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11 OCT 20.doc CITY OF JACKSONVILLE REGULAR CITY COUNCIL MEETING OCTOBER 20, 2011 7:00 P.M. – 7:58 P.M. REGULAR CITY COUNCIL MEETING - CITY HALL - #1 MUNICIPAL DRIVE The City Council of the City of Jacksonville, Arkansas met in regular session on October 20, 2011 at the regular meeting place of the City Council. Alderman Smith delivered the invocation and Ms. Wanda Eskridge, Ms. LaSonja Heard, and Ms. Amanda Lercher’s third grade classes led a standing audience in the “Pledge of Allegiance” to the flag. Following the pledge Mrs. Jackie Smith, Principal of Murrell Taylor Elementary, introduced Shayla Golden, Lorena Martin, Marcus Anderson, Kaylan Proffitt, Harley Michael, and Candice McDonald who recited the Preamble to the United States Constitution. ROLL CALL: Aldermen: Elliott, Smith, McCleary, Sansing, Ray, Rinker, Stroud, Robinson, and Howard answered roll call. Mayor Fletcher also answered ROLL CALL declaring a quorum. PRESENT NINE (9), ABSENT (1). Others present for the meeting were: Director of Administration Jim Durham, Fire Chief John Vanderhoof, Finance Director Cheryl Erkel, Human Resource Director Jill Ross, 911 Communications Director Tabby Hughes, City Engineer Jay Whisker, CDBG Director Theresa Watson, IT Director Barbara McDaniel, Wastewater Utility Manager Thea Hughes, Wastewater Commissioner John Ferrell, Wastewater Commission Chairman Joan Zumwalt, Rizelle Aaron, Jim Moore, Ivory Tillman, Brett Peters, Jackie Smith, interested citizens, and members of the press. PRESENTATION OF MINUTES: Mayor Fletcher presented the minutes of the regular City Council meeting of October 6, 2011 for approval and/or correction at the next regularly scheduled City Council meeting. APPROVAL AND/OR CORRECTION OF MINUTES: Alderman Smith moved, seconded by Alderman Howard that the minutes of the regular City Council meeting of 15 September 2011 be APPROVED. MOTION CARRIED. CONSENT AGENDA: REGULAR MONTHLY REPORT/FIRE DEPARTMENT Alderman Ray moved, seconded by Alderman Stroud to approve the Regular Monthly Report for September 2011 from the Jacksonville Fire Department, which reflects a fire loss of $0.00 and a savings total of $0.00. REGULAR MONTHLY REPORT/ANIMAL CONTROL Alderman Ray moved, seconded by Alderman Stroud to approve the Regular Monthly Animal Control Report for September 2011. Said report reflects: ADOPTION/FINES: $1,505.00 CONTRIBUTIONS: $ 25.00 TOTAL: $1,530.00 1 CITY OF JACKSONVILLE REGULAR CITY COUNCIL MEETING OCTOBER 20, 2011 7:00 P.M. – 7:58 P.M. REGULAR MONTHLY REPORT/POLICE DEPARTMENT Alderman Ray moved, seconded by Alderman Stroud to approve the Regular Monthly Report for September 2011 regarding annual crime statistical comparisons. REGULAR MONTHLY REPORT/ENGINEERING DEPARTMENT Alderman Ray moved, seconded by Alderman Stroud to approve the Regular Monthly Report for September 2011. PERMITS/LICENSE ISSUED INSPECTIONS PREFORMED Building Permits 12 Building Inspections 54 Business Licenses 8 Electrical 43 Plumbing 28 HVACR 17 UNSIGHTLY & UNSANITARY VEHICLES Grass Letters 170 Notice of Noncompliance 8 Property Mowed 118 Towed 2 Trash Letters 11 CONDEMNATIONS Trash Removal 4 Structural Maint. Letters 10 Property Maint. Letters 28 Structural repairs made 0 Cost $4,595.00 Demolitions 0 CITATIONS WARRANTS Debris & open storage 0 Arrest 0 Property maintenance 4 Search 0 ROLL CALL: Aldermen: Elliott, Smith, McCleary, Sansing, Ray, Rinker, Stroud, Robinson, and Howard voted AYE. MOTION CARRIED. WATER DEPARTMENT: WASTEWATER DEPARTMENT: FIRE DEPARTMENT: POLICE DEPARTMENT: STREET DEPARTMENT: SANITATION DEPARTMENT: PARKS & RECREATION: PLANNING COMMISSION: GENERAL: PRESENTATION: Sewer Rates Wastewater Manager Thea Hughes stated that the Commission is proposing a sewer rate adjustment, introducing Chairman Joan Zumwalt, Vice Chair Fred Belote, and Commissioner John Ferrell. She then introduced Aaron Benzing of Hawkins Weir Engineering, who prepared a rates study for the Utility. Mr. Aaron Benzing related that the study has two primary objectives, first to make sure that the rates in place are adequate to meet the Utility’s needs, and secondly to make sure that those rates are applied fairly. 2 CITY OF JACKSONVILLE REGULAR CITY COUNCIL MEETING OCTOBER 20, 2011 7:00 P.M. – 7:58 P.M. He related that most water and wastewater utilities seek a rate adjustment every 3 to 5 years, mostly because rate studies are limited by available projections. He noted that the Jacksonville Wastewater Utility has not had a rate study in almost 10 years, recalling that it was in 2002 when the last rate increase was brought before the City Council. He pointed out that since 2002, the Consumer Price Index has increased 21%, cost of fuel has increased 55%, JWWU’s electrical costs have increased 33%, labor/insurance cost for JWWU have increased 27%, and the annual debt service payment has gone from $0 in 2009 to $1.2 million. He recalled that in 2009, JWWU issued over $18 million in bonds, to be used to improve the wastewater treatment plant and to make significant improvements to the collection system. He added that those improvements are currently under construction. He stated that JWWU requires a 19.5% rate increase beginning in January 2012 to continue necessary utility operations. He reviewed budget projections regarding the total capital budget, debt service payment, and total O&M. He pointed out that in 2011 there was a significant spike in the total capital budget, representing the improvements to the wastewater treatment facility and collection system. Corresponding with that spike was the beginning debt service payment to over $1 million annually. He then reviewed projections regarding the three budgets in comparison to the existing revenue rate structure. He stated that it is obvious that the current rate structure is not adequate to meet those needs. He explained that currently the Utility is operating with the bond funds to offset the ongoing capital expenditures, pointing out that when those funds are depleted, the utility rates will have to completely support the budget. He then reviewed the rate structure equity, noting it to be a primary concern for the Utility. He noted that currently everyone pays the same rate whether they are residential, industrial, or commercial. He stated that an evaluation of the different classifications of customers proved it was an equitable structure rate, mainly because the industry and commercial customers in Jacksonville are similar in the type of return wastewater back to the Utility, which supports a single rate structure. He stated that it was then evaluated from how much flow is used monthly. He related that it was found that the low volume users are paying a higher rate per gallon than the high volume users. He clarified that the customers using less than 2,000 gallons a month of water are using approximately 6% of the Utility’s water and are paying close to 10% of the collected rates. He then clarified that wastewater rates are based on water usage, explaining that there is no efficient or effective way to measure the wastewater coming from a home or business. He reviewed the current rate structure: Inside City Limits Outside City Limits First 2,000 Gallons $11.36 $17.04 Each additional 1,000 Gallons $ 3.98 $ 5.97 3 CITY OF JACKSONVILLE REGULAR CITY COUNCIL MEETING OCTOBER 20, 2011 7:00 P.M. – 7:58 P.M. He explained that customers using a higher volume of water are given a break the more water used. He stated that in looking at the structure equity the following structure is being recommended. Inside City Limits Outside City Limits First 1,000 Gallons $ 6.00 $ 8.00 Each addition 1,000 Gallons $ 6.00 $ 8.00 He reviewed the projected revenue based on the proposed rate structure. He noted that the projected revenue is only proposed to be adequate through the year 2016, adding that there is a spike in 2017 regarding anticipated improvements needed at the Wastewater treatment plant. He clarified that the rate structure would need to be reevaluated in 2017. He reviewed scenarios regarding typical users, noting that a typical customer using 4,000 gallons monthly is currently paying $19.32. Under the proposed rate plan that same customer would pay $24.00 monthly. He clarified that this would be a difference of $4.68. He then noted that customers using 1,000 gallons of water would pay $6.00 monthly as opposed to the current rate of $11.36, which offers a break for those using less water, saving $5.36 monthly. He stated that a customer using 2,000 gallons monthly would only experience a slight increase of $0.64 monthly, explaining that as the flow increases – monthly cost increase. He stated that the proposed rate structure does not require the low volume users to subsidize the high volume users, which is currently the case. He stated that this rate structure is fairer for all users. Alderman Smith lamented that an increase has to be proposed at this time, adding that he would have preferred a step increase in stages instead of all at once. He then questioned the criteria for 4,000 gallons being the standard. Mr. Benzing explained that 4,000 gallons of water is the standard that is used by governmental agencies regarding the loan process, mentioning ANRC and others. He noted another method of considering the water data, dividing the flow by the number of users in a strictly residential classification of customers. He stated that this method averaged the typical user to be 4,500 gallons of water monthly; adding that while it would not represent the entire pool of users, it does confirm that Jacksonville would mirror what is the typical standard. Alderman Sansing stated that he has always supported citizens paying for the services that they use, adding that he likes the proposed rate structure. He noted that citizens who use less will not have to subsidize higher volume users. In response to a question from Alderman Stroud regarding cost for Jacksonville residents compared to other cities, Mr. Benzing explained that one of the most important factors is the level of treatment 4 CITY OF JACKSONVILLE REGULAR CITY COUNCIL MEETING OCTOBER 20, 2011 7:00 P.M. – 7:58 P.M. required. He added that the Jacksonville treatment facility discharges into the Bayou Meto, which is a small water body. He went on to say that the Wastewater Utility has to provide a high level of treatment to the wastewater so as not to adversely affect that water body. He explained that North Little Rock discharges into the Arkansas River, a much bigger water body, so they do not have to provide the level of treatment that Jacksonville is required to do. He added that obviously this would impact treatment costs. He pointed out that the size and age of the collection system is also a factor, noting that Jacksonville has portions of the collection system that are 50 and 60 years old. He stated that the Jacksonville Wastewater Utility is spending a significant amount to rehab the collection system to continue to serve their customers. He noted that other area cities have much newer collections systems and are not having the same problems that Jacksonville is experiencing. He related that topography makes a difference, pointing out that Jacksonville is flat and has many pump stations to be maintained. He further noted the economy of scale, meaning that there are approximately 29,000 citizens to distribute revenue needs across, explaining that larger cities are able to pass those costs along more easily. He concluded saying that Jacksonville is entirely supported by their rates, while other communities receive other sources of income such as sales tax proceeds to help offset rates. He reviewed a regional rate comparison, noting that the increase would not change Jacksonville’s ranking in the list. Alderman Stroud then questioned why outside the City customers are not being raised more than inside City users. Mr. Benzing replied that currently the outside the City customers pay 50% more than inside the City customers, adding that under the proposed rate structure they would pay 33% more. He explained that from an engineering standpoint, there are some typical reasons why outside the City customers might be charged more.  Located at the far reaches of the collection system. He noted that most of the outside the City users are located closer to the plant than many inside the City users.  Sewer rates supplemented by taxes paid by City residents. He related that this does not apply to Jacksonville.  Additional billing costs if served by a separate water provider. He related that all wastewater users are serviced by Jacksonville water. He stated that from an engineering standpoint, it is not costing more to treat the wastewater from outside the City users. He reviewed the revenue projections for 2012, saying that if the proposal passes the revenue generated will be $4,032,956. He added that this amount would not include fees collected. He stated that 99.71% is from inside the City users and 0.29% or $11,696.00 would be from outside the City users. He noted that there are only about 40 customers outside the City limits using Jacksonville Wastewater Utility. He then explained that if the 1.5 multiplier were used for outside the City customers, their rate would be 5 CITY OF JACKSONVILLE REGULAR CITY COUNCIL MEETING OCTOBER 20, 2011 7:00 P.M. – 7:58 P.M. $9.00 instead of $8.00 per 1,000 gallons. Changing the inside the City percentage to 99.67% and the outside percentage to 0.33% or $13,158; causing an additional revenue of $1,462. He stated that unfortunately that is not enough of a difference to have any impact on the rate that needs to be charged to customers inside the City limits. He pointed out that decreasing inside the City user’s rates by one cent would lower projected collections by $6,703 in revenues. He stated that in evaluating the rate structure equity there was no clear justification of charging a higher rate than being proposed. Alderman Stroud stated that while it is only a small amount, he is not interested in making it more attractive for outside the City users versus inside the City customers. He stated that from a political standpoint, he believes the rate increase should be across the board before he would be able to vote for the proposal. Mr. Benzing stated that outside the City users, under the proposed rate structure (1.33 multiplier) at 4,000 gallons, would pay $32.00 monthly and the inside the City users would pay $24.00. He related that if the existing 1.5 multiplier is applied to outside the City users their rate would be $36.00 monthly. He pointed out that lower volume users would still see a decrease in their monthly rate. He then agreed with Alderman Stroud that at the end of 2012 there would be surplus revenue and then into the red in 2013, 2014, and 2015. He explained that the first year surplus would support expenditures over the 5-year period. He reiterated that the proposed rates are only projected to be effective through 2016. He added that in 2017, based on projections, rates would need to be increased to $8.00 per thousand. He reviewed the operating results within the proposed rate adjustment, noting that there would be slightly under $400,000 in surplus at the end of 2012; ($140,937) deficit in 2013; $67,050 surplus in 2014; ($77,449) deficit in 2015; and ($164,306) in 2016. He stated that the net over that period is slightly in the positive by $60,000. Mr. Benzing concurred with Alderman Robinson that the revenue projections include emergency reserve funds. Alderman Robinson pointed out that there would also be $500,000 spent annually to reduce the I&I (Inflow & Infiltration) going to the Wastewater treatment plant. He clarified that $550,000 annually is being reserved for those two items. Mr. Benzing explained that as a part of the rate study they have recommended that the Wastewater Utility implement an emergency reserve fund. He noted that the current emergency reserve fund is tied in with the Little Rock Air Force Base and is restricted as to how those funds can be used. He noted that those emergency funds could not be used for items in the collection system, such as one of the pump stations failing. He stated that it was recommended that the Wastewater Utility have an 6 CITY OF JACKSONVILLE REGULAR CITY COUNCIL MEETING OCTOBER 20, 2011 7:00 P.M. – 7:58 P.M. additional emergency fund, capped at $500,000, representing 1% of the total infrastructure. He added that it was recommended that the reserve fund be funded at the rate of $50,000 annually until it caps and then discontinue funding unless those funds are depleted for some emergency. He reiterated that this recommendation is included in the budget. He then noted that currently the Wastewater Utility is spending approximately $1 million annually on improving the 50 to 60 year old sewer system to reduce I&I. He recalled that in the late 90’s Jacksonville was placed under an administrative order based on rehab conditions of overflowing manholes. He went on to say that most other communities in Arkansas are dealing with the same issue. He stated that the Utility spent the necessary funds and did a good job rehabbing that situation, adding that the administrative order was lifted. He noted that as a part of the order being lifted, the Wastewater Utility is required to continue rehabilitation. He stated that while $1 million sounds like a lot of money, in the world of sewer rehab it really isn’t. He related that the rehabilitation was cut from $1 million annually to $500,000 so as not to have to raise rates any higher than what is being proposed. He addressed issues regarding a step increase as opposed to a one-time rate increase, explaining that the last increase in 2002 was a step increase. He stated that the advantage of a step increase is that initially the increase would be lower at first, adding that the disadvantage is that at the end of the period rates would be higher than with a one-time single rate increase. He then reviewed projections regarding a step increase; noting that instead of a one-time increase of $6.00 there would be a step increase from $5.50 in 2012, ending with a final rate increase up to $6.50 in 2016. He stated that the revenue generated is the same; the only difference is that the burden is being shifted to the later years. Director of Administration Jim Durham stated that theoretically as the economy grows the step increase is a lot more tolerable for the customers. So the higher rate at the end of 5 years, if the CPI has gone up accordingly, may not be too bad and would be more tolerable. Mr. Benzing stated that another way to consider that is customers may become disgruntled that the sewer rates are going up year after year as opposed to “seeing it one time, getting use to it and then moving on”. He stated that he believes the Sewer Commission steered away from a step increase in favor of a one-time rate increase because at the end of the day, you are left with a higher monthly rate. Alderman Elliott noted that the factor for outside the City water users is 1.5, adding that he believes the same factor should be used for the wastewater. 7 CITY OF JACKSONVILLE REGULAR CITY COUNCIL MEETING OCTOBER 20, 2011 7:00 P.M. – 7:58 P.M. Wastewater Utility Manager Thea Hughes noted that there are approximately 40 outside the City users. Several Aldermen echoed Alderman Elliott’s sentiments that the outside the City users should be factored at the same factoring rate as inside the City users. Wastewater Utility Manager Thea Hughes also noted that the 40 outside the City users are located to the south of Jacksonville on Hwy. 161, which is being proposed for annexation. Alderman Stroud reiterated the amendment to factor outside the City users at 1.5 instead of 1.33. In response to a question from Director of Administration Jim Durham, Wastewater Utility Manager Thea Hughes stated that wastewater treated is more than water sold because of the I&I. Mr. Benzing concurred, noting that the amount is almost double. He stated that water usage is the only way it can be measured, adding that it is stacked against what is known of the Utilities needs. Mayor Fletcher announced that a public hearing would be set for December 1, 2011 to be held during the regularly scheduled City Council meeting. ADDITION TO AGENDA: Mr. Ivory Tillman presented CDBG Director Theresa Watson with an appreciation plaque from the Jacksonville, Arkansas Branch of the NAACP, thanking Director Watson for attending their branch membership meeting on Sunday, September 9, 2011 and giving a presentation to community members of New Town, Sunnyside, and Henry Estates in reference to Community Development Block Grants and other funds available for low to moderate income families, disabled and senior citizens in the City of Jacksonville. He noted that the information was very helpful to those in attendance. He stated that they look forward to a continuous relationship with Theresa Watson and the Development Department as well as all other Departments of the City of Jacksonville. He related that when minorities and poor people progress, we all progress. Mr. Tillman stated that he, on behalf of the Jacksonville Branch of the NAACP, would like to thank Mayor Fletcher and the City Council for making these grants available for these areas. TOWN HALL MEETING: Mayor Fletcher announced that a town hall meeting would be held October th 27 beginning 7:00 p.m. at the Jacksonville Community Center. He stated that there would be a variety of topics discussed regarding future directions for the City. He noted that a CodeRED call would be used to notify citizens of the meeting, as well as other forms of media coverage. 8 CITY OF JACKSONVILLE REGULAR CITY COUNCIL MEETING OCTOBER 20, 2011 7:00 P.M. – 7:58 P.M. Director of Administration Jim Durham informed everyone that the CodeRED system has been set up to send out non-emergency messages on behalf of the City, he then encouraged everyone to go onto the web site and sign up for the service. Mayor Fletcher stated that the sheetrock has been removed from the pool area and fortunately the studs do not appear to have the damage that was feared. He related that the project is moving forward. ADJOURNMENT: Without objection, Mayor Fletcher adjourned the meeting at approximately 7:58 p.m. MOTION CARRIED. Respectfully, ________________________ _________________________ Susan L. Davitt MAYOR GARY FLETCHER City Clerk-Treasurer 9