A new water rate study has been approved by the City of Corcoran, which could result in another increase in local water utility payments come July.
The city council approved the $30,000 expenditure, which will include an administrative overhead allocation study, during a special meeting last week. The contract will be handled by Interstate Gas Services (IG Services), which anticipates spending about $25,000 for the water rate portion of its work and another $5,000 to study the administrative overhead the city currently collects from its enterprise funds.
After implementing a recent eight percent water rate increase, the city determined that any future increases should be approved only after a comprehensive rate study was conducted. Increases in utility rates require such justification. The cost of services study on the water system—designed to determine rates that are fair and equitable—will meet the guidelines of Prop. 218, said Interim Public Works Director Baldo Rodriguez.
The entire issue was precipitated by the city’s renewal of a letter of credit on a 2008 bond issue used to construct the city’s $18 million water treatment plant (see additional story).
A long list of items will be addressed, including:
–Determination of customer classes (residential, commercial, industrial, prisons, schools, etc.);
–Allocation of water deliveries by customer classes;
–General assessment of the scope, cost and benefit of completing installation of water meters;
–General evaluation of extent of nonpayment of utility bills and consideration in rate planning;
–Categorization of costs to operate, including electricity, personnel, chemicals, vehicles and other factors;
–Collaboration with city staff and the municipal financial advisor regarding bond debt strategies;
–Creation of rate options, balanced between fixed and variable costs;
–Comparison of existing and proposed average residential cost in Corcoran to nearby communities.
The company will provide a written report, as well as a Prop 218 rate notice for legal review and approval, once the study is completed. IG Services will also participate in any public hearings regarding water rate increases.
The administrative overhead allocation study will show (in table form) the existing allocation of general government expenses, while categorizing total of the various cost centers, such as city council, city manager, finance, legal, human resources, etc.
There will be a first cut at allocating costs: allocate costs to expense centers as a function of the annual budget for each expense center and compare to current allocations. Within the enterprise funds, the study will allocate as a function of revenue in each fund and based on general government attention needed, if disproportionate.
The goal of the study, according to Rodriguez, is to create a defensible allocation of general government costs that is subject to public review and scrutiny.
The water rate study costs will be taken from the water funds. The administrative overhead allocation study costs will be coming from the finance department’s professional fees fund.
