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
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