TO: Mayor Collins and Town Council Members
FROM: Kevin Burke, Town Manager
DATE: October 27, 2016
DEPARTMENT: Town Manager
Staff Contact Kevin Burke, 480-348-3690
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AGENDA TITLE:
Title
Discussion of Phoenix Sewer Rate Concerns for Paradise Valley Residents
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Council Goals or Other Policies / Statutory Requirements:
Collaboration - Strengthen internal and external collaboration.
Customer Service
RECOMMENDATION:
Discuss and provide direction to staff regarding actions to address resident concerns on Phoenix Sewer rates.
SUMMARY STATEMENT:
In January of this year, the Paradise Valley Independent ran an article entitled “Paradise Valley Residents call into question Phoenix sewer fee assessments.” Following that article, the Town met with several Paradise Valley residents who are customers of Phoenix sewer to learn more about their concern. In short, the concern is how the City of Phoenix calculates the monthly sewer usage bill. Town staff has met with Phoenix staff on several occasions to present the concern and receive information. Phoenix staff has been very cooperative with our requests for information and meetings.
The structure of the Phoenix sewer rates is the heart of the Paradise Valley residents’ concern. The City of Phoenix estimates sewer flow similar to Paradise Valley. To meter sewage flow on a house-by-house basis similar to water flow is prohibitively expensive. Therefore, Phoenix estimates the flow by taking a “winter average” of water consumption. That winter average is calculated by measuring the average water through the water meter during the months of January, February and March. Most of these customers are on EPCOR water but in some cases they are also on Phoenix water. That average amount is then multiplied by 77% for single family residences. The theory is that 77% of water consumed by this land use during the winter months makes it into the sewer. This theory is not uncommon (the Town of PV and Scottsdale currently use a similar system for approximating individual flow). A rate per quantity of water is then applied. For PV residents on Phoenix Sewer, that rate is $3.64215 per 100 cubic feet (ccf) which is the equivalent of 748 gallons. There is also a base charge of $1.00 and an environmental fee of $0.8025 per ccf. Both the rate per ccf and the environmental fee are 50% higher for customers outside the Phoenix city limits than Phoenix residents.
For comparison purposes, let’s look at how the Town of Paradise Valley calculates its rates. First, the Town owns the collection system in a substantial portion of the corporate town limits. Second, it contracts with Scottsdale to take its sewer and treat it. Without going into all the particulars of that agreement, the Town pays a fixed cost to Scottsdale per connection. The Town’s base charge is $69.58 per connection. The first 15,000 gallons of sewer flow is included in that base figure. That is a significant difference between the Town’s calculation and how Phoenix calculates. In order to pay for debt service, repair and replacement of the collection system, and administrative costs, the Town then imposes a cost per 1,000 gallons beyond the first 15,000. Like Phoenix and Scottsdale, PV approximates sewer flow based upon a winter average. The Town’s “winter average” is calculated using 90% of the average water consumption of December, January, February and March excluding the month of greatest consumption. It is then multiplied against a rate of $0.95 per 1,000 gallons over the 15,000 gallons. A key distinction in the PV rate is the fact that the Town has a maximum bill of $220 per month.
Looking at both of these scenarios, a user could believe that the approximation of sewer flow is inaccurate principally due to the fact that irrigation is occurring during the winter average. In fact, this is the chief complaint regarding the Phoenix sewer rate.
Therefore, many municipalities offer a “landscape meter.” A landscape meter is the idea of separating the indoor plumbing (sinks, showers, toilets) from the outdoor plumbing (irrigation). Maintaining two water meters then provides a more accurate calculation of what water is flowing into the sewer system. EPCOR and the City of Phoenix offer this service. The EPCOR fee is $600. However, it does require the homeowner to segregate the plumbing which can be a notable additional expense.
Some residents have proposed that Phoenix bill based upon a per occupant or per fixture calculation. This again would be an estimation but based upon some study of historical flows. This represents a major paradigm shift and is not one the City of Phoenix indicated they were willing to explore.
Another consideration to improve the Phoenix Sewer rate concern is to challenge the 50% surcharge. By way of comparison, the City of Scottsdale currently charges Paradise Valley a 10% surcharge over in-city rates to take its sewer. The City of Flagstaff charges a 10% surcharge for water and sewer services to those outside the corporate city limits. Tempe charges no fees to it’s out of town customers. Chandler charges its out-of-city customers a 60% surcharge and Mesa charges a 47% surcharge. Further, the Town of Paradise Valley successfully challenged Phoenix on a similar surcharge for water. In the 1980’s, some Town residents sponsored a bill in the State Legislature preventing similarly high surcharges. It was successfully adopted but only applied to water charges. The Town could seek to amend that statute to include sewer or the Town could ask the City of Phoenix to amend that surcharge to something more like 10%.
An additional option to resolve these concerns was presented by the City of Phoenix. They propose the Town purchase the City of Phoenix collection system within the corporate boundaries of Paradise Valley, and then contract with Phoenix to take and treat the sewer flow. This would mirror the arrangement the Town has with Scottsdale on the eastern side of PV. The Town could then consider using the same rate structure for Paradise Valley customers or developing a different rate depending upon the finances of such an enterprise.
In summary, staff seeks Mayor and Town Council direction on three possible options, plus the status quo option, presented below with associated pros and cons.
I. Landscape Meter - Residents purchase a second meter to measure indoor water consumption versus outdoor water consumption.
a. Pros - Is available today. Requires no regulatory changes. Best approximation of sewer flows. No cost to the Town.
b. Cons - Costs the resident to purchase the second meter. Costs the resident to segregate the indoor plumbing from the outdoor plumbing. Does not satisfy those customers who believe sewer should be calculated upon a per occupant or per fixture structure.
II. 50% Surcharge - Negotiate with City of Phoenix to reduce the surcharge or sponsor a bill in the State Legislature to amend the statute to include sewer rates.
a. Pros - Has been done before. No cost to the Town or resident. Provides a sizeable rate decrease.
b. Cons - May not succeed. Will take some time (approximately 6 months to a year) to determine if successful or not. Does not solve the irrigation consumption concern in the rate structure.
III. Purchase Phoenix Collection System -
a. Pro - Provides the Town greater control over sewer rates for its residents. Could possibly blend with the Scottsdale accounts for a single, better financed enterprise.
b. Cons - Will require time and money to determine the condition of the collection system, its value and long term financial requirements to maintain and operate. Would count against the State imposed expenditure limit and was not calculated into permanent base adjustment request in the latest election. Town would need to contract with Phoenix, Scottsdale or hire its own staff to maintain the system.
BUDGETARY IMPACT:
Depends upon the option selected. Cost of acquiring and maintaining the Phoenix collection system is unknown at this time.
ATTACHMENT(S):
Map of Phoenix Sewer Service Area in PV