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HomeMy WebLinkAbout1997 05 12 Regular Item E COMMISSION AGENDA ITEM E ADD-ON REGULAR X CONSENT INFORMATIONAL May 12. 1997 Meeting MGRi(~EPT , Authorization REQUEST: The City Manager 1) requesting policy direction from the Commission relative to the rates, billing and collection of Master Irrigation Meter Accounts, 2) requesting authorization for the City Manager to enter into a contract with Robert Ori, Public Resources Management Group, Inc., to prepare an emergency interim progressive conservation rate for irrigation meters, and to review utility billing and customer service policies, procedures and business practices, and 3) requesting the Commission to find an emergency to justify waiving of bid procedures pursuant to City Code 2.152 for said contract. PURPOSE: The purpose of this Agenda Item is for the Commission to provide policy guidance and direction relative to possible flaws in Master Irrigation Meter Rates, and billing and collection activities, to authorize engagement of the firm of Robert Ori, Public Resources Management Group, Inc., to develop an emergency interim progressive conservation rate for irrigation meters, and to perform a review and provide recommendations relative to the City's Utility billing and customer service policies, procedures and business practices. CONSIDERA nONS: Inquiry into the billing and collection of the eight Master Irrigation Meter Accounts in the City has determined that misinterpretations of the City's Progressive Conservation Water Rate Ordinance adopted in May 1996 may have resulted in the misapplication of the Progressive Conservation Water Rate to seven of the eight Master Irrigation Meters between June 1996 and September 1996, resulting in an over billing of $26,273.24 to the various accounts. Additionally, this inquiry has revealed that inadequate automated utility billing software resulted in the under billing of six of the eight master irrigation meter accounts in the total amount of $15,329.97. Page 1 The Progressive Conservation Rate Structure-Over Billing FACTS: I) The initial progressive conservation water rate was adopted in July 1994. The rate was not authorized to be applied to irrigation master meters since there were no irrigation master meters in the City at the time. II) The first irrigation master meter was installed fall, 1994, to provide temporary irrigation from potable water until such time that re-use water could be supplied to new developments in the City. From fall, 1994, to spring, 1995, eight irrigation master meters were installed. As of this date five meters have been taken off line with three remaining in service. III) In May 1996, the progressive conservation water rate was amended by the City Commission based upon recommendations of the City Utility Director. The Utility Director's actions resulted from the previous rate structure failing to meet Water Management District Conservation goals for the reduction of water usage. IV) In June 1996, the City Finance Director applied the progressive water conservation rates to master irrigation meters for the first time. The Finance Director's actions resulted from his interpretation of the new language in the amended rate ordinance, and the assumption that it was the Utility Director's and City Commission's desire to have the rate applied to master irrigation meters. A review of the language in the amended ordinance demonstrates that the meaning of the language is "fairly debatable." V) In November 1996, the Finance Director and the Utility Director decided to terminate the practice of applying the progressive water conservation rate to irrigation master meters. This action resulted from complaints made by irrigation master meter users related to the extraordinary amount of the bills during the high usage season. The complaints resulted in discussion between the Finance Director and Utility Director in which the Utility Director advised the Finance Director of two facts as follows: 1) That it was not his intent for the progressive water conservation rate to be applied to irrigation master meters through the amended ordinance. 2) That special rate would have to be drafted for irrigation master meters to provide for a fair rate. That such a rate was not included in the amended ordinance, since it was not his intent for it to be applied to irrigation master meters. CONCLUSION: It was not the intent of the Utility Director to apply the progressive water conservation rate to master irrigation meters from June 1996 to November 1996. Page 2 It is not known at this time if it was the City Commission's intent to apply the progressive rate to the master record accounts. The City Commission will need to determine this ruling. Software Under Billing FACTS: I) The first irrigation master meter was installed fall, 1994, to provide temporary irrigation from potable water sources until such time that re-use water could be supplied to new developments in the City. From fall, 1994 to spring 1995, eight irrigation master meters were installed. As of this date five meters have been taken off line with three remaining in service. II) When master irrigation meter service was initiated there was no definitive process in place to activate the account at a time certain. The developers installed the meters and were to notify the City when they were ready to turn on the meter and pay the bill. Meter accounts were not established in a timely manner. As a result water flowed through the meter in large volumes, not here before experienced by the City prior to reading. III) In October 1995, it was discovered that the computer billing software was not able to read seven digit numbers being turned in by the meter readers. The software in place at that time could only read six digit numbers. IV) Therefore, readings on several master meters which involved water usage of 1,000,000 gallons of water or more were billed for 999,999 gallons of water usage regardless of the usage over that amount. V) Therefore, several master meters were read properly but under billed by the computer software. VI) A procedure was put into place to require reading of the meter and initiation of the account before final site development approval. Additionally, the software was upgraded to read seven digit numbers. Vll) Although this problem has been resolved, no attempt has been made to bill and collect the under billings that occurred between November 1995 and June 1996. CONCLUSION: The City Commission needs to provide policy direction relative to the billing and collection of the under billed accounts. In light of the information contained in this report the Commission has to provide policy direction relative to the following two questions: I. What is the Commission's direcff,9n relative to the "over billing?" :\ Option "A" Determine that it is Commission policy to apply the progressive conservation rates to master irrigation accounts. Page 3 If the Commission chooses this alternative the City will retain a total of $26,273.24 in revenue from inactive and active accounts, and back bill these accounts for the period the rate was not collected. Option "B" Determine that it is not Commission policy to apply the progressive conservation rate to master irrigation meters and credit both active and inactive accounts. If the Commission chooses this alternative the City will reimburse or credit a total of $26,272.24 to the active and inactive accounts. Option "c" Determine that it is not Commission policy to apply the progressive conservation rate to master irrigation meters and credit the active accounts only. If the City chooses this alternative the City will reimburse $14,474.42 to the active accounts and create a question in equity relative to the application of City collection policy. ll. What is the Commission's direction relative to the "under billing?" Option "A" Forgive the under billing and bill neither active nor inactive accounts. If the Commission chooses this alternative a total of$15,329.97, to which the City is entitled for actual water usage will not be billed to active and inactive accounts resulting in a $15,329.97 loss. Option "B" Do not forgive the under billing and bill active and inactive accounts. If the Commission chooses this alternative a total of $15,329.97, to which the City is entitled for actual water usage will be billed to active and inactive accounts. Option "c" Do not forgive the under billing and bill only active accounts. If the Commission chooses this alternative $2,297.37 in actual water usage will be billed to active accounts. This action would create a question in equity relative to the application of City collection policy. Other Indicated Actions: The above findings demonstrate the need for two important aCtions as follows: 1) There is an immediate need to develop a progressive conservation rate structure for master and common areas irrigation meters and related accounts that are a) fair and equitable when compared to single family potable water usage for irrigation and b) in place for the high demand irrigation season that is rapidly approaching. 2) There is an immediate need to review all of the Utility's billing, collection and customer service related policies, procedures, and business practices with the assistance of a qualified consultant to ensure fairness and public confidence in the City's utility billing system. Robert Ori of Public Resources Management Group, Inc., brings to the City impressive credentials in utility finance and rate administration services. Additionally, a resident of Tuscawilla, Rob Ori brings to the project a level of Page 4 personal interest and commitment that only a local resident could bring. FUNDING: It is not known what if any cost might be incurred to collect the under billing. There would be a $15,329.97 opportunity cost lost as a result of not collecting the under billings. There would be no cost for crediting the accounts of persons over billed. There would be some mailing cost associated with mailing reimbursement checks for person with closed accounts. The cost of the contract with Robert Ori, Public Resources Management Group, Inc., is $6,000 and would be charged against the Utility Operating Fund. None of these costs would not require any additional appropriations. Staff Recommendation: Over BillinglUnder Billing: Staff is recommending that the Commission choose one of the following alternatives relative to the over billing/under billing issues. Alternative 1 Credit all accounts for the over billing and forgive the under billing. This would result in the following: Over billing credits given Under billing forgiven $26,273.24 $15.329.97 $41,603.21 Loss $15,329.97 This recommendation is based upon the Commission's agreement with staff that it was never the City's intent to collect over billings that resulted from the application of the progressive conservation rate to master irrigation meter accounts. Thus, returning the over billing does not constitute a loss of $26,273.24. This recommendation has also taken into consideration the potential difficulties that could be experienced in attempting to collect the under billings. Alternative 2 Credit all accounts for the over billing and collect the under billings. This would result in the following: Over billing credited Under billings billed Net Loss $26,273.24 $15,329.97 $10,943.27 -0- Page 5 This recommendation is based upon the Commission's agreement with staff that was never the City's intent to collect the over billings that resulted from the application of the progressive conservation rate to master irrigation meter accounts. Thus, returning the over billing does not constitute a loss of $26,273.24. This recommendation is further based upon the fact that the collection of the under billings would prevent a loss of $15,329.97 in under billings. Finally, this recommendation is based upon the fact that the under billings are for actual water usage, a real value given for which the City is entitled to payment. Thus the City is ethically compelled to attempt to collect the revenues regardless of the difficulties that might arise. Staff prefers Alternative 2. STAFF RECOMMENDATION: OTHER INDICATED ACTIONS It is recommended that the Commission find that an emergency condition exists and authorize the City Manager to enter into an emergency contract with Robert Ori, Public Resources Management Group, Inc., to develop a temporary master and commons area progressive conservation meter rate equitable with single family potable rates, and to review and make recommendations relative to the City's utility billing and customer service policies, procedures and business practices said contract to be in the amount of $6,000. IMPLEMENTATION: Implementation of the under billing and over billing issues will depend upon the alternatives chosen by the Commission and the method of repayment for over billing. Credits could be worked out over a negotiable period with each of the accounts. Robert Ori will complete his study within 30 days of authorization to proceed. ATTACHMENTS: A. Billing Chart B. Ori Proposal Page 6 Analysis of Utility Under and Over Billing Assuming Commission Directive to Forgive Over Billing and Collect Under Billing Net Balance Owed City Current Due City Under Over (Owed) Balance (Due) Inactive Accounts Billed Billed (Customer) Due ** (Customer) Florida Country Clubs, Inc. $2,486.49 ($5,191.30) ($2,704.81 ) $10,339.28 $7,634.47 Tusca Oaks - 4" Meter $6,545.29 ($5,840.47) $704.82 $704.82 Tusca Oaks - 3/4" Meter $2,083.37 $2,083.37 $2,083.37 Chestnut Estates - #P4955830 ($248.85) ($248.85) ($248.85) Chestnut Estates - #P4955831 $1,247.44 ($518.20) $729.24 $729.24 TOTAL INACTIVE ACCOUNTS $12,362.59 ($11,798.82) $563.77 $10,339.28 $10,903.05 Active Accounts Grand Reserve Homeowners Association $0.00 ($1,233.79) ($1,233.79) $0.00 ($1,233.79) Howell Creek Reserve $105.30 ($6,955.41 ) ($6,850.11 ) $0.00 ($6,850.11 ) Eagles Watch $2,862.07 ($6,285.22) ($3,423.15) $0.00 ($3,423.15) TOTAL ACTIVE ACCOUNTS $2,967.37 ($14,474.42) ($11,507.04) $0.00 ($11,507.04) TOTAL ALL ACCOUNTS $15,329.97 ($26,273.24) ($10,943.27) $10,339.28 ($603.99) ** Current Balance as of May 6th, 1997 05 '"09 '"9i FRI 12: 4 i F.li 40i 623 5334 PR)IG ~003 May 9, 1997 Mr. Ronald W. McLemore City Manager City of Winter Springs 1126 East S.R. 434 Winter Springs, FL 32708 SUBJECT: Letter Agreement to Provide Utility Consulting Services Dear Ron: Public Resources Management Group, Inc. (PRMG) is pleased to submit this Letter Agreement (the "Agreement") to the City of Winter Springs (the "City") to perform utility consulting services. Based on our discussions with members of the City staff, we propose the following: PROJECT TEAM AND BILLING RATES Mr. Robert 1. Ori will be the project manager and primary contact with the City with respect to the performance of the engagement as outlined in this Letter Agreement. Other financial analysts and administrative personnel may be utilized during the course of the engagement as needed. The following is a summary of the PRMU personnel hy title, name, and billing rate which may be used on this engagement: Title Principal/Project Manager Principal/Executive Analyst Supervisory Analyst Supervisory Analyst Financial Analyst Financial Analyst Administrative Assistant Name Robert J. Ori Henry L. Thomas Julian J Burgiel Carolyn A. Scu1co Paige F. Rrunault Gary Morse Peggy L. Perry Billing Rate $90.00 $90.00 $60.00 $60.00 $45.00 $45.00 $30.00 05/09/9i FRI 12: 4 i F.U 40i 628 5884 PRMG ~004 Mr. Ronald W. McLemore May 9, 1997 Page 2 SCOPE OF SERVICES The scope of services to be performed by PRMO will include the following: 1. Irrigation Rate Analysis - PRMG will collect and review the necessary information to evaluate and design interim potable irrigation rates for the City's water system. The rates will be designed to provide a more equitable method of billing for irrigation services to greenspace and cormnon areas. The analysis will not include a review of the revenue requirements required to be recovered from such rates but 'Will be based on the rate structure and rate relationships among the customer cla~ses of the City's water system. A letter report will be prepared based upon this analysis and review. Additionally, PRMG will assist in making any updates of the utility rate ordinance required to adopt the interim potable irrigation rate as well as attend one (1) public hearing before the City COWlcil. 2. Customer Service Review - PRMG will collt:ct and review data and interview staff members of the customer service department in Qrder to identify issues and policy matters relative to the utility billing and customer service function. Although not considered as an audit, the primary purpose of this task will be to identify areas of concern or where improvements should be made relative to the billing and collection function, rates to be charged for specific services, and other related factors of the customer service function for consideration by City management. A letter report outlining the observations \vill be prepared for the City's use. COMPENSATION AND BILLING Based on the scope of services as discussed with the City and as described in this Letter Agreement, we propose a noHo-exceed cOIltract to perfom1 sllch services of $6,000. This contract amount will include the direct cosl of pasonnd anticipated to be assigned to the project from PRMG as well as any indirect costs that may be incurred relative to this engagement. Other indirect costs will include such expenses as delivery C:Uld printing costs. Such indirect costs will be billed to the City based on the actual costs incurred by PRMG. It is proposed that PRMG will bill monthly for services relative to this J .etter Agreement based on the sum of: i) the hours and time spent by the project team members; and ii) invoices received relative to actual indirect costs incurred on behalf of the engagement by PR.i\1G. We appreciate the opportunity to submit this Letter Agreement to the City to provide utility consulting services. We have sent hvo (2) copies of this Letter Agreement to you for consideration by the City. If this Letter Agreement is acceptable to the City, please sign both copies acknowledging your acceptance and send one (I) copy back to PRMG. The second copy is for your files and reference. 05/09/9i FRI 12: 48 F.U 40i 628 5884 PR)IG @005 Mr. Ronald W. McLemore May 9, 1997 Page 3 We look forward to working with you and the City on. this project and thank you for allowing PRMG to assist the City with this important prqject. Very truly yours, Public Resources Management Group, Inc. Robert 1. Ori Pre~ident City of ''''inter Springs, Florida Authorized Signature Title Date Enclosures letterslmcleml.lct