerce
June 30	Flagstaff Home Builders
May 25	City Council Meeting 5:30 pm - Presentation and Public Comment on Rate Study
June 15	Notice of Intent - City Council Meeting 5:30 pm
June 20	Publish Notice of Intent Advertisement in the Arizona Daily Sun
July 27	City Council Meeting 5:30 pm - Public Hearing, First Reading of Ordinance and Resolution
August 3	City Council Meeting 5:30 pm - Final Reading of Ordinance & Resolution and Adoption

Comparison of Annual Residential Rates

Rate Comparisons
How does the proposed rates compare to other Cities and towns in AZ?
The chart on the left shows that even after the increase, our rates are still very low within the region and within the state. While the cost structure and facilities vary greatly between Utilities, rate comparisons provide the City a barometer of its rates in relation to surrounding communities. The figure compares the estimated monthly bill for 5,000 gallon of water consumption.

The rates are structured to have the least impact on residential customers that use less than 6,500 gallons per month. If your apartment, home or family has low to moderate water usage (5,000 gallons or less) you will see a very moderate increase, less than $4 per month. The tiered water rates (charging progressively higher prices as water use increases), are intended to promote water conservation and recognize that water is valuable limited resource in the City of Flagstaff.

The Chart below shows a comparison of monthly water bills for a family of 4 using 7500 gallons per month. Find the cost Impacts to the Typical Residential Customer.

Monthly Rate Comparison