Title
Amend City Code - Proposed Water Service Revenue Increase (Ordinance G-6826)
Description
Request the City Council amend sections 37-63 of the Phoenix City Code to adjust water service rates to increase rate revenue by 6.5 percent over the next two years.
Report
Summary
The Finance Department, in conjunction with the Water Services Department, develops a Water Financial Plan to determine the revenue requirements that support the capital infrastructure replacement, rehabilitation, and development needs, the operating budget, and the debt service requirements of the water utility. The proposed changes to the water rates planned for October 2021 and March 2022 are estimated to produce $29.5 million the first full fiscal year after the rates take effect.
The proposed water rate changes for October 2021 will be applied to the low, medium and high seasonal volume charges. On average, customer bills for water will increase 3.0 percent. Depending on the actual water consumption, some customers may pay more or less than this average.
The proposed water rate changes for March 2022 also will be applied to the low, medium and high seasonal volume charges. On average, customer bills for water will increase 3.5 percent. Depending on the actual water consumption, some customers may pay more or less than this average.
An independent rate consultant has reviewed and evaluated the Water Financial Plan and determined that the financial plan information supports rate adjustments that are reasonable and consistent with rating agency standards (Attachment A).
There is no proposed increase to wastewater rates in Fiscal Years (FYs) 2021 or 2022.
Concurrence/Previous Council Action
On Jan. 6, 2021, the City Council heard the Notice of Intention to consider an increase in water rates and/or rate components and set a public hearing date to consider the proposed increase.
The Citizens' Water/Wastewater Rate Advisory Committee (WWRAC) recommended:
- A zero percent wastewater revenue increase for FY 2021, based upon the five-year financial plan that includes zero percent wastewater revenue increases in each of FYs 2021-25 on Oct. 20, 2020, by a vote of 6-2; and
- A 3.0 percent water revenue increase effective October 2021 and a 3.5 percent increase in revenue effective March 2022; based upon the five-year financial plan that includes 3.5 percent increases in revenue for each of FYs 2023-25 on Jan. 21, 2021, by a vote of 6-0.
The Transportation, Infrastructure, and Innovation Subcommittee:
- Reviewed the WWRAC recommendation on Dec. 2, 2020, and requested three CIP Plan Alternatives be evaluated;
- Reviewed the three requested CIP Plan Alternatives on Feb. 3, 2021; and
- On March 3, 2021, recommended approval of a 3.0 percent water revenue increase effective October 2021, a 3.5 percent water revenue increase effective March 2022, and zero percent wastewater revenue increases for FYs 2021 and 2022, by a vote of 4-0.
Public Outreach
In accordance with Arizona Revised Statute 9-511.01, the City Council will conduct a public hearing on March 17, 2021, to receive comments on the proposed increase in water rates. Additional information regarding public outreach efforts is detailed in the Council Report for the public hearing agenda item.
Department
Responsible Department
This item is submitted by Deputy City Manager Karen Peters and the Water Services and Finance departments.