March 2013

Week 8 (March 4-8)

This week I finished up my proposal. I also calculated the average cost for the City of Gunnison to treat and supply water to the customer.  Since 2009, I found that on average, it costs the City $2.03 per 1,000 gallons used.  This is a problem that I included with the current system in that the highest tier does not even account for this amount.  In total, my proposal is now 16 pages, with four pages of graphs that compare the rates for the City of Gunnison to other communities that are similar.  I have provided four options for rate increases.  Option A consists of a $5 addition to the monthly minimum, followed by a 5% rate increase to each tier.  Option B consists of a 20% increase across all tiers, Option C a 15% increase and Option D a 10% increase to each tier.  In my suggestions, I ask that Option A be adopted immediately in order to build up the reserves as quickly as possible.  I also suggested that if Option B or C be adopted that they be phased in.  For example Option B would have a 10% increase effective immediately followed by another 10% increase in, or around the month of September 2013.  This would allow for the customers to gradually accept the rate increase! On Friday, I sent Joe a copy of my rough draft proposal.

Week 9 (March 11-15)

This week, I heard back from Joe that my proposal was good and that he would like me to make a PowerPoint for when I will be presenting my proposal to council.  I spent most of the week going through my proposal once again, as well as making a PowerPoint for when I will be need to meet with council.

Once I was done with that, I began collecting the rates for sewer departments around the state.  I did this the same way that I did for the water, beginning by looking at all of their websites for the information and sending out an almost exact e-mail to the cities that I couldn’t find rates for.  I will call the communities I haven’t heard back from when I return from Spring Break.

 

March 18-22 SPRING BREAK

Week 10 (March 25-29)

At the beginning of the week, Joe and I visited Ken Coleman, the City Manager of Gunnison.  I did a preliminary proposal from him and he had lots of changes that he wanted me to make.  First off, he advised that I suggest an increase in the meter prices.  For example, the charge I used as my base was for $3.99, Ken Suggested that I make it $4.00 even.  He also suggested that I re-evaluate my options for rate increase.  Ken liked my option A in which there is a dollar amount increase  to the monthly minimum as well as an increase in the rates.  He suggested that I change my other Options so that each Option Generates the same amount of revenue.  I spent my week fixing both of these issues that Ken had.  I developed only three Options for rate increase.  Option A remained the same while Option B became a $4 raise to the monthly minimum and a 10% increase to the rates and Option C became a $3 increase to the monthly minimum and a 15% increase to all of the tiered rates.

After I was done making these, as well as the other minor changes Ken, Joe and myself discussed, I began working on the sewer rates once again.  I started by calling the three communities I had not heard from and then began entering the rates into an excel graph as I had for the water rates.

February 2013

Week 4 (Feb 4-8)

            I spent the first part of the week completing my charts.  I added on to the first chart by finding the populations of each community.  I messed around with the chart a bit, organizing it by different rates to get a feel of where Gunnison lied on the charts in comparison to all the other communities.  When I added the populations, I saw that Gunnison had lower rates than every community.  In fact the only community that even came close to the rates of Gunnison was Alamosa.  Alamosa’s rates were pretty similar, but still higher and the next closest communities were almost double what Gunnison charges.  This is due to the fact that Gunnison has not increased its rates for years, while other communities raise their rates between 3-10% each year.

            With the populations included, I wanted to see what the rates were for the communities that were most like the size of Gunnison’s population.  So I made a third chart that compared the populations between 4,000-7,000 members since Gunnison sits at about 5,886 members.  From the original list of communities that Joe gave me, this range included only Aspen, Carbondale, Eagle, Estes Park and Salida.  Once again, the charges for Gunnison didn’t even account for half of what these other communities were charging their customers.

            At this point, Joe had been telling me that an increase of about 5% is what was usual and about what we should be doing.  When I showed him these graphs and talked to him about how much other similar communities have been charging, this began to change.  For the rest of the week, I kept crunching number and testing situations.  I began entering a 5% increase, a 10% increase and finally a 20% increase onto each of my charts for comparison.  Even with a 20% increase, bills were only raised a couple of dollars since the rates were so low to begin with.  This is where I have left off this week.

Week 5 (Feb 11-15)

            This week I have spent most of my time looking over the past expenses and revenues, the future fixed expenses and the five-year capital improvement plan for the water department.  I have been compiling this data into charts on the same excel sheet as before.  It was interesting to see the budget that the department is given each year and how much they actually spend, usually going over and dipping into reserves in each category.  Once looking at this, it was obvious that the rates needed to drastically increase.  Not only does the department need to be charging more to account for the expenses of each year, they needed to increase to replenish the reserves and to account for the capital improvements necessary.

            Joe and I also spent some time looking at the amount of water that is pumped out of a well each month and how much is actually billed to the customers.  I was surprised to see how much more is pumped than is billed.  Of course some of the pumped water escapes through leaks, fire hydrant testing and other random occurrences, but that should only be a small fraction of the actual amount billed and most months it was almost double.  I asked Joe what else it could be that is causing this large discrepancy.  We only really talked about one problem, the meters.  The meters around the city of Gunnison are extremely outdated and could be reading completely inaccurate numbers.

            This is when I began thinking that we needed to increase the minimum monthly payment.  I started playing with numbers and decided that a $5 increase on a monthly payment and a 5% increase across the board for the rest of the rates would be the best way to go.   Immediately this $5 addition will go to installing new meters around town.  This will not only make reading the meters quicker as they are all electronically linked to the system, but it will also increase the accuracy that the meter reads and hopefully cut back on the unaccounted for water.  After these new meters are payed off, this extra revenue can go towards other system improvements and eventually help to reimburse the reserves.  The revenue increase of 5% will also account for inflation in the expenditures of the department.

 

Week 6 (Feb 18-22)

            This week Joe gave me a computer program that is to help me develop a rate structure.  I began going through the program and filling out all of the information, even though most of it is information I already have in my excel charts.  It was good for me to go through this program though because it organized my information in a way that was easier for me to read the information as a whole.

            The program was also beneficial for me to go through because it brought some questions to my attention.  I finished out filling out and reading the 56 pages today and now I feel like I have everything I need to get going on a rate increase proposal.  I did bring to Joe’s attention the information that I will need to move forward, which I discovered while filling out the program.  For instance, I need to know how much water is used to flush systems, for fire training and things like that.  I discovered that on an average over the past two years, the City of Gunnison has been pumping a way higher volume of water than it is billing its customers.  On average, 34% of the water pumped is not billed for which is completely unacceptable.  The introduction of updated meters will help cut this number back, but not completely.  Having a number for how many gallons are spent flushing systems and such will help make my report more accurate.

            I also would like to figure out how many customers each month are using more than “x” gallons.  For instance, if there are a lot of people using over 20,000 gallons a month maybe we need to include another tier to promote more water conservation.  I also would like to know how many new connections are made each year as they provide much more revenue than the average water sales.  I also asked Joe what he would like the reserves to be.  It has been depleted much more than it has been replenished in the past few years, so I am going to attempt to build it up to where it should be.

Week 7 (Feb 25-Mar 1)

            At the beginning of the week I read through old rate increase proposals to get a better sense of what I would be doing next.  I also took a look at the proposal that the City of Salida had available online from 2012.  I noticed that all of the graphs had an average included in their comparisons, so therefore I added one to each of my tables and graphs as well. 

            This week I also went over everything that Joe wanted to see in the proposal for the rate increase.  I also made sure to clarify some last minor details that I wanted to include in the proposal.  Joe agreed to look into them for me, but he may not figure them out in time for my first draft.  When going through the numbers we also realized that all of my Gunnison calculations were for a larger meter size than the average.  I had calculated all the rates at a 3/4” meter when the average user only has a 5/8” meter.  This resulted in my numbers all actually being higher than what the average person pays.  It did not take me long to correct my mistake and fix my averages as well.

            Friday I began writing the proposal.  I have decided to break it up into 8 sections to introduce the current plan in place, its problems, provide my graphs, explanations, suggestions and finish with my other options and any other needed data.  I chose to write my proposal this way, because it is how it was introduced in the past.  I only began the proposal this week, but I look to have a draft to Joe by Wednesday next week.  I will begin to work on setting up the sewer rate study as I wait for instructions from Joe on what to do for the next draft of my proposal.

January 2013

Week 1 (Jan 14-18)

            The first day at the internship I spent my time reading through old water and sewer rate studies and read through old books on how to perform a rate analysis.  These were both very helpful in helping me to understand the process of collecting all the data I would need and how to analyze the information I gathered.  The books that I was provided showed me different ways in which we could charge for water use, which will be interesting to see if I will be given the chance to completely restructure the rate tiers or if I will just be increasing the current rates.  The latter part of the week I spent doing more reading from the books Joe provided me.  I then created a list of twenty like communities that we will be comparing to Gunnison’s water rates. I began going onto websites for each community to find their water and sewer rates or contact information for the Finance Department.

Week 2 (Jan 21-25)

This week we had Monday off for Martin Luther King Day so I only was at the office Wednesday and Friday.  I continued going on to the websites of the like communities to find their water and sewer rates.  Some of the rates were very hard to find, or I couldn’t find them at all, while other communities had links to their rates on their homepage.  Once I found the rates, I printed them out and filed them for once all the information was gathered.  I also made note of the contact information for the finance department of each city just in case I did not get enough information or I had a question in the future.  For the communities that I could not find rates for, I constructed an e-mail that I sent out on Friday.

I am an intern for the City of Gunnison, Public Works Department, working on a rate analysis of water use. I am writing this request to municipalities which have similarities to the City of Gunnison for the purpose of obtaining information on your sewer and water rates for commercial and residential use as well as water and sewer tap fees.

I have been able to find this information on some city/town websites, so if this information is available on-line I was unable to find it and would greatly appreciate a response as to where I should be looking. If not, could you please fax (970-641-8021) or e-mail the information as a reply to myself (the above address) or to my supervisor, Joe Doherty (joe@cityofgunnison-co.gov).

I would like to thank you for your assistance in this matter and this department will be more than willing to reciprocate to any similar requests that you may have in the future.

Best Wishes,

Brittany Saeman

            I will be looking for the responses to the e-mails on Monday and making sure I have all of the data collected that I will need from each of the like communities.

Week 3 (Jan 28- Feb 1)

            This week I spent compiling all of the data I had received.  Any community that did not respond to the e-mail was called.  Once I had all of the rates, I began to make a couple charts in Microsoft Excel.  The first chart showed what each community charged as a base rate (for both residential and commercial as most communities have different rates).  I then figured out what each community billed for 5,000 gallons of water, 10,000 gallons of water and 15,000 gallons of water, once again for both residential and commercial rates.  I chose to calculate at these numbers because this is where the City of Gunnison tiers their water rates (tier 1: 0-5,000 gal, tier 2: 5,001-10,000 gal and tier 3: 10,001-15,000).  With this table, I will be able to compare the rates of other communities to our own.  Some of the rates were at a fixed rate and therefore no math was involved, but some were more difficult.  For instance, lots of smaller communities bill on a quarterly system and therefore I had to calculate what they were being charged on a monthly rate.

            After completing this chart, I began to make my second chart, with all the same communities.  This chart told what the communities were charging per 1,000 gallons used at 5,000 gal, 10,000 gal and 15,000 gal.  Once again, I chose these values because that is where the City of Gunnison changes their rates.    These two charts together are all that I will need to compare Gunnison’s water rates to those of other cities.  I also found and printed out a rate study report on the City of Salida’s website.  They had a chart like mine, comparing the rates in Salida to like communities, and I will also be able to use their rate analysis as a reference when I am trying to write my proposal.

            This week Joe also gave me an article to read in Headwater’s Magazine that was talking about the water rates in Colorado.  The article focused on water rates in the Front Range, but explained the significance of fixed and tiered water rates.  After talking with Joe, we have decided not to change the system currently in place, but to increase the current system at rate of x%.

Introduction to a Rate Analysis

Though I started this Internship January 14, 2013, it has taken me some time to figure out the blog.  I have been working with the City of Gunnison's Public works Department to analyze their rates for water and sewer.  I just recently started the sewer rates, so the majority of my blogs will be on the water rate analysis I have performed.

As you all know, the resources we use do not come to our houses for free.  The City of Gunnison has meters for water, sewer and electricity in each house within the City limits.  Each month, these values are read and the consumer is charged per how much they used the given month.  The City is responsible for providing a safe and efficient product and therefore the cost of business increases each year.  Outdated or broken equipment as well as an inefficiencies in the system, such as a water leak, must be fixed as soon as possible to maintain a quality product and a profitable system.  The City of Gunnison has not increased their rates for water or sewer since 2009.  Since the cost of business increases each year, this has created an inefficient system that cuts into its reserve funds each year.

I was hired on by the City of Gunnison to take a closer look at these rates.  I will be taking into account future drought possibilities, costs of business and rates of similar communities.  After looking into this information, I will be able to suggest possible future rates for the City Council to review.