HomeMy WebLinkAboutAgenda - 1/20/1997 - Finance and Personnel Committee . �
� AGENDA SUPPLEMENT
January 20, 1997
FINANCE COMMITTEE
TO: Mayor and City Council
FROM: Fred Batt�'�
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SUBJECT: Debt Service Charge - Sewer Rates
The present sewer service charge method was established in accordance with IEPA regulations
pertaining to the grant received for the construction of the South Wastewater Treatment Plant in
1989. A user charge system was established pursuant to the Federal Clean Water Act in an
amount sufficient to recover the cost of operation, maintenance and replacement of the system.
At that time the costs were as follows:
� 1. Operation and maintenance $0.86 per 1,000 gallons
2. Replacement cost 0.16 per 1,000 gallons
3. Debt service charge 0.33 per 1,000 al� lons
$1.35
In addition, part of the debt service was included in the rate as a flat rate of$3.00 per month in
order to maintain the stated per gallon rate of$1.35.
At present we have 715 sewer only accounts and 6,570 metered water customers with sewer
service. The flat rate of$3.00/month generates about $264,000 per year in revenue. $264,000
could be translated into a metered rate per 1,000 gallons as follows:
264 000
$590,000 (1,000's of gallons annually) = 45 cents/1,000 gallons
To eliminate the flat rate debt service charge and charge it to a fee per 1,000 gallons would result
in an increase in the sewer rate from $1.65 to $2.10 per 1,000 gallons.
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The impact of this charge on the small user follows:
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Based on 5,000 gallons/2 months
PRESENT SEWER CHARGE _ $11.25
REVISED SEWER CHARGE _ $10.50
The impact of this charge on the average sewer user follows:
Based on 15,000 gallons/2 months
PRESENT SEWER CHARGE _ $30.75
REVISED SEWER CHARGE _ $31.50
The impact of the charge on a large user follows:
Based on 150,000 �allons/2 months
PRESENT SEWER CHARGE _ $250.50
REVISED SEWER CHARGE _ $315.00
Another option is to simply revise the term "debt service charge" to another term such as
"administrative fee". It is not necessary to use the term "debt service" or "debt service charge".
As a sidelight the present debt service for FY 1997-8 for the 1993 Revenue Bond Issue will be
$585,800 which is considerably more than the flat $3.00/month debt service charge generates.
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The 1993 Revenue Bond issue debt will be retired in 2006.
FCB:ch
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FINANCE COMMITTEE MEETING
AGENDA
�� Monday, January 20, 1997
7:30 P.M.
Aldermen's Conference Room
� 1 . South Wastewater Treatment Plant Bond Financing
- Capital Projects
- Capital Development Fund
- Determination of Bond Financing Amount
2. Debt Service Discussion
3. Any and All Business Which May Properly Come Before the
Committee
Posted and Mailed: January 17, 1997
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�- AGENDA SUPPLEMENT
January 20, 1997
FINANCE COMMITTEE
TO: Mayor and City Council
, ,
FROM: Fred Batt �
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SUBJECT: Capital �evelopment Fund
Attached is a summary of Capital Development Fund revenue and expenditures since fiscal year
1988-9. Beginning in FY 1990-1 the Council decided to spend Capital Development Funds only
to expand VGater and Wastewater Plants and elevated storage tanks. If the expenditure was
unrelated to new growth it was not to be charged to Capital Development Fund reserves.
� To that end, the staff provided a capital development fee based on the current per capita cost of
wastewater treatment facilities. Water capital development fees remained essentially as they were.
At almost the same period in time the 594 properties assessed in McHenry Shores were allowed
a period of time to connect at the old sewer capital development of$750 rather than the new fee
of$1315. All but about 35 homes were connected at the old fee costing the Capital Development
Fund over $300,000 plus interest for several years.
Since 1989-90 the capital fund has been used for South Wastewater Plant expansion costs of
$29,000; Well improvements totalling $122,000; Water Plant 4 construction totalling $1,083,000;
Centrifuge improvements at the Central Plant costing $580,000; land acquisition costs of
$160,000 and east side sanitary sewer expansion costs of $170,000. Total expenditures of
$2,175,000 have been charged to the fund since May of 1990.
The land acquisition costs of$160,000 and the east side sewer expansion costs of$170,000 will
presumably be reimbursed to the fund once the sale of the river property is accomplished and the
bonds are sold for the sewer expansion, adding $330,000 to the fund.
During the same period of time we have grown by about 2,200 sewer users and 1,700 water
users. Each new household is using about 250 gallons per day requiring a water plant
comparable to 35% of Water Plant 4. Two thousand two hundred (2,200) sewer users would
require a treatment plant of about 0.55 MGD which would cost about $3,630,000 plus
engineering costs of another $450,000 or about $4.1 million total.
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The total amount of Capital Development Fees plus interest collected during this period was
`„ $3,370,000. If we added back into the fund the $300,000 for the Shores sewers the fund would
really have generated a little over $3.7 million dollars in the same time period that water and
sewer facility costs were about $4.5 million.
Since we haven't built an elevated storage tank in this period we need additional funds for the
cost of a tank. The conclusion is: Capital Development Fees need to be increased, particularly
if engineering costs are charged to the fund. (Note: engineering costs were not included in the
original fee structure.)
It is also noted the costs associated with the installation of the centrifuge may not be directly
associated with plant expansion which contributes to the lack of fund balances to pay for an entire
plant expansion at this time.
If we stay strictly with the intended purpose of the fund and raise the fees by about 25% we have
caught up to the times. The fee should be annually increased (or decreased) in accordance with
construction costs in excess (or less than) interest earned.
The only project that classically would be a project we would charge to capital development in
the next 2 to 5 years is an elevated storage tank. The estimated project cost is $750,000. It is
noted we need to replace Water Plant 1 but this is a replacement not an expansion and therefore
should not be charged to the Capital Development Fund.
� With the reimbursement to the fund of$330,000 from bond proceeds and using a conservative
estimate of proceeds and earnings of $350,000 during the next year, the fund balance could be
taken down drastically to offset the amount of bond sale necessary to build the South Treatment
Plant. A $2,000,000 decrease in the fund would be possible leaving a bond sale at about
$1,600,000. We then would have enough in fund balances to consider an elevated tank next year.
,
FCB:ch
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CITY OF MCHENRY
CAPITAL DEVELOPMENT FUND
May 1998 thru April 30, 1986
1988-89 196&90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 5/1/96 to 12l31 V96
BEGINNING BALANCE: $ 681,814.00 $ 922,297.00 $ 1,112,246.00 $ 1,743,306.00 $ 2,314,210.00 $ 2,546,689.00 $ 1,720,695.00 $ 2,080,865.00 $ 2,397,517.00
REVENUE:
Water Hookup Fees $ 154,700.00 $ 144,890.00 $ 87,805.00 $ 109,400.00 $ 114,088.00 $ 153,838.00 $ 123,368.00 $ 81,601.00 $ 83,992.00
Sewer Hookup Fees $ 270,982.00 $ 269,676.00 $ 440,648.00 $ 374,346.00 $ 221,487.00 $ 306,802.00 $ 278,282.00 $ 135,116.00 $ 112,019.00
Interst Earned $ 56,502.00 $ 103,578.00 $ 105,816.00 $ 112,614.00 $ 111,509.00 $ 74,253.00 $ 66,856.00 $ 168,253.00 $ 111,109.00
Total Revenue $ 482,194.00 $ 518,144.00 $ 634,269.00 $ 596,360.00 $ 447,084.00 $ 533,893.00 $ 467,506.00 $ 384,970.00 $ 307,120.00
EXPENSES:
Drainage Study $ 24,975.00 $ 11,261.00 $ - $ - $ - $ - $ - $ - $ -
Miilstream Pumping Station $ 7,455.00 $ 16,152.00 $ - $ - $ - $ - $ - $ - $ -
SWWTP&Infuluent Sewer $ 157,228.00 $ 52,091.00 $ - $ - $ - $ - $ - $ - $ -
Welllmprovements $ 24,33:i.00 $ - $ - $ - $ - $ - $ - $ 68,318.00 $ 54,031.00
Misc.lmprovements $ 27,720.00 $ 10,127.00 $ - $ 3,749.00 $ 3,201.00 $ 6,833.00 $ 18,151.00 $ - $ -
SWWTP Expansion $ - $ 230,564.00 $ 3,209.00 $ 7,971.00 $ - $ 4,814.00 $ - $ - $ 13,261.00
WTP#4Constr.&Engr. $ - $ - $ - $ 13,736.00 $ 156,109.0� $ 911,173.00 $ 1,631.00 $ - $ -
McH.Shores SpeC.Assmt. $ - $ 8,000.00 $ - $ - $ - $ - $ - $ ' - $ -
Centrifuge $ - $ - $ - $ - $ 55,295.00 $ 437,067.00 $ 87,554.00 $ - $ -
Land Aquisition $ - $ - $ - $ - $ - $ - $ - $ - $ 159,712.00
Sanitary Sewer Expansion $ - $ - $ - $ - $ - $ - $ - $ - $ 16'9,362.00
Total Expenses $ 241,711.00 $ 328,196.00 $ 3,209.00 $ 25,456.00 $ 214,6a5.00 $ 1,359,887.00 $ 107,336.00 $ 68,318.00 $ 396,366.00
ENDING BALANCE: $ 922,297.00 $ 1,112,246.00 $ 1,743,306.00 $ 2,314,210.00 $ 2,546,689.00 $ 1,720,695.00 $ 2,080,8�.00 $ 2,397,517.00 $ 2,308,271.00
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SC:iE�ULE 1: �
CITY OF McHENRY, ILLI��OIS a
Alternative Debt Retirement Schedulestl) �n
South Wastewater T�eatment Plant Financing R
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Examples: 53,600,000; S2,900,000; 52.600,000; 52,100,004; 52.600,000 � y
(lj l21 (3} i4i l3)
Outstanding Conbined � Combined C�mbined - Combined CanDined
Year End Qbligations S3,600,OQ0 iotal 52,900,000 Total S2,bD0,000 Total S2,100,000 Total S1.600,00o Tctal
�-30 583 S 608,008 5 �3�833 5 605.258 ; S 19.250 S 600,675 5 14,6fi7 S 596.092 0
1997 5 581,425 S 49,500 S 630,925 S 26.
1998 585.800 298,000 883,800 209.340 795,300 1�3,000 728.80U �15,50� T01,30Q 138,000 723,804
1999 5t3.800 292,5D0 906.300 206,750 820.350 193,000 806.800 165,500 ;19,300 135,250 )49.050 °►.°
200� 5B9,050 261,000 876.050 204,OQ0 193,050 190,250 779.3Q0 i62,750 151�800 132,50� 721.�30 �
2001 61;.000 281,500 898,500 20:,250 818,250 i87�500 844,500 :60,000 J7?�000 129;750 146,150
2002 596,D00 276.000 872,000 198,500 i94,500 784,750 780,150 151,2�0 ;53,250 152,000 748,000 �
2003 b24�?30 270.500 895,230 195,;50 820,500 182,000 8Q6.150 :3E,500 T,'9,2�0 147,875 772�525 �
2004 601,375 265,000 86b.375 193,000 791,375 ]79,250 780,625 151.750 7S3,I25 143,750 745,125
2045 428,000 459,050 88;.500 390,250 818,250 326,500 154,500 i99,000 627�OOU 314.625 742,525
2006 414,000 4�3.000 857,000 376,500 740,500 315,500 i29.500 I93.500 607,500 300,875 714,875
20fl7 - 826,50U 82b,�00 " � - 762,750 762;i50 704,5Q0 704,500 588.�00 ' S88,d00 �12,125 7I2,125
2008 - 888.000 $88,OQ0 777,000 7i7,a00 721,500 i21,500 SfiQ,500 5fi0,500 - -
2009 - 844.000 844,Q00 738,500 i38,5D0 685 750 68S,T50 fi33,Op0 633,000 - -
55,480.550 54,�80,333 ,Q37,333 S3.260,500 i2,327,4i7
(1) The amovnt shown as debt retirement inciude both interest and principa3. .
InLerest is calculated at 5-1/2�.
The total arnount of debt �etirement each year includes bvth outstanding and �
propo5ed boads. �
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SCHEDULE 2• �
C]TY OF }IcHEWRY, ILLJPI4IS
Alternative Princi�al Payment_ Schedules 9
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{1;� (2; t3i �Q} (5)
Existing S3,600,000 52,900,Q00 52,b00,000 52,100,000 5:,60Q,000
Year End Principal Proposed Totai Propused Total Proposed Tota7 Pr�posed Total ProposeC Total o
(4-30� "
1997 ; 3i5,000 $ - S 375,D00 S - S 375,000 S - 5 375,040 S - $ 375,000 $ - $ 375.000 °,.°
1998 400,000 100,000 500,d00 50,000 450,000 - 400.000 - 400,000 50,000 450,000 �
., 1999 450,000 140,000 550,000 50.000 500,000 50,000 500,OD0 SJ.000 500,000 50,000 500,000 W
2000 4�0,000 ' 100�000 550,400 50,000 500,000 SO,OOQ 500,Ofl0 50,000 500,000 50,000 500,000 �
20�: 500,000 100,000 600,000 50.000 350,000 50,000 550,000 50.004 550,U00 50,000 350,000 �
2002 SOQ,000 100.000 600,000 50,000 550,000 50,000 550.000 50,000 530,000 75,000 575,000
2003 550,D00 100.000 650,40Q 50,000 600,000 50,000 60Q,0�0 50,000 600,000 75,000 625,000
2004 350,000 100,000 650,40Q 50,000 600,000 50�000 600,000 5U,000 600,000 75,000 625,000
2W5 400,400 300�000 700.000 250.00a 650,000 200,000 600,000 10U�000 �00,000 i50,000 650.U4d
2006 400,000 300,000 100,DOQ 250.000 650,000 200�000 600,OOQ L00.000 �00,000 250,000 650,OU0
2007 - 700,000 700,OOQ 650,000 650�000 600,000 600,00a 300,000 300,000 675.000 675,QOQ
2008 - 800,000 800.000 700,000 700,000 650,000 630,000 500�000 300,000 - -
2009 - 800,000 800,U00 700,OU0 700,000 650�000 650,000 600,000 6Q0.040 - -
4,575.000 53,600.000 8,175, 00 2,9 0,000 7,4 5,000 2, 00,000 57,1i5,000 2,100, 00 .67 ,000 51,6�0,000 56,175,000
Cash reserves: -0- 5700,�00 S1,OOO,G�O 51,500,000 52,000,000
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