Alva Review-Courier -

It's no secret that Alva City Council committees have been closely examining all expenses and sources of revenue during the past several months. Since we continue experiencing the economic impact of the oil and gas industry decline, it is clear that evolving strategies are needed to assure current and future generations that their needs will be able to be met in Alva.

In good economic times or bad economic times, the basic needs of our taxpayers do not vary. Our people depend on the city for clean, abundant water; our people need law enforcement, fire protection, and emergency response; they need sanitation and sewer services; and they need safe roadways throughout town. In each case, they expect a greater level of service today than ever before, and greater still tomorrow than today.

Recent Spending Strategies

With sales tax dollars declining, our whole community has felt the pinch to do more with less. The city has been very diligent to ensure its expenditures are both prudent and have lasting positive effects.

We completed construction on the transfer station spending only $733,677 doing it ourselves after rejecting a $1.2 million bid for a construction company to do it turnkey. Not only did we save $473,323, but we reduced our travel by about 20 miles per trip; with multiple trips daily, this saves a ton of fuel as well as wear and tear on our garbage trucks. And we can now serve our sanitation needs with less expensive smaller garbage trucks that do not require CDL drivers to operate.

We've spent $622,005 on street department equipment in order to avoid the high cost of contracting our street projects. Some will recall we went out for bids to resurface three blocks of Flynn Street downtown, but ultimately rejected bids of about $396,552. Had we accepted such a bid, that money would have completed three blocks of Flynn Street, but crippled us in resurfacing many other streets in dire need. The money spent for the street department equipment has allowed us to complete many resurfacing projects, with more to come, at a fraction of the cost to contract them done.

We've cut the personnel budget by $345,623 per year without furloughs or layoffs. And we've managed to still give pay increases to our staff, maintain a quality health insurance benefit, and provide a 30 percent increase in retirement benefits to our employees. How did we do that? We absorbed eight full-time positions left vacant due to retirement and resignations. We battled with the insurance brokers and we took advantage of some municipal retirement programs previously overlooked.

Thanks to the new automatic water meters, we can read meters in as few as 16 hours when it used to take 23 days. We've replaced our most derelict water and sewer lines, reducing repair work significantly. We've invested in our water well field as well, helping to mitigate future possibilities of water service interruptions. And there remain over $3 million in vital water system enhancement projects yet to be budgeted.

Responsible expense management and long term leveraging of capital expenditures have occurred throughout the entire municipal operation. We are on track for a three-year low in annual expenditures, both capital outlay and day-to-day expenses.

I am very proud of the efforts of our elected officials, city management and front line employees. We are doing what we set out to do in the best interest of citizens and we need to stay the course.

Even with extreme measures in expense management, revenues are not enough to fund our basic municipal functions of public safety, utility services and infrastructure, and street maintenance and resurfacing. Our looming needs are tremendous. We have no choice but to look at revenue.

Understanding Revenues

Starting with taxes, over half of the city's collections cannot be used for general operations. Fifty-three percent of sales taxes were voter approved for the college, recreation complex and the hospital (all of which have a tremendous positive impact on quality of life, health, and the economic stability of the community). We need to dispel the belief that taking these taxes away from the college, the recreation complex and the hospital will free up money for the city; that's just not true. We either have these taxes or we don't; the dollars don't go to the city if they are taken from these entities.

We also need to dispel the belief that the city receives property tax. Oklahoma is the only state in the nation that prohibits cities from assessing anything other than sales taxes to support their operations.

Out of the 9.25 percent Alva sales tax rate, the city is left with 2.00 percent to fund its operations. That's 21.6 cents out of every sales tax dollar after the state, county and voter-approved entities receive their portions. Even with that being the case, there is NO interest by the citizens or the city council to increase the Alva sales tax rate.

Another source of revenue is grants. The city has received grant money to fund portions of capital projects and will continue to do so whenever possible. However, grants are becoming far more competitive in the state, since state budget woes are adversely impacting the total amount of grant funding available.

And we've recently learned that our eligibility for grants has been compromised due to our utility rates structure. We were specifically denied eligibility for Oklahoma Water Resources Board (OWRB) grants because our rate structure did not promote water conservation. The city council switched to a progressive rate structure to become eligible, but we've been denied eligibility again because our rates are deemed insufficient to maintain our existing water distribution system.

Rate Structure Examination

With City of Alva utility rates being the only source of revenue that we can control, we are faced with the unpopular task of appropriately adjusting our utility rate structure. Changes to the rate structure require the passage of a resolution by the city council. For these reasons, the Alva City Council is considering the Fair and Uniform Treatment of Utility Rates Endeavor (FUTURE), or the FUTURE of Alva Resolution.

The FUTURE of Alva Resolution is primarily a consumption, or demand, based adjustment to the rate structure from which utility bills are derived. The proposed adjustments are grounded in achieving fairness and uniformity of the rate structure. It stands to reason that a family of four with modest usage would need to pay more than the conservative widow next door. And the customer who waters the lawn and garden daily would pay more for their water consumption than the one who doesn't water at all.

This will have little financial impact for those who have the least burden on the system and other customers will pay according to their utilization. And this creates a structure that is able to stand the test of time in a fair and consistent manner. If and when future rate adjustments are deemed appropriate, they can be implemented fairly and consistently across all service lines and with all services.

The FUTURE of Alva Resolution begins with the premise of fairness. The current rates unfairly burden the lowest city utility consumers while the highest users have few incentives to reduce overall demand on the city's systems, particularly the water distribution system. Water is the most important and the most expensive utility service provided by the City of Alva, and is the primary focus of rate structure adjustments.

We are proposing reducing the minimum water consumption level from 5,000 gallons per month to 1,000 gallons per month. This is because our average customer uses just over 5,000 gallons per month and the minimum standard should be less than average in a fair system. Approximately 20 percent of City of Alva water customers use 1,000 gallons of water or less; 1,000 gallons is a more appropriate minimum water consumption level.

Current vs. Proposed Future Utility Bill*

*Bill totals derived from Alva City Council Finance Committee Rate Analysis (working document) dated March 20, 2017; bill totals are for customers inside the city limits and include street fees with no proposed increase, and water, sewer, and garbage rates with varying rate adjustments.

Right now, customers using 1,000 gallons of water per month pay the same $54.72 utility bill as customers using 5,000 gallons per month. Customers using 10,000 gallons only pay $7.45 more for a total utility bill of $62.17. The $7.45 difference seems unfairly low when the 10,000 gallon customer is using up to ten times more water.

The more water a customer uses, the higher their bill is, but currently these are still unreasonably low increases. Users of 50,000 gallons per month, using up to fifty times more water, are billed $121.77, which is only barely double that of our 1,000 gallon per month customers.

Let me put it this way: 50 1,000-gallon-per-month customers pay the city a combined $2,736, but one 50,000-gallon-per-month customer pays only $121.77. To be fair, it is appropriate to adjust that discrepancy.

In the proposed FUTURE of Alva Resolution, the 1,000-gallon-per-month customer will see a total monthly utility bill of $58.16; 10,000-gallon-per-month customers will see a total utility bill of $84.35 per month; and 50,000 gallon per month customers will see a total utility bill of $224.84. This is fair and adequate based on our current service, especially when considering that the infrastructure is essentially the same for all customers and that expense is well more than the water itself.

If we shift focus away from our lower and higher volume consumers, when we examine the average utility bill, total monthly billing for the residential customer (using 5,289 gallons per month average) inside the city limits would be a $13.48 increase in their total monthly utility bill. The average city customer inside the city limits goes from $55.15 to $68.63. Lower consumers will see a smaller increase and higher consumers will see a larger increase.

Services provided outside the city limits cost more to provide and to maintain the service delivery system. For example, inside the city limits, the population is denser and 1,000 feet of water or sewer lines may serve ten or more customers. But outside the city limits, where the population is not as dense, 1,000 feet of water or sewer lines may serve only one customer, or even zero depending on location. So, per customer the cost to maintain the system outside the city limits is greater.

With the FUTURE of Alva Resolution, there will be uniformity across service lines meaning water, sewer and garbage will be provided at a uniform rate of increase outside the city limits. Presently, this is not the case.

Governmental entities, largely burdened by state and federal budget reductions, will experience an increase in garbage rates only. The water and sewer rates will remain unchanged for governmental entities and these are set at a percentage below other consumer rates. This applies to municipal, county, state and federal entities including schools, the prison and others.

And there will be no distinction between commercial and residential customers. All rates will be based on consumption. So, if you have a small office, you are not unfairly billed. But if you are a heavy user, like a restaurant or a car wash, your bill will reflect the amount of water used, and/or garbage produced.

Rural Water Districts are not addressed in this resolution as each of the three districts has a contract for negotiated rates. These contracts will be negotiated separately.

For those wondering how these consumption level adjustments will affect their city utility bill, we are now able to be very specific. Thanks to the new water meter system, City Business Manager Dunham can tell any customer who asks what their city utility bill would be if the council were to approve the proposed FUTURE of Alva Resolution. Please call him if you want to know what your bill will be. He will be able to figure your highest month, lowest month, current month, average month, or all of the above.

Next Steps

The FUTURE of Alva Resolution is necessary to ensure Alva citizens' future needs for well-maintained city infrastructure and service delivery systems can be met for generations to come. We cannot afford to go backwards as a city, but that is likely if this resolution fails.

With the FUTURE of Alva Resolution, there will be even greater accountability placed on our leaders and those who deliver services for the city. Our community deserves and should expect continued enhanced services, higher quality services and more reliable delivery. Our city does well, but it can and it must do better.

City of Alva utilities will remain the most affordable utilities many of our residents take. And the basic needs our taxpayers expect from the city may continue to be met without compromise.

This is not a matter that has been taken lightly. It has taken months to get to the point at which we are able to analyze the actual financial demands on our infrastructure and the strategies to meet those demands moving forward.

We cannot succinctly explain every aspect of this resolution in a summative way, so we want to hear your questions; we want to hear your concerns. And we want what's best for our people. We will be scheduling town hall meetings and/or hearings to discuss City of Alva utility rates with the public. Though this proposal has been well thought out, that doesn't mean it cannot be better. We will listen to any reasonable suggestions our citizens may have. I cannot promise to please everyone, but we will be fair to our citizens and our city.

We've been making progress. We cannot afford to stand still or we may fall behind. The FUTURE of Alva Resolution is another step forward that must be taken to help ensure future progress can be made.