Rochester Hills Legistar System

Committee discussed Water & Sewer Rates July 1, 2005, as follows:

Ms. Jenuwine presented to the committee explanation on the projected customer

increases on Water and Sewer rates noting the following:

* City is now dividing the cost of the Customer Charge between both the Water and

Sewer because they both benefit from this.

* Customer Charge is the cost of producing a bill.

* Water and Sewer have different Commodity Charges which are the actual units that

are measured.

* Received from DWSD notification of its increase to Rochester Hills residents.

* Received from Oakland County notification of its increase to Rochester Hills residents.

* DWSD meters our water and Oakland County Drain Commission calculates their

increase off of DWSD's number.

Committee member expressed concern with the substantial increase and would like the

Committee to consider stretching the increase out for a longer time period.

Mr. Dalton would like to see City meet its goal of Operating Revenues meeting

Operating Expenses further out into 2010 to reduce percentage increase.

* Substantial increase is necessary in order for the City to meet the goal of the

Operating Revenues meeting the Operating Expenses in approximately 2007.

* Commodity charge increased by 12.5% percent.

* Capacity charge increased by 5% percent.

* Customer charge increased by 1.23% percent.

* Many variables, such as, Water Reservoirs and Radio Read System are factored into

calculating rates and, as such, have an affect on how the rate is determined.

* City has been subsidizing the rates with the excess "tap in" monies sitting in the Water

and Sewer Fund.

* City has been subsidizing drains with the City's cash reserves which should be held

and used for any Capital Improvements.

* Original customer "tap-in" fees amounted to $48 million and have decreased to the

current amount of $13 million through subsidization.

* City's current focus is to take Capital and Lateral revenues and place them into a

Capital Replacement Fund for future replacements.

Mr. Dalton requested from Ms. Jenuwine different rate scenarios of "average customer

increase" to discuss at the May Financial Services Committee meeting.

Discussion regarding Purchase of AMR Radio Read System

Mr. Rousse gave a brief introduction and Mr. Leafdale discussed the mechanics of

Radio Read System with Mr. Mckechnie providing examples and follow-up with

Financial information.

* Radio Read System began in 2003 when City Council requested DPS to research

methods to reduce future rate increases.

* In May 2003 a new rate structure was adopted to include Radio Read System.

System was also budgeted for 2004 and 2005.

* Currently City uses hand held touch read device which downloads meter reads into

the Billing Department.

* Billing Department has a set schedule which requires a certain number of meter reads

downloaded per day for the billing system to run efficiently.

* Approximately 31,348 meters are read per billing cycle.

* Radio Read System allows the meter reader to read the whole City in one (1) day.

* The recommendation is to go with the MXU System; forty (40) other communities

currently have this system so DPS has had a chance to watch the operation of the

system.

* City's goal is to have the Radio Read System installation completed for the entire City

in three (3) one-half (1/2) years.

* Radio Read System will reduce meter reader staff from three (3) to one (1).

* Negative impacts of other vendors:

* Required removal of touch pads for installation of their unit which eliminates back

up plan.

* If homeowner has two (2) water meters, other vendors require installation of two (

2) of their units mounted to the home which would result in additional holes drilled into

the structure.

* Three (3) considerations given when the Committee reviewed the proposals:

* Customer Service - how do we minimize impact on customers

* Operations - how the department is organized and workload

* Financial - perspective

* MXU System is being recommended for the following reasons:

* Reduces staff and man hours.

* System fits Rochester Hills needs.

* System has longevity, its a proven system.

* City of Rochester is a potential customer who currently does manual

reads.

* Radio Read can be converted to a fixed network system at a later

date.

* Rochester Hills would have to reimburse MXU installation monies to

the new construction developers.

* Manufacturer guarantees Radio Read System can be adapted to

new technology.

* Unit offers simplicity and is user friendly.

* Eliminates liability from slip and falls and dog bites.

Committee discussed the following cost savings pertaining to, reduction in staff,

reduction in man hours, hidden costs, such as, Administration and Accounting costs,

DPS planning organizing meter reading and complaints.

* Calculation of installation expense.

* Uncertainty of battery life and initial cost vs. replacement cost of battery.

* How Radio Read System affects the customer charge increase.

* Suggested that Consumer's Power read the City's meters; however, this would result

in the City losing the Stars Program which currently provides maintenance and software.

Mr. Rousse concluded that over the 20 year life cycle, manual meter reading vs.

automated meter reading, City would save approximately $8.5 million.

Continued discussion regarding Radio Read impact on customer rates noting the

following:

* Ten (10) year payback would cost $1 per month.

* Five (5) year payback would cost $30 per year

* Three (3) year payback would cost $50 per year.

* Radio Read completed installation at four (4) years creates immediate

positive cash flow.

* Cash flow reduces operating costs.

* Customer charge increased an additional $6.45 per month.

* Customer charge for sewer is currently $1.27 increasing to $3.23.

* Customer charge for water is currently $1.58 increasing to $3.23.

* One year purchase of AMR Radio Read System customer charge is $2.65 of that $6.

45.

* Financing Radio Read System over ten (10) years would reduce the $2.65 to $1.00

per month.