CRANE LAKE WATER & SANITARY DISTRICT (CLWSD)
April 28, 2006 – 10:00 A.M.
CRANE LAKE CHAPEL FELLOWSHIP HALL
The meeting was called to order by Chairman Rob Scott at 10:00 A.M.
Members present: Managers Bill Congdon, Darrell Scott and Rob Scott.
Members Absent: None.
Also present: Scott Harder of Environmental Financial Group, Clerk Jo Ann Pohlman, reporters from the Voyageur Sentinel and the Timberjay, and 19 members of the community.
Chairman R. Scott began by explaining the purpose of the meeting. Scott Harder of the Environmental Financial Group would review his Draft 2006-7 Rate Projection and Schedule, which was mailed to the Western Service Area property owners previously. R. Scott described the Draft as revision one of the financial plan of June 1, 2004. Mr. Harder’s presentation would be followed by public comment and questions. R. Scott then turned the meeting over to Scott Harder.
Mr. Harder provided some background information before reviewing the options outlined in the Draft. He stated that the benefit of a track record of how the system is functioning helped to form his option choices. He stated that the fact that the flows are much lower than expected had precipitated the need to review the rates. Three elements to be considered when reviewing the rate structure are; how to raise money, how to allocate the cost of service among customers, and the appropriate structure or how to charge. Mr. Harder stressed the importance of the Board’s review of flows on a regular basis and the need to spot check grinder operation for discrepancies. He explained that the EDU basis of 250 gallons per day per EDU was the standard figure used by the engineers prior to construction. The EDU’s were used to send to the USDA and to identify Special Assessment value. Mr. Harder explained the change in numbers from his November report to the March Draft as clarification of expenses and incomes received from the Board.
Mr. Harder reviewed the options presented in his Draft. The focus was on options 3, 5, 6, and 7. The other options were presented as a benchmark and for comparison. All options were adjusted to reflect increase in 2006 costs and the lower than planned flows. Option #3 used the existing EDU assignments and original rate schedule; Option #5 addressed volume only; Option #6 addressed the existing EDU assignments/base charge only; and Option #7 used the existing EDU assignments, volume and an excess volume charge. Mr. Harder felt Option #7 was the best choice for lower volume users. Of the current 2.5 million gallons of flow, 1 million gallons would fall into the excess volume category.
R. Scott thanked Mr. Harder for his presentation stating that no decisions would be made by the Board until public comment was considered. The meeting was opened for public comment and discussion.
Paul Hamblin commented on the need to look at the EDU’s when considering a rate increase and asked Mr. Harder what the significance of the current EDU valuation was. Mr. Harder responded that the EDU was a way of creating residential classes to treat all fairly. They also create a benchmark from which to build changes for the future. Mr. Hamblin stated that there was not anticipated change in use expected and that the current EDU valuation was disproportionate. Mr. Harder stated that he did not recommend the review of EDU valuation at this time as he saw numerous adjustments in 2005 as well as frozen lines. Firm base information just isn’t there yet. Mr. Hamblin then addressed the use of the Pre-Paid Special Assessments. He stated that after the PPSA’s were allocated for debt payment as described in the Draft, a rate increase to generate $50,000 would be needed for 2008. Scott Harder explained that the CLWSD Attorney stressed the importance of using those funds for long-term debt payment expeditiously to avoid tax issues; but the Board could decide to spread the use of those funds over more years.
CLWSD Public Meeting – 4/28/06
Mr. Hamblin continued with his questions stating that Option #7 excess volume charge with an estimated 1 million gallons being considered excess volume seemed to be incorrect. His review of monthly individual gallon usage did not reflect that. Mr. Harder’s information did reflect a number of users moving into the excess volume usage category on a monthly basis. Mr. Hamblin requested that the Board generate a report to compare to his figures. Mr. Hamblin ended by saying that Scott Harder stated at the 4/24/04 Public Meeting that the guiding principal of the Plan is to be fair and flexible. It will be critical to watch the system operation over the years to keep the rates fair and equitable. That is what the people are asking for.
Mike White asked why beginning and ending cash balances were not included with Mr. Harder’s cash flow projections and balances. Mr. Harder responded that that was not part of the assignment. Mr. White stated that a cash balance reserve should be stated and would like to know what that anticipated balance would be for the end of 2006. Mr. White referred to the EDU’s stating that there is data for 2005 plus January, February, and March of 2006 providing 15 months of data for review. It is understood that the meter change in the lift station and frozen lines affected those numbers. The CLWSD Ordinance says rates will be reviewed and adjusted annually; it does not say after 3 years. Mr. White does not feel the risk of change at this time is so great to continue with such a disproportionate EDU structure. Mr. Harder responded that he used 2005 data only and he did not see good data to make an EDU change. Mr. White explained that the actual average residential usage was 56 gallons per day rather than the predicted 250 gallons per day. The plant capacity use is at 13%.
Mike Seigley asked if Mr. Harder could compare what he felt was an over built plant to other projects he has worked with. Mr. Harder responded that that would be a question for the Engineers.
Paul Hamblin asked if it was fair to say that it is hard to get things perfect but when you see extremes in use something is wrong. Mr. Harder responded that a proportional structure is in place and that a case should be built to adjust customer classes. Mr. Hamblin stated that the Board rejected a class structure previously. He further stated that the plant is here and must be paid for. The public is not going to accept the figures, numbers, quotes received and will fight to the bitter end to have fair and equitable rates.
Stuart McKie asked why a houseboat is evaluated as 1/12th of an EDU when a cabin is considered 1 EDU. Mr. Harder and R. Scott explained that black water only is processed from the houseboats and that the District has no jurisdiction over grey water disposal. The valuation was determined with engineering input. Mr. Harder explained that we have completed the start up phase and are now working through phase two with current data to reach a phase where there is more complete data for evaluating rate decisions. Mr. McKie asked if Special Assessments could be adjusted. Mr. Harder responded that they could not as they were created to cover the expense of the original grinder pump infrastructure. Mr. McKie asked why the EDU number changed from 212 to 125. Mr. Harder explained that the 212 number was used to include vacant lots and possible expansion; 125 is the number of EDU’s currently in use.
Richard Dinter asked about the current hook-up fee charge and if that would be adjusted in the future. Mr. Harder responded that the hook-up fee rate should be reviewed every few years to adjust according to construction cost changes. It is possible it could go up. Mr. Dinter suggested that a procedure for regular review by the Board be established.
Paul Hamblin recommended that Capacity Reservation Fees be reviewed on a regular basis also.
Gretchen Janssen asked if, in Mr. Harder’s experience, when 68% of the volume is generated by a commercial entity was it common practice for that user to provide an equal amount in revenue? Scott Harder responded that he was familiar with three approaches for commercial rate structure, they were; 1) cost of service, 2) economic development policy, and 3) life line rate for low users such as fixed income people.
CLWSD Public Meeting – 4/28/06
Sandra Bodkin asked if the CLWSD had other sources for income than the rates. The response was that there was an approximate income of $30,000 per year from Special Assessments included on property taxes of WSA individuals who did not pay the total Special Assessment amount up front. It was also explained that all District members have a charge on their property tax statement for Administrative expenses, not used for plant operation.
Mike Seigley asked how Mr. Harder’s time was billed. Mr. Harder explained that he was paid for time and material not to exceed a set amount per assignment.
Mary McKie asked when the Board would be making a decision on the rates. R. Scott responded that it would be up to the Board. If all questions were answered they would decide. He further explained that using the current rate schedule, the District would be at a minus for plant operation. This is manageable, but as months go on, the debt will increase.
Mike White requested that Scott Harder define the specific risks and their potential impact involved in current EDU adjustments for billing purposes. The risk is not identified.
Paul Hamblin again requested a report on excess volume usage to compare to his figures.
The meeting did not include correspondence or the reading of correspondence. A letter from Virginia Clifford dated 4/27/06 is attached.
The meeting was adjourned at 11:40A.M.
NEXT MEETING: REGULAR MEETING ON MAY 3, 2006, 7:30PM, CRANE LAKE FELLOWSHIP HALL