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City of Puyallup

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AI- 3694   17.    
City Council Agenda
Meeting Date: 05/21/2013  
Subject:    Elimination of Usage Rate Surcharge for Water & Wastewater Customers who are Located Outside City Limits
Presenter: Bill McDonald/Kevin Yamamoto
Department: City Attorney's Office  

Information
Recommended Action
At the May 7th Council meeting, a second reading of this Ordinance was considered but not voted on. The City Manager was asked to bring an alternative Ordinance which would provide for a more modest differential in the water and sewer rates for customers outside the City. The alternative Ordinance is attached but does not specify a percentage. It is very typical for cities which charge a differential to base it on common practice or policy considerations as opposed to a detailed financial analysis.

The City Attorney advises that if the content of the alternative Ordinance is favored by the Council, then there would have to be a motion to amend the Ordinance approved in the first reading.

Otherwise the City Council can proceed to a second reading of an ordinance that amends  Appendix A to Title 14 of the Puyallup Municipal Code (PMC), PMC 14.01.030 and PMC 14.22.060 to eliminate the usage rate surcharge for water and wastewater customers who are located outside city limits.
Background
Additional Information since May 7th Council Meeting:
 
Statutory authority and case law allows a City to charge a differential rate to outside the city customers. MRSC states in a document dated 11/29/10 (attached) regarding outside rates: "We have opined that a city does not have to conduct extensive studies or compile a lengthy record to justify a higher utility rate for nonresidents. The presumption is that such a surcharge is justifed."

Three rationales are given in key court decisions for such a differential rate: historic investment in the system, difference in cost of providing service, and the inability to tax properties outside the city for increased values due to water service.

Utility Rate decisions are a policy call. Eliminating the surcharge will reduce revenues in both the Sewer and Water Utilities unless a corresponding upward adjustment occurs in the equalized rate. The City Manager would recommend that in the case of both the Water and Sewer Utilities the Council review the revenue recommendations of the HDR reports before the rates are equalized or adjusted.

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In 2004, the City, under Ordinance No. 2806, imposed a usage rate surcharge for water and wastewater customers who are located outside city limits.

After significant inquiry, discussion and debate spanning a number of years, and most recently occuring at its January 15, 2013 study session, the City Council called for elimination of the usage rate surcharge for water and wastewater customers who are located outside city limits.  The City Council determined that use of a cost allocation model, rather than a usage rate surcharge, would sufficiently satisfy the requirements of RCW 35.92.010.
Previous Actions (Discussions/Presentations)
As noted above, councilmembers have engaged in significant inquiry, discussion and debate over a number of years after the passage of Ordinance No. 2806 in 2004.  Most recently, the Council held a study session on January 15, 2013 to address system development charges and usage rates.

Following discussion of this item at the Council's regular meeting of May 7, 2013, Council directed that it be brought back on May 21st along with any additional research performed by staff.
Summary of Proposal
The City Council is provided with two alternatives: one would eliminate a surcharge on water and sewer service outside the City, the other would reduce the surcharge to a percentage determined by the Council. 

Either version would amend Appendix A to Title 14 of the Puyallup Municipal Code, PMC 14.01.030 and PMC 14.22.060.
Alternatives/Options
The City can use surcharges, a cost allocation model or both to satisfy the requirements of RCW 35.92.010.

Fiscal Impact
Attachments
Ordinance eliminating surcharge
Appendix A surcharge elimination
Ordinance rate surcharge (with blanks)
Appendix A with blanks
Map maximum water service distance
Map meter density
MRSC inquiry re surcharges
Sanitary sewer service area map
2012 actual charge (50% surcharge)

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