4414 Utility RatesOrdinance No. 2017-4414
An Ordinance of the City of Sanford, Florida relating to utility rates;
amending the provisions of Section 102-3, Article 1, Chapter 102 of
the City Code relating to utility rates; method and annual
adjustments and providing for indexing and a minimum amount of
indexing; providing for legislative findings and intent; providing for
changes in amount of fees, charges, rates or other similar matters by
means of adoption of resolutions; providing for implementing
administrative actions; providing for a savings provision; providing
for conflicts; providing for severability; providing for codification as
well as the correction of scrivener's errors and providing for an
effective date.
Whereas, controlling State law and sound and generally accepted public
Management practices and principles prohibit municipal enterprise funds from incurring
operational financial deficits; and
Whereas, the City Commission of the City of Sanford finds that it is
necessary, desirable and fiscally prudent for the City of Sanford to enact this Ordinance
amending the provisions of the ' City Code relating to the indexing of utility rates by the
City with regard to the provision of utility services by the City; and
Whereas, the Legislature of the State of Florida has, in Chapter 166, Florida
Statutes, conferred upon local governments the authority to adopt regulations designed
to promote the public health, safety, and general welfare of its citizenry and other
controlling law of the State of Florida vests. home rule powers in the City of Sanford
acting through its governing body, the City Commission; and
Whereas, the City should modify fees, charges, rates or any other similar
matters by means of the adoption of a resolution at a public meeting as opposed to
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unnecessarily incurring the significant costs of advertising and processing ordinances to
take such actions; and
Whereas, this Ordinance is enacted pursuant to the home rule powers of the
City of Sanford as set forth at Article VIII, Section 2, of the Constitution of the State of
Florida; Chapter 166, Florida Statutes, Chapter 180, Florida Statutes, and other
applicable controlling law; and
Whereas, the City Commission of the City of Sanford has deemed approval of
this Ordinance to be in the best interest of the residents and citizens of the City of
Sanford and to further the public health, safety and welfare; and
Whereas, the City Commission of the City of Sanford has complied with all
procedural and substantive requirements of controlling law in enacting this Ordinance;
M
Whereas, underlined words in this Ordinance shall constitute additions to the
original text of the Code of Ordinances of the City of Sanford, strike t,hmu@4s shall
constitute deletions to the Code of Ordinances of the City of Sanford, and ellipsis ( ... )
represents unchanged text.
Now, therefore, Be it enacted by the People of the City of Sanford:
Section 1. Legislative Findings And Intent.
(a). The City Commission of the City of Sanford hereby adopts and
incorporates into this Ordinance the recitals (whereas clauses) set forth herein as the
legislative and administrative findings and intent of the City Commission.
(b). Additionally, the City Commission adopts as legislative findings the
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substance of the agenda memoranda relative to this Ordinance as well as the text of the
memorandum to William Marcous from Henry Thomas and Shawn Ocasio of Public
Resources Management Group, Inc., dated June 26, 2017, the subject of which is
"Annual Rate Indexing Provision Language Modification".
Section 2. Amendment to Section 102-3, Article 1, Chapter 102 of the City
Code; utility rates; method and annual adjustments. The provisions of Section
102-3, Article 1, Chapter 102 of the Code of Ordinances of the City of Sanford are
amended to read as follows:
Sec. 102-3. - Establishment of utility rates; method and annual adjustments.
The water and sewer rates, fees and charges relating to the utility systems of the
City as set forth in Chapter 102 of the City of Sanford Code shall be established by
resolutions adopted from time -to -time by the City Commission or as otherwise set forth
herein. Upon adoption of a resolution establishing a rate, fee 9r, charge, or similar
matters; said rates, fees an41 charges and similar matters shall be adjusted annually on
October 1 of each year by the Consumer Price Index for All Urban Consumers as
published from time -to -time by the United States Department of Labor, Bureau of Labor
Statistics.; provided, however, that each year's increase shall not be less than 2% per
year and not greater than 5% per year. Automatic rate adjustments associated with the
change in the referenced Consumer Price Index that are greater than 5% for a given
year must be reviewed and specifically approved by the City Commission. The City
Manager is hereby authorized and directed to calculate and implement said revised
rates, fees and, charges and similar matters on an annual basis. Notwithstanding the
foregoing, at any time that it elects to do so, the City Commission may adopt a
resolution establishing rates, fees and charges and such resolution shall take
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precedence over the previously established rates, fees and, charges and similar matters
then in effect until modified as set forth herein. The City Manager may adopt
administrative rules to implement the provision of this Article.
Section 3. Changes In Amount Of Fees, Charges, Rates Or Other Similar
Matters. A new provision of the Code of Ordinances of the City of Sanford are
enacted to read as follows:
All provisions of the City Code which relate to the establishment of the amount of
fees, charges, rates or any other similar matters are hereby repealed and the Code
codifier shall replace such provisions with the following text: "All fees, charges, rates or
similar matters shall be as provided in a resolution adopted by the City Commission."
Section 4. Implementing Administrative Actions.
(a). The City Manager is hereby authorized and directed to implement the
provisions of this Ordinance by the promulgation of rules and the development and
usage of forms and processes all as may be deemed necessary or appropriate by the
City Manager.
(b). The City Manager and City Attorney are also hereby authorized and
directed to generally implement the provisions of this Ordinance and to take any and all
necessary administrative actions to bring into effect the provisions of this Ordinance as
such officials may deem appropriate in their respective roles and functions under the
City of Sanford City Charter.
(c). The City Attorney may, as may be advisable, seek an advisory legal
opinion from the Attorney General of the State of Florida relative to the provisions of
Section 180.136, Florida Statutes, pertaining to water or sewer utilities rate increase
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0
notices.
Section 5. Savings; Effect Of Ordinance.
The prior actions of the City of Sanford in terms of the matters relating to the
establishment and revisions of rates, fees and, charges and similar matters, as well as
any and all activities of the City of Sanford pertaining thereto or of an associated nature,
are hereby ratified and affirmed.
Section 6. Codification; Scrivener's Errors.
(a). Sections 2 and 3 of this Ordinance shall be codified and all other sections
shall not be codified.
(b). The sections, divisions and provisions of this Ordinance may be
renumbered or re -lettered as deemed appropriate by the Code codifier.
(c). Typographical errors and other matters of a similar nature that do not
affect the intent of this Ordinance, as determined by the City Clerk and City Attorney,
may be corrected with the endorsement of the City Manager, or designee, without the
need for a public hearing.
Section 7. Conflicts.
All ordinances or parts thereof in conflict with this Ordinance are hereby repealed
to the extent of such conflict.
Section 8. Severability.
If any section, subsection, sentence, clause, phrase, or portion of this Ordinance,
or application hereof, is for any reason held invalid or unconstitutional by any court of
competent jurisdiction, such portion or application shall be deemed a separate, distinct,
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and independent provision and such holding shall not affect the validity of the remaining
portions thereof.
Attest.,
Section 9. Effective Date.
This Ordinance shall take effect immediately upon enactment.
Passed and adopted this 14th day of August, 2017.
City Commission of the City of
Sanford, Florida Seminole County,
Florida. I
Cynth% Porter, City Clerk Jeff Triplett,
Approved as to form and
Legality:
William L. Colbert, Esquire
City Attorney
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Public Resources Management Group, Inc.
Utility, Rate, Financial, and Management Consultants
F0 341 N. Maitland Avenue, Suite 300, Maitland, FL 32751
TeIe:407-628-2600 • Fax: 407-628-2610
Email: PRMG@PRMGinc.com
MEMORANDUM
To: William Marcous
CC: Bilal Iftikhar, Cynthia Lindsay, David Gierach
From: Henry Thomas and Shawn Ocasio
Date: June 26, 2017
' 1
Subject: Annual Rate Indexing Provision Language Modification
Dear Mr. Marcous:
Public Resources Management Group, Inc. ("PRMG") has recently completed our annual review
of water and wastewater rates for the City of Sanford (the "City") for Fiscal Years 2017 through
2021. During the course of this review it was observed that the index (Consumer Price Index for
All Urban Consumers or "CPI") the City uses for annually adjusting its water, sewer and reclaimed
water monthly user rates has been coming in at lower. levels than what was,originally projected
during previous studies. During the Fiscal Year 2015 and 2016 Financial Forecast Updates the
originally projected increases to the Fiscal Year 2016 and 2017 monthly user rates were 2.0% and
2.2%, respectively. These estimates were based on the federal government's Congressional Budget
Office's projection of CPI for the respective forecast periods. However, once the change in CPI
was officially reported by the Bureau of Labor Statistics the actual adjustment was only 0.2% and
0.8% for 2016 and 2017, respectively.
While the CPI is a good tool for annual rate indexing it does have certain shortcomings. The City's
utility system cost structure is largely comprised of recurring operating costs that can be affected
by changes in inflation such (e.g. materials and supplies, chemicals, electricity, etc.). However, it
also consists of costs that are not tied to general cost inflation such as the system's capital
improvement program (e.eg. line replacements, plant expansions, Biosolids management, etc.) and
debt service payments on bonds and SRF loans for existing and future debt. As a part of the utility
system's forward looking capital financing plan certain projects are anticipated to be funded
through the issuance of additional debt. This additional debt will increase the overall expenditures
of the system in addition to the effects of inflation on recurring operating costs. It is because of
these increases in non-operating expense related items that the overall revenue requirements (the
total expenditures to be funded from monthly user rates comprised of operating expenses, capital
costs and debt service costs) are increasing. As such, an annual rate adjustment mechanism solely
1 tied to inflation can have the potential to come up short when compared to the actual expenditures
J of a utility system.
K,MC11095-301RpM1e Index Floor Tech Memo —1
Mr. William Marcous
City of Sanford
June 26, 2017
Page 2
It is our opinion that the City consider adopting a modification to its current rate indexing
ordinance (Rate Ordinance No. 4026.) to account for this issue. We propose a minimum indexing
policy or Indexing Floor Provision of the greater of CPI or 2.0% per year but not greater than 5%
per year. This will allow the utility to preserve its financial position when overall inflation is lower
than 2.0% but revenue requirements are increasing due to capital -related expenditures and the
associated increase in annual debt service. An example of the possible wording for this
modification is shown below as the underlined text.
"...Said rates, fees and charges shall be adjusted annually on October 1 of each year by the
Consumer Price Index for All Urban Consumers as published from time -to -time by the United
States Department of Labor, Bureau of Labor Statistics but not less than two percent (2%) per year
and not greater than five percent (5%)ear year. Automatic rate adjustments associated with the
change in'the Consumer Price Index that are greater than five percent (5%) for a given year must
be reviewed and specifically approved by the City Commission."
Additionally, because the City would be changing the existing ordinance by adding this minimum
indexing provision the City would be obligated to notify its customers of the change per the Florida
Statutes section 180.136 which states the following:
"180.136 Water or sewer utilities; notice.—Before a local government water or sewer utility
increases any rate, charge, or fee for water or sewer utility service, the utility shall provide notice
of the proposed increase to each customer of the utility through the utility's billing process. The
notice shall state the ,date, time, and place,of the meeting of the governing bo,'ard of the local
government at which such increase will be considered. The notice required in this section is in
addition to any notice and public meeting requirements for ordinance adoption as provided by
general law."
However, before anything is finalized we recommend that these changes to the ordinance as well
as the interpretation on the notification rules should be reviewed and confirmed with the City
Attorney to ensure everything is handled and disclosed properly.
K.%l095-3l%RpMte Index Floor Tech Memo —2—
CITY COMMISSION MEMORANDUM 17240
AUGUST 14, 2017 AGENDA
To:
PREPARED BY:
SUBMITTED BY:
SUBJECT:
WS_ RrM-�x
Item No. t I
Honorable Mayor and Members of the City Commission
Cynthia Porter, City Clerk
Bill Marcous, Utility Manage
Norton N. Bonaparte, Jr., City Man ger
Indexing of City Utility Rates
STRATEGIC PRIORITIES:
❑ Unify Downtown & the Waterfront
❑ Promote the City's Distinct Culture
❑ Update Regulatory Framework
❑ - Redevelop and Revitalize Disadvantaged Communities
SYNOPSIS:
Ordinance No. 4414, relating to the indexing of City utility rates with regard to the provision of
utility services by the City, is being submitted for second reading and adoption.
FISCAL/STAFFING STATEMENT:
Implementing proposed Ordinance Number 4414 will save a great deal of administrative costs
with regard to the implementation of utility rate adjustments and will ensure the fiscal integrity of
the City's utility systems as recommended by the City's utility rates consultant, Public Resources
Management Group, Inc. ("PRMG").
BACKGROUND:
PRMG has recently completed the annual review of the City's water and wastewater rates for the
Fiscal Years 2017 through 2021. During the course of this review, PRMG observed that the index
(Consumer Price Index for All Urban Consumers or "CPP') which the City uses for annually
adjusting its water, sewer and reclaimed water monthly user rates has been increasing at lower
levels than what was originally projected during previous rate studies.
During the Fiscal Year 2015 and 2016 financial forecast updates the projected increases to the
Fiscal Year 2016 and 2017 monthly user rates were 2.0% and 2.2%, respectively. These estimates
were based on the Federal government's Congressional Budget Office's projection of CPI for the
respective forecast periods. However, once the change in CPI was officially reported by the Bureau
of Labor Statistics the actual adjustment was only 0.2% and 0.8% for 2016 and 2017, respectively.
While the CPI is a good tool for annual rate indexing it has shortcomings. The City's utility system
cost structure is largely comprised of recurring operating costs that can be affected by changes in
inflation such (e.g. materials and supplies, chemicals, electricity, etc.). However, the cost structure
consists of costs that are not tied to general cost inflation such as the system's capital improvement
program. (e.g. line replacements, plant expansions, biosolids management, etc.) and debt service
payments on bonds and State Revolving Fund loans for existing and future debt. As a part of the
utility system's forward looking capital financing plan, certain projects are anticipated to be funded
through the issuance of additional debt. This additional debt will increase the overall expenditures
of the system in addition to the effects of inflation on recurring operating costs. It is because of
these increases in non-operating expense related items that the overall revenue requirements (the
total expenditures to be funded from monthly user rates comprised of operating expenses, capital
costs and debt service costs) are increasing. As such, an annual rate adjustment mechanism solely
tied to inflation can have the potential to be deficient when compared to the actual expenditures of
a utility system.
PRMG recommended that the City's current rate indexing provision of the City Code (Section
102-3, Article I, Chapter 102) be modified by providing for a minimum indexing in the amount of
the greater of CPI or 2.0% per year but not greater than 5% per year. Enacting Ordinance Number
4414 will allow the utility to preserve its financial position when overall inflation is lower than
2.0%, but revenue requirements are increasing due to capital -related expenditures and the
associated increase in annual debt service.
Ordinance Number 4414 implements the recommendation of PRMG.
The City Commission approved the first reading of Ordinance No. 4414 on July 24, 2017.
The City Clerk published notice of the public hearing in the Sanford Herald on July 23, 2017.
LEGAL REYIEW:
The City Attorney has assisted in drafting Ordinance Number 4414 to implement the
recommendations of PRMG. That being said, and although jurisdictions do provide for automatic
indexing, PRMG did raise a legal issue relative to the provisions of Section 180.136, Florida
Statutes, pertaining to water or sewer utilities rate increase notices. Accordingly, the proposed
ordinance authorizes the City Attorney, as may be advisable, to seek an advisory legal opinion
from the Attorney General of Florida relative to the legal issue.
RECOMMENDATION:
Staff recommends that the City Commission adopt Ordinance Number 4414.
SUGGESTED MOTION:
"I move to adopt Ordinance Number 4414."
Attachments: (1) Ordinance Number 4414
(2) Correspondence from Henry Thomas and Shawn Ocasio of PRMG dated
June 26, 2017, the subject of which is "Annual Rate Indexing Provision
Language Modification"