AGENDA MEMO

City Council

 Meeting Date: April 5, 2010

 

Issue Statement

Approval of AN ORDINANCE AMENDING SECTION 6C-4-7 OF THE DARIEN CITY CODE, WATER CONSUMPTION CHARGES.

 

ORDINANCE

 

Background/History

Governmental water operations are established as enterprise funds. An enterprise fund is a fund established to account for operations that are financed and operated in a manner similar to private business enterprises. The intent of the governing body is that the costs (operating and capital improvement expenses, including depreciation) of providing goods and services to the general public on a continuing basis be financed or recovered primarily through user charges. The definition of an enterprise fund implies that sufficient user fees should be collected to ensure that the utility can operate on a self-sustaining basis.

 

Determining a fair user fee is a factor of 2 issues:

·        analyzing our operating expenses, projecting system capital projects, determining sufficient cash reserves, and setting aside funds to replace portions of the system as needed

 

·        analyzing the number of gallons of water billed to all customers in order to determine  the rate that covers the expenses mentioned above

 

The staff conducts this determination every year when preparing the draft budget for City Council consideration.  It is always desirable to maintain the lowest possible water rate. The City’s water budget for FYE 4-30-11, which includes projections through FYE 2013, shows the need to adjust water user rates in order to operate on a self-sustaining basis. The water for Darien residents comes from Lake Michigan through two organizations: the City of Chicago and the DuPage Water Commission.  The City of Chicago, who initially provides water to the DuPage Water Commission, has increased their rates 15% in 2008, 15% in 2009 and 14% in 2010, for a total 50% increase over the past three years. These increases forced the DuPage Water Commission, which further pumps the water to the communities in DuPage County, to raise prices 40% over the same period of time.  Approximately 50% of the water fund expenses are for the direct purchase of Lake Michigan water from the DuPage Water Commission (DWC).

 

The City’s water rate has not increased since 1992.  Darien’s resident user rate was decreased to $3.63/1000 in 2008, which reflected a $0.20/1000 rate decrease. The current rate continues to be $3.63/1000. The Council reached a consensus on the water fund budget at the March 9th budget meeting. Based on the staff’s water rate analysis the Council was presented with alternate rates. The Council agreed on a tentative rate of $4.90 per 1000 for Darien residents and $6.74 per 1000 rate for unincorporated water customers. In addition to the rate per 1000 a $5.00 fixed fee will be applied to each invoice to account for a portion of the City’s fixed expenses associated with the water fund. The fixed fee will be included in the total amount due line, which reads City of Darien Water Charge, but not be listed separately on the invoice. The rate will take effect for all billings sent to customers after the approval of the ordinance. For example, the invoices sent by the County in May will be at the new rate. Those invoices will include service dated prior to, and after, the passage of the ordinance.

 

Staff/Committee Recommendation

Staff recommends adoption of the proposed ordinance.

 

Alternate Consideration

Not adopt the ordinance or further amend the water rate.

 

Decision Mode

This item will be on the April 5th, 2010, City Council agenda for formal consideration.