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Non-Voting Members Present: Kurt Dawson, Julie Jenuwine |
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Non-Voting Members Absent: Rajeev Gudipati and Lang Lui |
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Water and Sewer Board Members Present: Richard Rowe, Gerard Verschueren |
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Others Present: Ed Anzek, Bud Leafdale, Bill Costick, Roger Rousse, Mayor Somerville |
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Discussion commenced on 2004/2005 Water and Sewer Rate recommendation to |
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Mayor and City Council. |
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Ms. Julie Jenuwine, Interim Finance Director, reviewed the information discussed at |
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previous meetings including: |
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* Where the City's water rates are going |
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* Depleting the Fund Balance to support the organization |
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* Identified that the City did not want to encounter the same problems in fifteen |
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(15) years that it is currently having with road funding, noting that many of the |
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water and sewer lines will need to be replaced at that time |
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* Taking lateral charge revenues in the Water and Sewer Funds and shifting |
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them over to a replacement fund as directed by the City's Ordinance |
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* The water and sewer rate needs to truly fund the City's operations |
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Ms. Jenuwine indicated that new data to be forthcoming and distributed at the next |
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meeting. |
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Discussion commenced including: |
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* Possible funding for future replacement program. |
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* City Ordinance calls for water and sewer lateral charge revenues to be deposited into |
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a replacement fund. |
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* $400,000 lateral charges for sewer (2004-2005). |
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* $350,000 lateral charges for water (2004-2005). |
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* Forecast for lateral revenue charges will decline as City becomes built out within the |
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next ten (10) years. |
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* Projected revenues for the next ten (10) years: |
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* $2.9 million for water. |
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* Problem: Currently these charges are used to offset operating expenditures. |
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* Possible Solution: Raise water/sewer rates appropriately. |
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* It was suggested that the City increase the capacity and customer charge by five (5) |
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percent which would minimally generate approximately $30,000 in revenue for capacity |
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and $20,000 in revenue for customer charges. |
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* Capacity charge will go from $1.41 to $1.48 at five (5) percent |
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* Customer charge will go from $1.44 to $1.51 at five (5) percent |
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* City receives greater part of revenue from commodity charges. |
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* City must determine all sources of revenue before deciding on commodity charge. |
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* Discussed "Break-Even Analysis" for 2004-2005 to generate operating revenue to |
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cover operating expenditures as follows: |
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* Increase water rates 18 percent. |
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* Increase sewer rates 20.5 percent. |
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* Engineering Department currently working on a present value/future replacement |
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project. |
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Ms. Jenuwine discussed Black and Veach Study and how government accounting |
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handles water and sewer funds including the following points. |
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* Operating Fund should have 90 days operating supply plus fifteen (15%) percent of |
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annual depreciation. |
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* Water and Sewer system may require emergency repair of fifteen (15%) percent. |
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* Black and Veach requires a Capital Replacement Fund for capital revenue charges. |
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* The City's capital revenue charges are currently deposited in Operating Fund to |
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subsidize operations |
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Chairperson Hill stated the two committees have been meeting to discuss local road |
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funding strategies and how to move forward with these strategies. She noted that |
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additional information regarding the conclusion their report was to be available at |
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tonights meeting is not ready. Chairperson Hill stated that the main reason for tonights |
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meeting is to be sure that everyone is on the same page regarding this issue, noting the |
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big question is whether the City will be placing this item on the ballot and if yes, what will |
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be the context of the question. |
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Roger Rousse, Director of Public Service, concurred that the Rehman Robson |
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consultant's report is not ready for presentation tonight. As an alternative the Finance |
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Director has developed financial data regarding the amount of money the City needs |
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now for local roads and for ten (10) years into the future. |
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Committee members reviewed and discussed financial data including the following |
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points: |
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* Currently DPS develops the local road budget based on fifty (50) percent of the |
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current needs |
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* The rational for the millage proposal in November is two-fold |
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1. A plan that would propose an ideal program of capital road replacement |
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and maintenance, rather than reduce the services and then ask for a |
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2. The expected voter turnout at Presidential Election is eighty (80%) percent, |
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creating a greater opportunity for a millage to be passed. |
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* Plan of action includes: |
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* Articles in the Hills Herald. |
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* Channel 55 advertisement |
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* Public education program targeting service clubs, churches, |
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homeowner associations and other groups. |
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Committee members discussed determination on the necessary millage rate needed to |
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provide funding for operating and capital expenditures for local street program. |
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* Construction program places emphasis on front-loading overlay work to |
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extend the life of superior rated streets which will keep program costs down |
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* Through the use of the PMS rating system it was determined that intervention for |
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some roads will extend the life cycle and prevent further deterioration. |
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* When a road becomes deteriorated to a certain degree, it becomes ineligible for |
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overlay. |
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* Determined millage rate calculated on Taxable Value with growth rates: |
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* Estimated Headlee Rollback is ninety-nine (99%) percent in years following 2005 |
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* Estimated construction costs increase four and one-half (4.5%) percent annually. |
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* Estimated operating expenditures increase two and one-half (2.5%) percent annually |
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with the exception of wages and benefits. |
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* Estimated wages and benefits expenditures increase seven (7%) percent in 2005 and |
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six (6%) percent thereafter. |
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* Estimated City staff time dedicated to local construction function will be at a |
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comparable level to previous years. |
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* Act 51 revenue will remain at a constant. |
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* Transfer in from Major Road Fund (Act 51) will remain at a constant. |
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* Estimated City revenue charges increase four (4%) to five (5%) percent annually. |
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* Evaluation assumes operating and capital expenditures for local street program are |
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supported by dedicated millage. |
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* Operating expenditure fund balance is to remain at twenty-five (25%) percent. |
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* Estimated interest earnings on fund balance will be two and one-half (2.5%) percent. |
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Committee reviewed analysis for ten (10) year programs, seven (7) year programs and |
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five (5) year programs including the following points: |
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* Report focuses on analysis for both ten (10) year plans: |
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* One program with a transfer from Major Road Fund with a proposed 2.87 mil. |
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* One program without a transfer from the Major Road Fund and with a |
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* Report analysis reflects the proposed millage rate without revenue transfer from |
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General Fund. |
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* Report analysis takes into consideration a four (4%) to five (5%) percent increase in |
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revenues. |
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Committee discussed fifty (50%) percent funding under the assumption of a failed |
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millage. |
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* Assumption that 2005 budget will have a reduced level of service due to reduced |
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funding of local road fund. |
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* Targeted a fifty (50%) percent program of planned local road needs to maintain road |
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safety for motoring public based on expected revenues. |
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* Develop a road program that is fifty (50%) percent of ideal road maintenance. |
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* Taking money from the Fund Balance in 2005 would create another reduction in level |
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of service for 2006. |
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* Should the City continue the major road transfer because it is putting a strain on the |
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Major Road Fund |
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* Ideally, the fund should be a stand alone program that has dedicated funding sources |
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to support all of the operation and construction costs |
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* Current Major Road Fund projects: |
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Discussion commenced regarding combining the five road budgets into one local road |
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budget including the following: |
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* The five budgets that should be combined are construction, traffic, winter |
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maintenance, routine maintenance and administration |
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* Removes funding restrictions and allows employees in the field to maintain |
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safety for the motoring public. |
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* Offers flexibility to re-prioritize as we progress throughout the budget year. |
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* Allows the Department to make adjustments on an as need basis |
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* Allows the Department to re-prioritize functions |
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* Finance Department is in support of combining budgets because: |
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* Budgets can be tracked through a line item as opposed to being |
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* GFOA requires a mission statement without narrowly defined goals and |
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* Separate budget mission statements are too narrowly defined. |
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* JD Edwards program provides capability of capturing detail. |
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* The departments are basically functions that have been turned into |
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departments for accounting and tracking purposes |
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* Functions can be tracked through a line item as opposed to having |
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* Keeping Local Road Fund budgets together |
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* Separated budgets provide a carefulness of how money is spent. |
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* Budget Amendments are currently used to shift funds from one fund to |
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* Using multiple funds gives Council a quick picture of how the money is |
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Discussion commenced on wording for the ballot including the following options: |
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* Should residents have a choice of ten (10) years or twenty (20) years. |
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* Using multiple options on the ballot such as |
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* Yes vote means approval of millage at (4) mils |
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* No vote means approval of millage at (3) mils |
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* Left blank means failed millage. |
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* One option could be to levy for ten (10) years with |
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* 2.87 for the first five (5) years |
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* 3.2 for the last five (5) years |
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* Consideration of the Headlee Roll Back must be included when determining the |
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millage rate to be sure that sufficient funding is obtained |
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Committee members continued discussion on strategies for successful millage. |
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* History of public support of millages has not been positive |
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* Bill Costich from OHM provided successful millage input from other communities. |
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* Ypsilanti went for a successful $18 million bond issue. |
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* Livonia formed a citizens committee for a successful one (1) mil. |
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* Citizens distributed a newsletter and any updates. |
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* Farmington requested a successful 3 mils with the guarantee no more |
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* Homeowner's Association distributed written material. |
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* Cities achieved success within a three-month time span to plan. |
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* Some communities structure millage question in parts such as an amount |
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for maintenance and separate mil construction. |
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* Residents can petition to specially assess the cost of their reconstruction. |
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* Some communities are asking for substantial millages. |
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* Example: 2.8 mils for maintenance and 3.2 mils for a bond issue. |
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* Downside is residents may approve the bond issue only. |
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Committee members continued to discuss road millage issues including the following |
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points: |
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* Public perception on rounded millage number is not an actual. |
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* It is important to educate the public so they understand exactly for what the millage |
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will be used, such as snow plowing, maintenance |
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* There is a need to consider that a longer period of time for the millage would result in |
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a lesser amount versus a shorter period of time that generate a higher amount of funds |
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and determine what is the best strategy |
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* The goal is to have all local roads rated fair or above within ten (10) years. |
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* A 3.2 mil would be a break even point for the City's roads to remain in fair condition |
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with a continuing program. |
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* At expiration of the millage in ten (10) years, the City loses construction, operation and |
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maintenance costs. |
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* Historically residents will not vote for a long-term millages |
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Consensus of the Committees was to recommend a 3.2 millage proposal for roads |
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Discussion commenced regarding placement of the millage proposal on the ballot |
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including the following: |
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* Submit language in August and distribute millage literature in October. |
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* Members expressed concern with informing the absentee voters |
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* Members discussed the use of a citizens committee and/or homeowners groups |
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throughout the community to actively participate in getting information out to the |
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residents |
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* Mayor Somerville's contact to provide financial support for written material. |
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* The biggest hurdle is getting the correct and consistent information out to the voters |
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* Venues to get information to the voters include |
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* Flyers/pamphlets - estimated cost for three (3) mailings $75,000. |
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* It was suggested that the proposal should be marketed in dollars rather than mils |
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* Committee members believe that at election time residents will acknowledge that |
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Rochester Hills: |
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* Remains the second lowest tax rate. |
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* Taxes have not been raised. |
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* Continues to provide subsidized water rates. |
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* It is important to inform residents that: |
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* Good roads increase property value. |
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* Millage guarantees investment in home. |
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Committee members discussed the importance of putting a plan of action in place |
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immediately if the committee sees placing this on the November Election ballot |
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* CDV will hold their regular meeting on March 25 to discuss specifically a plan of action |
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including funding, someone to champion the program, and resources available |
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* Council Members agreed with Mayor's request to go door-to-door |
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* Council Members expressed the need for written materials to be distributed to |
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residents. |
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* Mayor Somerville will make written material request known to financial supporter. |
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* Committee members suggested possible help from RARA. and students to help |
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distribute information and hanging a banner at "Tons of Trucks" event. |
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Ms. Jenuwine reminded the Committee that the City can only use City funds to educate |
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the public, and funds cannot be used to campaign for approval of the millage. |
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It was noted that Report from Rehman Robson is due on May 7, 2004. |
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* Rochester Hills is withholding payment to Rehman Robson. |
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* Consultant withdrew offer to facilitate the marketing process. |
