MINUTES OF THE PEORIA CITY COUNCIL CITY OF PEORIA, ARIZONA PINE ROOM, CITY HALL September 18, 2007 A Study Session Meeting of the City Council of the City of Peoria, Arizona was convened at 8401 West Monroe Street in open and public session at 4:01 p.m. Members Present: Mayor Bob Barrett; Vice Mayor Vicki Hunt; Councilmembers Ron Aames, Cathy Carlat, Joan Evans, Carlo Leone and Dave Pearson. Members Absent: None Other Municipal Officials Present: Terrence Ellis, City Manager; Carl Swenson, Deputy City Manager; Susan Thorpe, Deputy City Manager; John Wenderski, Deputy City Manager; Mary Jo Kief, City Clerk; Stephen Bontrager, J.P. de la Montaigne, Brent Mattingly, Bill Mattingly, Bob McKibben, Grady Miller, Dave Moody, Steve Prokopek, Larry Ratcliff, Jeff Tyne, Glen Van Nimwegen, Constance Copeland and James Mason. Audience: Approximately 10 members of the public. Subject for Discussion only: 1. Impact Fees Katie Gregory, Development Agreement Coordinator, provided an overview of development impact fees (DIF’s). DIF’s are one-time fees, subject to statutory and legal requirements, which are used to offset capital costs related to new growth developments. The City currently has 15 fees using three zones which account for 26 percent, or approximately $27 million per year, of the funding for the Capital Improvement Project (CIP). In 1990 Peoria adopted citywide impact fees and in 1999 developed general government, transportation, and water resource fees. Every other year the fees are updated and Peoria is currently on its fifth update. Ms. Gregory discussed the impact fee update timeline. The update began on April 11, 2007. An initial stakeholder meeting was held on May 1, 2007, as well as two subsequent meetings. Infrastructure Improvement Plans (IIP’s) were developed and the Impact Fee Report/Notice of Intent was issued on September 7, 2007. Ms. Gregory commented Red Oak Consulting assisted with general government fees and Raftelis Financial Consultants assisted with utility fees. She introduced Richard Giardina, Vice President of Red Oak Consulting. Mr. Giardina reported a review and update of existing non-utility DIF’s was conducted. He highlighted a cash flow test using the formula: cash divided by units equals fee. The fee is based on the projected development plan and determines if it is sufficient (self- sustaining funds). Mr. Giardina noted the objectives of the project are to determine the unit costs of providing service to commercial and residential developments and to develop impact fees that are: equitable, legally defensible, compliant with state law, and recover the cost to serve new growth. Mr. Giardina highlighted Arizona Revised Statutes § 9-463.05. Infrastructure Improvement Plans (IIP’s) are required to be adopted prior to fee modifications and must include all costs for fees imposed and the estimated time required to finance and provide the necessary service. The Development Impact Fee (DIF) Report identifies methodologies used, establishes relationships between fee and demand for service, and has a provision for an allowed automatic adjustment using the national index. Discussion ensued on the annual report which accounts for fee collection. The purpose of the report is to ensure accountability on fees received and expended and continuity among communities’ fees calculated. Mr. Giardina discussed the project approach. Individual department meetings were held to assess impact fee challenges and concerns, identify objectives, and to review data. The existing fee schedule and methodologies were reviewed. Mr. Giardina reported on the study conducted for 2008 through 2017. He noted fees were developed incorporating the IIP. Cash flow impacts were analyzed based on the timing of the impact fee revenues to IIP outlays and debt was issued to fund projects in years of revenue deficiencies. Discussion ensued on fee methodologies, which use a forward looking approach. The incremental approach is based on the cost of growth-related expansion and is appropriate for high-growth communities. The average approach recovers costs of existing facilities and projected growth-related improvements. Pat Walker, Principal Consultant for Red Oak Consulting, reported on the fee development for general government. Discussion ensued on the fee development for transportation. Projects eligible for credits were identified, trip data was analyzed for all existing land use development, and current levels of service were incorporated into calculations. Ms. Walker commented on the calculation methods used. In response to Councilmember Evans, Ms. Walker stated different factors are used for certain areas resulting in varying development impact fees. Vicki Rios, Revenue Manager, reported on development impact fees for utilities. The estimated number of persons per household was changed with respect to solid waste. In response to Councilmember Pearson, Ms. Rios stated that the number of persons for single-family homes have lowered while multi-family homes have increased. The cost per unit of additional capacity is relatively stable for water, wastewater, and water resource. In response to Mayor Barrett, Ms. Rios reported the cost for the acquisition of water is included in the water resource fee. Ms. Rios discussed impact fees for Vistancia Community Facilities District (VCFD). The fee calculation is different as VCFD funds most of their major infrastructure. The fees for water and wastewater for single-family homes have increased. Councilmember Aames inquired if there is a different fee structure for single-family versus multi-family. Ms. Rios responded that generally the percentages are the same. Ms. Gregory reported on the single-family residential maximum supportable impact fee level by zone. Councilmember Carlat inquired on the purpose of three zones. Ms. Gregory commented transportation currently uses two zones (north and south) while parks differ in the central zone. The boundaries were not adjusted; however, staff will consider doing so in future studies. In response to Mayor Barrett, Ms. Gregory noted the northern boundaries of the southern zone are south of Bell Road and north of Dynamite Road. Ms. Gregory reported on the commercial maximum supportable impact fee level by zone. She noted the City did forego approximately 12 million dollars over the last two years in impact fee revenue for transportation. As a result, funds had to be located to support growth-related projects. The 65% fee schedule will result in 4.5 million dollars over the next two years. Councilmember Pearson inquired on the rationale for 65%. John Wenderski, Deputy City Manager, clarified that any adjustment to impact fees must be applied to all areas; they cannot discriminate from residential to commercial. He commented the maximum allowable fee for transportation could create a disincentive. Ms. Gregory reported there was concern for the negative impact on the type of anticipated development. Terry Ellis, City Manager, noted the detrimental effect on economic development was considered. Discussion ensued on a city comparison of residential and commercial impact fees. Ms. Gregory noted each city has different components included in their fees. In response to Mayor Barrett, Mr. Giardina noted fees are a direct reflection on the cost of serving growth. Ms. Gregory recommended the 100% fee to achieve City goals. She commented on the timeline after today’s presentation, noting a possible fee effective date of March 3, 2008. Councilmember Carlat inquired about different fee options. Mayor Barrett clarified the City is currently at 50%, will move to 65%, 80%, and finally 100%. In response to Vice Mayor Hunt, Mr. Wenderski clarified staff is recommending the 100% fee for all categories; however, transportation will be discounted for the southern half of the City and the southern portion of the northern City. He noted that there are no fees if modifications to a building are similar; however, a fee is assessed if modifications intensify and the demands on the City are increased. Councilmember Aames inquired about data reflecting the fees impact on economic development. Mr. Wenderski explained developers anticipate/accept impact fees. In response to Council, Ms. Gregory noted additional charts will be produced for Council’s review. Mayor Barrett commented on a possible Study Session to review the additional information. Mr. Ellis responded staff will review scheduling. 2. Right-of-Way Maintenance Carl Swenson, Deputy City Manager, explained the Right-of-Way Maintenance presentation was in response to Council questions during the budget session. J.P. de la Montaigne, Community Services Director, compared right-of-ways (ROW’s) among Arizona cities. The City of Peoria recently hired a Right-of-Way Contract Compliance Supervisor and currently contracts the maintenance. The maintenance schedule is monthly for developed areas, quarterly for undeveloped areas, and weekly for litter pickup. Mr. de la Montaigne commented ROW maintenance was studied weekly for two months and reported on the areas reviewed. 71st Avenue/Peoria Avenue is a newer subdivision maintained weekly through a Home Owners Association (HOA). It has a wide ROW and dense landscape. 75th Avenue/Mountain View Road is City maintained, has a small ROW, and is weed free. The other side of 75th Avenue/Mountain View Road has an interior sidewalk, desert landscape, and is maintained appropriately. 83rd Avenue – south of Olive Road has grade challenges and low shrubs due to power lines. In response to Councilmember Hunt, Erik Wilson, Landscape Maintenance Supervisor, stated tire marks in granite created by maintenance vehicles are blown out. Vice Mayor Hunt suggested they be raked and stated the granite is compromised when vehicles are driven over it. Mr. de la Montaigne noted the process will be re-evaluated. Discussion ensued regarding the other side of 83rd Avenue – south of Olive Road. Mr. de la Montaigne recommended progressive maintenance to include tree trimming. Mr. de la Montaigne reported the commercial landscape at Thunderbird Road and 79th and 81st Avenues north is a model for City maintained ROW’s. The area has meandering sidewalks and enhanced landscape. Thunderbird Road and 79th and 81st Avenues south is City maintained, has a wide ROW, good wall treatments, and less dense landscape. Mr. de la Montaigne recommended landscape enhancements. Union Hills Road between 83rd and 87th Avenues north is maintained by Westbrook Village HOA through a separate contractor on a weekly basis. The landscape is dense and there are few trees. Councilmember Evans commented the sculpted look was not as pleasing as a natural looking landscape. Union Hills Road between 83rd and 87th Avenues south is City maintained, weed and litter free, and lacks landscape density. Councilmember Leone commented on the cacti on Olive Avenue from 85th – 91st Avenues. Councilmember Aames commented on 81st Avenue, from Cactus Road to Sweetwater Road, which lacks plants and has poor wall treatment. Vice Mayor Hunt stated that it is Peoria’s responsibility to uphold the appearance of all ROW’s, regardless of who is primarily responsible for the maintenance. Mr. de la Montaigne noted staff will work with HOA’s and developers. Mr. Swenson stated the landscaping on various ROW’s are several years old and the examples presented today were of ROW’s to be modeled after. Mr. de la Montaigne discussed the recommendations for City maintained ROW’s. He stated the Right-of-Way Contract Compliance Supervisor will ensure accountability on contractors and suggested dividing the current contract among additional contractors. He highlighted the pilot program on Cactus Avenue from 85th Avenue to 89th Avenue, which includes wall enhancements and plant and gravel additions. Mr. de la Montaigne recommended reviewing high traffic areas for enhancements, such as Olive Avenue, 83rd Avenue, and Thunderbird Road. Mr. Wilson commented on the difference between natural and sculpted plant pruning. The natural look is difficult to maintain as it requires a higher level of skill. He noted a possible option of species specific annual pruning. Discussion ensued on the recommendations for City maintained ROW’s, which include: new contractor solicitations as the current contract expires January 31, 2008, City-wide spraying twice a year, and bi-weekly spraying during high growth periods. Mr. de la Montaigne suggested the irrigation system be improved, contract a crew for specific assignments, increase service for developed areas to bi-weekly during high growth months and monthly for undeveloped areas, and enhance the density of landscaping in high traffic areas. Clerk’s Note: The Right-of-Way Maintenance presentation is on file in the City Clerk’s Office. 3. Utility Rates Vicki Rios, Revenue Manager, explained rates are analyzed yearly and are adopted by Council every two years. Multiple departments collaborated on the process and two consulting firms were contracted: Raftelis Financial Consultants, Inc. assisted with water and wastewater rates and R.W. Beck, Inc. assisted with solid waste rates. Ms. Rios reviewed the rate analysis process. The existing utilities forecasting model was updated and a new solid waste forecasting model was developed. New information was incorporated from Fiscal Year 2008 budget requests, the Capital Improvement Program, billing and usage trends, and customer growth projections. Ms. Rios noted the goal was to ensure the recommended rates meet objectives established by Council in the Principles of Sound Financial Management. Ms. Rios discussed water rates. Fitch Ratings recently upgraded the rating on revenue bonds from A+ to AA-, indicating water and wastewater are financially sound. There are increases in operating and construction costs and there is modest customer growth. Ms. Rios reported wastewater is financially sound. There are increases in operating and construction costs and modest customer growth. She highlighted the Butler Drive Plant which is under construction and on schedule. Favorable financing was obtained from the Water Infrastructure Finance Authority of Arizona (WIFA). Ms. Rios reported the recommended rate increases for water are 3% for January 2008 and 3% for January 2009. The recommended rate increases for wastewater are 3% for January 2008 and 3% for January 2009. Discussion ensued on residential solid waste. There is modest customer growth, the utility is financially sound, and it will meet its reserve requirement over the planning period. Operating costs have increased yet this is mitigated on the residential side by the implementation of curbside recycling. Recycling has reduced disposal of waste at the landfill and brought revenue from the sale of recyclable materials. The recommended rates for solid waste for 2008 are zero increase for single and additional barrels. The recommended rates for solid waste for 2009 are $0.50 for single residential barrel and zero increase for additional barrels. Ms. Rios commented on the impact of rates for customers. In response to Councilmember Pearson, Ms. Rios noted the sewer fee is calculated based on the average of winter bills. Councilmember Carlat inquired on what the rates would be without curbside recycling. Ms. Rios responded staff predicted in previous rate studies the increase would be $1.00 with an earlier effective date. Ms. Rios highlighted a comparison of combined utility rates among Arizona cities. In response to Mayor Barrett, Ms. Rios noted the most current rates available were reflected. She noted that with the rate increase the City is mid-range. Discussion ensued on commercial service, which includes multi-family residential. The utility is financially sound, there are cost increases, and modest customer growth. The recommended rate increases for front load service are 3% for January 2008 and 3% for January 2009. The rate for front load containers depends on the size of the container and the frequency of pick up per month. In response to Councilmember Evans, Jesse Duarte, Solid Waste Manager, noted the City will still be competitive with other vendors with the commercial rate increase. In response to Councilmember Aames, Ms. Rios noted there is competition with private vendors for commercial service, excluding multi- family as it is considered residential. Staff is projecting the City will retain its current customers and gain multi-family customers. Ms. Rios reported on commercial roll-off bins. Current revenue is fully recovering costs, long range forecast shows cost increase, and there is minimal customer growth. Consultants recommended implementing a new billing method: a monthly fee for container size, a flat pull fee for each pick up, and a per ton price for each pick up. Ms. Rios commented this new billing method will have the following effects: billing will be consistent with other cities and private vendors; billing will be easier to administer with the utility billing system; and it will provide better information regarding usage for longer range trends forecasting. The new billing method will be monitored for one year and results will be reported back to Council. Ms. Rios discussed the time-line for statutory requirements. The notice of intent will be adopted October 16, 2007, the report will be filed October 19, 2007, and a public hearing will be held November 20, 2007 where Council will consider adoption of rates. If adopted, the rate effective date will be January 2, 2008. In response to Councilmember Aames, Ms. Rios reported water rates decreased 5% in January 2004 and decreased 5% in January 2005. She noted there were substantial increases prior to those decreases and there were no adjustments in 2006 and 2007. Mayor Barrett commented the high water rate increases were due to the construction of the water treatment plant. Ms. Rios reported the rates for wastewater increased 5% in January 2005, 5% in January 2006, and 3% in January 2007. She noted prior to 2005 there were no rate increases for several years. Adjournment: Being no further business to come before the Council, the meeting was duly adjourned at 6:34 p.m. ____ __________________________________ Bob Barrett, Mayor ATTEST: ______________________________________ Mary Jo Kief, City Clerk CERTIFICATION I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the Study Session Meeting of the City Council of Peoria, Arizona held on the 18th day of September, 2007. I further certify that the meeting was duly called and held and that a quorum was present. Dated this 20th day of November, 2007. (Seal) ______________________________________ Mary Jo Kief, City Clerk