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Agenda & Minutes

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Mayor & Council (View All)

City Council Joint Study Session with Medford Water Commission Minutes & Agenda

Thursday, October 08, 2015

October 8, 2015
Medford City Hall, Medford Room
411 West Eighth Street, Medford, Oregon
  1. Cash Flow
  2. Bonding
  3. Support Services
  4. Auditor

October 8, 2015
Medford City Hall, Medford Room
411 West Eighth Street, Medford, Oregon

The Medford City Council Study Session was called to order at 12:00 p.m. in the Carnegie Building Main Floor, 413 West Main Street, Medford, Oregon on the above date with the following members and staff present:
Mayor Gary Wheeler; Councilmembers Clay Bearnson, Daniel Bunn, Chris Corcoran, Dick Gordon, Tim Jackle, Eli Matthews, Kevin Stine, Michael Zarosinski
Medford Water Commissioners: Chair Leigh Johnson; Jason Anderson, John Dailey, Lee Fortier, Bob Strosser
City Manager Pro Tem Bill Hoke; City Attorneys John Huttl and Kevin McConnell; City Recorder Karen Spoonts; Finance Director Alison Chan
MWC Manager Larry Rains, MWC Finance Director Tessa DeLine, MWC PIC Laura Hodnett
MWC Cash Flow
Mayor Wheeler noted that we don't get together often with the Medford Water Commission and it is good for Council to know how things are going for the Commission. Commissioner Johnson noted that communication has been good although he would like a joint meeting on a yearly basis. 
Manager Rains stated that a MWC study session was held yesterday to present the draft of the rate study. Methodology was reviewed by HDR Consulting. Workshops have been held to work on details. In two weeks there will be a public hearing pertaining to a rate increase. Rates generally will go up about 13%; districts will go down slightly.
The MWC does a yearly budget; staff informed the Board that in approximately four years there would be a decline in the cash flow. There is a MWC rule that requires a certain amount of reserves in the construction fund, which is one years operating expenses. In 2018-19 we would be close to a quarter of that amount; in one year we would be below the rule. Because of that the Board was informed and needed to decide how they wanted to deal with this. At the point, Councilmember Corcoran suggested a joint meeting to discuss this with the Council. Rates are the MWC's only source of revenue. Cash flow is an issue and the inside customers, the citizens of Medford, are the owners of the system. Commissioner Anderson stated that the study session revealed a rate increase of 12-13% every year for the next four years. The MWC has never bonded before and that has been suggested.
Commissioner Strosser noted that the Board chose to review the methodology and obtain an updated model to perform annual cost of service studies in the future.
Councilmember Bunn questioned what is causing this to happen; Mr. Rains stated that there are routinely six-seven million dollars in capital projects each year; the Floc/Sed Basin is a very large project which will be built in four years to spread it out. Commissioner Anderson noted that project is due to capacity and the projection of needed water. Councilmember Bunn questioned if the cash flow graph will continue to go up as shown; Mr. Rains noted that it will level off as needed and controlled by future rates and the graph currently includes the upcoming rate increases planned. Rates have not been raised in four years. Councilmember Stine questioned how the bonding discussion was going; Mr. Rains noted that the Board has not decided. Finance Director Alison Chan had given a study session on bonding to the Commission, which was very helpful.
Councilmember Corcoran questioned why in the past few years a rate increase was not done; Mr. Rains noted that the new software system had to be completed in order to do the rate study and the study took about two years as well because of coordination with transparency with wholesale users.  The Board noted they have been very conservative on pay as we go philosophy but held the last rate increase to 5%, although staff wanted to raise it about 13%. Councilmember Corcoran questioned if a study is needed every year in order to have increases; Mr. Rains noted the goal is to continue to have yearly cost of service reviews. Councilmember Corcoran noted that if bonding is used the debt must still be paid off. Commissioner Anderson noted that the bond payments can stretch rate increases of smaller amounts over longer periods of time and it is a Board policy decision on who pays that, current users or those that follow us through the years. Commissioner Johnson stated that Commissioner Dailey and he would suggest borrowing from our other reserve funds and pay back as if a debt service. Commissioner Dailey stated that in 10 years it would be about 30 million dollars that we will have put into various funds and could be tapped over the 10 years to solve any cash flow issues.
Mayor Wheeler would prefer that the Board make their own decisions and that it be done in-house. He questioned if Duff II was on the back burner. Commissioner Anderson noted the Floc/Sed Basin is one of the last projects of Phase IV of Duff I.  The MWC serves the wholesale other cities around us and at some point Duff II will have to be built. The Board struggles with who will pay for this. Mr. Rains provided information on the maximum potential for Duff I at 65 MGD. Phase I of Duff II will be about 20 MGD and was estimated in 2008 as 70 million dollars. Commissioner Strosser noted all options are on the table. Commissioner Anderson noted that most citizens of Medford don't know the difference between the Council and the MWC. Councilmember Gordon stated outside service customers pay a cost and questioned what that entails; Mr. Rains noted that costs have been reviewed by HDR, including the outside customer group. Commissioner Anderson stated that the outside, other cities, and districts all pay a fair rate of return for their use.  Inside customers pay a lower cost due to the fact that MWCís customers do not pay a rate of return since they are the owners of the system. Commissioner Johnson explained the history behind the outside customers on the transmission line from Butte Falls.  The other largest outside customer area is White City.
Software Upgrades
Mr. Rains noted the software is working, although there are a few bugs yet to resolve. He remarked that it is a tough road to go through.
Councilmember Gordon noted that perhaps the City didnít understand fully the costs that MWC was charging at the time to do the joint billing and it has become very difficult and costly for the City to collect on a separate utility bill and questioned if there was a way to recombine the bill and help the City collect fees on their other utility billings. Mr. Rains noted that staff has a lot of input to this issue as this subject has been discussed in the recent past and as our new software system has been changed greatly to reflect that parting of the billing and MWC has moved down the road. To bring the billing back together would be a tremendous project now and he felt the costs would be unacceptable or too much to consider. Councilmember Corcoran stated there might be opportunities for cost savings if we didn't duplicate services and talked about shared systems. Councilmember Corcoran questioned why the Emergency Services Manager had no role with the MWC and why the backup is at Duff; Mr. Rains noted that we have to have the emergency services at Duff as it is more convenient for MWC. Mr. Rains thought we have and do cooperate very much with Technology Services and that the MWC is a part of the overall plan and documentation with Emergency Services. Mr. Rains stated he will talk with staff to be sure this is still the case and to clarify his concerns.
The meeting adjourned at 12:48 p.m.
Karen M. Spoonts, MMC
City Recorder

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