Utility Committee Agenda and Packet 2021 02 09

Home Browse Search

LLC* Ity0.f Louisville COLORADO • SINCE 1878 Memorandum To: Utility Committee CC: Heather Balser, City Manager From: Kurt Kowar, P.E., Director of Public Works and Utilities Cory Peterson, Deputy Director of Utilities Date: 2/9/2021 Re: Tap Fee Projection Methodology Background Public Works & Utilities The City's finance utility rate model relies on a variety of inputs to generate the long term utility rate adjustments. One of the more impactful inputs are the water and sewer tap fee projections. These projections are derived from a multidepartment approach between Finance, Planning and Public Works. Planning leverages the interactions with the development community to gage the likelihood of future projects in both vacant and the revitalization of existing properties. Applying this information, a conservative recommendation of potential projects and the time frame is produced. Following this step, Public Works joins Planning in assigning a tap fee value to each identified development and summarizing for a total. The final phase, is a review by Finance to ensure consistency and accuracy. The current practice is to only include projects with a significant level of confidence of occurring. The consequences of over projecting tap fee revenues will create major deficiencies in the budget resulting in: the delay or elimination of capital projects, reduction in operating budgets or increases in rates. This danger was exemplified in 2017, when an aggressive tap projection was utilized for the water fund creating a multi -million dollar shortage. This reduction was a contributing factor in the subsequent water rate increase in 2018 of 3% which is noteworthy in the fact that it has been the only water rate increase between 2016 and the upcoming increase for 2021. This event was the basis for the change to the conservative approach of tap fee projections that is utilized today. 2021 Impacts During the analyses and discussions last year on the 2021 rates, it was requested by the Utility Committee to investigate the current methodology and ensure that the modeled tap fee estimates are as accurate as possible. The following table outlines the projections used during these discussion. 13