Finance Committee

AGENDA Finance Committee Special Meeting Village Hall 1900 Hassell Road, Hoffman Estates, IL 60169 October 14, 2024 Council Chambers Immediately Following General Administration & Personnel Committee 1. CALL TO ORDER/ROLL CALL 2. PUBLIC COMMENT 3. NEW BUSINESS A. Presentation by Baxter & Woodman of the 5-year Water & Sewer Rate Study and the 5-year Stormwater Rate Study. 4. ADJOURNMENT Further details and information can be found in the agenda packet attached hereto and incorporated herein and can also be viewed online at www.hoffmanestates.org and/or in person in the Village Clerk's office. The Village of Hoffman Estates complies with the Americans with Disabilities Act (ADA). For accessibility assistance, call the ADA Coordinator at 847/882-9100. Page 1 Page 1 of 36  AGENDA ITEM REPORT Finance Committee October 14, 2024 ITEM 3A REQUEST: Presentation by Baxter & Woodman of the 5-year Water & Sewer Rate Study and the 5-year Stormwater Rate Study. FROM: Rachel Musiala, Finance Director ITEM TYPE: Discussion - Committee REQUEST SUMMARY The Village has established the responsible practice of conducting rate studies every five years since 1999 and planned rate increases have occurred regularly since then to meet operating and capital needs of the water and sewer operations of the Village. As you may recall, the last Water Rate study was completed in July, 2019 by Clark Deitz, Inc with a recommendation of rate increases between 3.5% and 4.0% for each of the next five years, starting January 1, 2020. This recommendation was approved by the Finance Committee and Village Board and implemented. The last scheduled rate increase under that study occurred on January 1, 2024. In July, 2024, the Village entered into a contract with Baxter & Woodman to perform a Water & Sewer Rate Study to take a comprehensive look at water and sewer needs, including capital projects and debt funding. Additionally, the Village also contracted with Baxter & Woodman to do a Stormwater Rate Study, since those rates have not been reevaluated since their inception in 2013. Mark Siefert, project manager from Baxter & Woodman will be presenting the results from their studies. Staff is looking for direction after the presentation in terms of rate increases and an ordinance will be brought back to the Finance Committee based on that recommendation. FINANCIAL IMPACT The rate increases chosen by the Finance Committee will determine the financial impact on the Water & Sewer Fund as well as the Stormwater Fund. RECOMMENDATION For discussion purposes. Based on that discussion, a rate ordinance will be brought before the Finance Committee at a future meeting. ATTACHMENTS 1. HOFFE W-S-S Presentation 9-16-24 Page 1 of 1 Page 2 of 36 Village of Hoffman Estates Water, Sewer, and Storm Rate Study September 23, 2024 Mark Siefert, MPA Lucas Komara Carolyn Grieves, PE Page 3 of 36  Overview 1. Rate Study Overview Recap 2. Study Assumptions 3. Capital Projects List 4. Preliminary Rate Study Scenarios • Rate Scenario Comparisons • Rate Impacts and Sample Bills 5. Neighboring Sample Bill Comparison Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study Page24 of 36  Revenue Requirements vs. Customer Impacts ➢ Review the fully funded Revenue Requirements against proposed rate increases and impact to sample customer bills under the Village’s current rate structure: Needs: Impacts: Address Aging Infrastructure Monitor Rate Increases Build Financial Reserves Funding Capital Needs Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study Page35 of 36  Study Title Assumptions 1. The 5-year capital plan for the Village budget is $56,972,100 ✓ Water Capital $32,907,100 ✓ Sewer Capital $18,050,000 ✓ Storm Capital $6,015,000 2. Population and water usage projections to remain consistent throughout the projected time ✓ Expenses are increased annually by 3%. 3. Rate increases scheduled to begin May 2025. Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study Page46 of 36  Capital Projects List Water Main Replacements Dump Truck Replacements South and West Zone Backup Water Other Heavy Duty Vehicle Replacements Supplies Public Works Equipment Replacements Water Storage Replacement or Rehabilitation Public Works Pickup Truck Replacements Tollway Utility Crossings Specialized Public Works Vehicle Repairs Abbey Wood Pump Station Improvements Lift Station Replacement or Rehabilitation Hydrant Purchase Sanitary Sewer Improvements Water Meter Purchase Annual Drainage Improvements Valve Purchase and Assessment/Exercising Street Projects Sewer Televising Equipment and Software Televising County Projects Storm Engineering Village Hall Site Improvements Storm Construction Oversite Fleet Maintenance Site Improvements Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study Page57 of 36  Capital Projects List Water Main Replacements Other Heavy Duty Vehicle Replacements South and West Zone Backup Water Public Works Equipment Replacements Supplies Public Works Pickup Truck Replacements Water Storage Replacement or Specialized Public Works Vehicle Repairs Rehabilitation (Tower 1) Lift Station Replacement or Rehabilitation Tollway Utility Crossings Sanitary Sewer Improvements Abbey Wood Pump Station Improvements Annual Drainage Improvements Hydrant Purchase Street Projects Water Meter Purchase Televising Valve Purchase and Assessment/Exercising Storm Engineering Sewer Televising Equipment and Software Storm Construction Oversite County Projects Village Hall Site Improvements Fleet Maintenance Site Improvements Dump Truck Replacements Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study Page68 of 36 Village an states ater an e er ate tu ater an e er un as l r ec n cenari : aseline cenari Page 9 of 36  Village’s xisting ate tructure Volumetric Fee Line Fee Stormwater Utility Fee • Measured per 1000 • Based on Meter Size • Residential Tiered gallons ✓5/ ” – 1 ” System ✓0-7,500 SF ✓7,500 – 12,500 SF ✓12,501+ SF • Commercial ✓ Impervious Area Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study Page810 of 36  Rate Scenarios/Structures Summary Scenario 1 Scenario 2 Scenario 3 • Full Capital Improvement • Reduced Capital • Full Capital Improvement Plan Improvement Plan Plan • $56 Million in Capital • $33.5 Million in Capital • $12 Million in Loan/Bond Projects Projects • $2 Million in Transfers from • Rate increases ending after • Consistent rate increases General Fund to FY26 year over year supplement storm capital Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study Page911 of 36  Draft Title Scenario 1: Full CIP Scenario ■ Year 1 ■ Year 2 Water → 15% Increase Water → 12% increase ($12.74 to $14.65) to Volumetric Rate (per 1,000 ($14.65 to $16.41) to Volumetric Rate (per 1,000 gals). gals). Sewer → 15% Increase ($1.83 to $2.10) to Volumetric Rate (per 1,000 Sewer → 12% increase gals). ($2.10 to $2.36) to Volumetric Rate (per 1,000 gals). Storm → $5/$10/$15 increase. ($5 tier 1, $10 tier 2, $15 tier 3). Storm → No increase $8 increase ($2 to $10) to Impervious Area Fee. Line Fee → 1 5/ ” M increases per meter size. Line Fee → 1 5/ ” M increases per meter size. No further increases needed for the years FY27-FY32. Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 1012 of 36 Page  Draft Title Scenario 1: Full CIP Scenario Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 1113 of 36 Page  Draft Title Scenario 1: Full CIP Scenario Village an states ater an e er ate tu ater an e er un as l r ec n cenari : ull 5 ■Capital Reserve Goal added in 2025 15 ■Large spike in 2027 due to heavy 1 upfront rate increases to fund 5 the current CIP plan Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 1214 of 36 Page  Draft Title Scenario 1: Full CIP Scenario Village an states ater an e er ate tu ater an e er un as l r ec n cenari : ull ■Additional projects to be added with creation of new Capital Improvement Plan. Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm /Rate Study 1315 of 36 Page  Draft Title Scenario 1: Full CIP Scenario Village an states ater an e er ate tu t r ater un as l r ec n cenari : ull 5 ■Additional 5 projects/capital to be added as Storm 15 Infrastructure continues to age. 1 5 Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 1416 of 36 Page  Rate Scenarios/Structures Summary Scenario 1 Scenario 2 Scenario 3 • Full Capital Improvement • Reduced Capital • Full Capital Improvement Plan Improvement Plan Plan • $56 Million in Capital • $33.5 Million in Capital • $12 Million in Loan/Bond Projects Projects • $2 Million in Transfers from • Rate increases ending after • Consistent rate increases General Fund to FY26 year over year supplement storm capital Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 1517 of 36 Page  Draft Title Scenario 2: Reduced CIP Scenario ■ Year 1 ■ Year 2 Water → Yearly 4% increase Water → Yearly 4% increase ($12.74 to $13.25) to Volumetric Rate. ($13.25 to $13.78) to Volumetric Rate. Sewer → Yearly 4% increase Sewer → Yearly 4% increase ($1.90 to $1.98) to Volumetric Rate. ($1.83 to $1.90) to Volumetric Rate. Storm → Yearly $0.50 increase to all tiers. Storm → Yearly $0.50 increase to all tiers. Stops in FY 28. $3 increase to Impervious Area Fee. No increase to Impervious Area Fee. Line Fee → Yearly $0.50 i 5/ ” Line Fee → Yearly $0.50 i 5/ ” Meter and increases per meter size. Meter and increases per meter size. Yearly increases continue through the years FY27-FY32. Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 1618 of 36 Page  Draft Scenario 2: Reduced CIP Scenario Title Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 1719 of 36 Page  Draft Title Scenario 2: Reduced CIP Scenario Village an states ater an e er ate tu ater an e er un as l r ec n cenari : e uce 5 ■Capital Reserve Goal added in 2025 15 ■Fund balance falls slightly below 1 Operating Reserve Goal in FY 27 – FY 29 5 Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 1820 of 36 Page  Draft Title Scenario 2: Reduced CIP Scenario Village an states ater an e er ate tu ater an e er un as l r ec n cenari : e uce ■Assigned yearly reduced CIP allowances to simulate a scenario with less CIP spending ■Provides more gradual rate increases to customers Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate / Study 1921 of 36 Page  Draft Title Scenario 2: Reduced CIP Scenario Village an states ater an e er ate tu t r ater un as l r ec n cenari : e uce ■Additional 5 projects/capital to be added as Storm 15 Infrastructure 1 continues to age. 5 Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 2022 of 36 Page  Rate Scenarios/Structures Summary Scenario 1 Scenario 2 Scenario 3 • Full Capital Improvement • Reduced Capital • Full Capital Improvement Plan Improvement Plan Plan • $56 Million in Capital • $33.5 Million in Capital • $12 Million in Loan/Bond Projects Projects • $2 Million in Transfers from • Rate increases ending after • Consistent rate increases General Fund to FY26 year over year supplement storm capital Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 2323 of 36 Page  Draft Title Scenario 3: Loan Funded CIP ■Year 1 ■Year 2 & 3 Water, Volumetric → 6% increase Water, Volumetric → 6% increase Sewer, Volumetric → 6% increase Sewer, Volumetric → 6% increase Storm, Residential → $2/$4/$6 increase to storm tiers. Storm → No increase $4 increase to Impervious Area Fee. Line Fee → 5/ ” Line Fee → 5 5/ ” and increases per meter size. and increases per meter size. Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 2424 of 36 Page  Draft Title Scenario 3: Loan Funded CIP ■Year 4 ■Year 5+ Water, Volumetric → 5% increase Water, Volumetric → 4% increase Sewer, Volumetric → 4% increase Sewer, Volumetric → 4% increase Storm → No increase Storm → No increase Line Fee → 5/ ” Line Fee → 5/ ” and increases per meter size. and increases per meter size. (No increase after this year) Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 2525 of 36 Page Draft Scenario 3: Loan Funded CIP Page 26 of 36  Draft Title Scenario 3: Loan Funded CIP Village an states ater an e er ate tu ater an e er un as l r ec n cenari : an un e 5 ■Capital Reserve Goal added in 2025 15 ■Fund balance falls slightly below 1 Operating Reserve Goal in FY26 – FY28 5 Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 2727 of 36 Page  Draft Title Scenario 3: Loan Funded CIP Village an states ater an e er ate tu ater an e er un as l r ec n cenari : an un e ■$12 Million Loan/Bond to fund Capital Improvement Projects Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate / Study 2828 of 36 Page  Draft Title Scenario 3: Loan Funded CIP Village an states ater an e er ate tu t r ater un as l r ec n cenari : an un e 5 5 15 1 5 Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 2929 of 36 Page  Rate Title Scenario Comparison – 2025 Sample Bills 2024 Scenario 1 Scenario 2 Scenario 3 Partially Loan Funded Existing Rates Fully Funded CIP Reduced CIP CIP Residential User (5 kgals / ” M – $81.43 $116.29 $85.37 $93.06 Tier 1 Storm Residential User (5 kgals / ” M – $81.93 $121.79 $85.87 $95.56 Tier 2 Storm Residential User (5 kgals / ” M – $82.43 $127.29 $86.37 $98.06 Tier 3 Storm Commercial User $711.94 $1,017.97 $799.38 $843.38 (45 kgals ” M Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 3030 of 36 Page  Rate Title Scenario Comparison – 2028 Sample Bills Scenario 1 Scenario 2 Scenario 3 Fully Funded CIP Reduced CIP Partially Loan Funded CIP Residential User (5 kgals / ” $136.87 $97.41 $118.41 Meter) – Tier 1 Storm ($17.51 increase/yr) ($3.01 increase/yr) ($6.41 increase/yr) Residential User (5 kgals / ” $142.37 $97.91 $120.91 Meter) – Tier 2 Storm ($17.51 increase/yr) ($3.01 increase/yr) ($6.41 increase/yr) Residential User (5 kgals / ” $147.87 $98.41 $123.41 Meter) – Tier 3 Storm ($17.51 increase/yr) ($3.01 increase/yr) ($6.41 increase/yr) Commercial User $1,141.06 $888.15 $993.97 (45 kgals ” M ($124.70 increase/yr) ($22.19 increase/yr) ($36.55 increase/yr) Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 3131 of 36 Page  Neighboring Title Sample Bill Comparisons ■Hoffman Estates Comparison utilizes sample bills from Scenarios 1, 2, and 3 ■Comparisons show 2024 rates as well as projected 2025 rates ■All presented communities purchase water through NSM-JAWA ■Not inclusive of planned increases for neighboring communities Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 3232 of 36 Page  Residential Title Sample Bill Comparison (2024-2025) M 5 / M M 5 5 M 1 5 1 1 M M M Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 3333 of 36 Page  Commercial Title Sample Bill Comparison (2024-2025) M 5 M 5 5 M 1 5 M 1 5 M M M Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 3434 of 36 Page  Summary Title and Conclusion ■Each subsequent scenario was developed to evaluate the impacts of differing capital plans. ■The goal of each scenario was to meet the revenue requirements of the Village while balancing the impact across its diverse customer base. ■Due to the number of assumptions and factors that could still change, it is strongly recommended that these rates be revisited on an annual basis. ■Village Board action requested: ─ Select preferred scenario and direct staff to bring back an ordinance for adoption. Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 3535 of 36 Page  Questions? Baxter & Woodman | Village of Hoffman Estates – Water, Sewer, and Storm Rate Study 3636 of 36 Page