This is a request for the Mayor and Council to award a contract to Hawksley Consulting in the amount of $99,950 to perform a Stormwater Utility Rate Study and authorize a budget transfer from Stormwater contingency funds.

The City will soon be renewing its MS4 Phase 2 Stormwater permit with the State of Arizona.  It is anticipated that the new permit’s regulations will increase the City’s compliance efforts, leading to increased regulatory costs.  Most of the basic maintenance efforts under the current program have been funded with revenues from a $1 per-month stormwater fee from all active utility account dwelling units.  Additional stormwater management-related activities are funded in other General Fund departments, while drainage capital projects are funded through the use of general obligation bonds. 

The Stormwater Fund is established as a City enterprise fund, but is not currently financially self-supporting.  The increased compliance efforts will further exacerbate the shortfall in funding.  Staff recommends the City further explore the establishment of a Stormwater Utility that is more financially self-sufficient and relies on a structure of charges and fees that is equitable to the program’s benefitting customers.  Utilizing a consulting firm with expertise in developing stormwater rate structures will help provide the City with recommendations on the implementation of a fair and defensible rate structure and its administration in order to become a more financially self-supporting program in the future. 

Staff selected Hawksley Consulting through a competitive bid process in August, 2016 to begin a Stormwater rate study with the goal of recommending rates and fees for Council consideration in FY2018.  The firm has extensive experience around the country in establishing municipal stormwater utilities and can assist the City with potential public outreach forums that may be desired.          

In November, 2015, as part of its Water and Wastewater Rate Study contract, the Finance and Budget Department utilized the services of Raftelis Financial Consultants to complete a Stormwater Rate Design Feasibility Study.  The Study reviewed the City’s desired policy objectives and data available in order to recommend:  policy considerations; costs that might be considered in developing rates; and, potential rate structures that would ensure customer equity while reaching desired cost-recovery objectives.

In FY2016, the Public Works Utilities Department contracted with Michael Baker & Associates to perform a Stormwater Compliance Study as part of the City’s renewal of its MS4 Stormwater Permit in FY2016.  The firm is assisting staff in identifying new compliance requirements and resource options for meeting these anticipated requirements.  Work is continuing on this study as the State of Arizona finalizes its permit with the Federal Environmental Protection Agency.  The timing of the City’s compliance efforts is dependent upon when the state permit is issued and the required timeframes for compliance.

A.      That the Mayor and Council approve the award of a consulting contract to Hawksley Consulting in the amount of $99,950 and authorize a budget transfer of $99,950 from the Stormwater Fund reserves.

B.      The Mayor and Council could disapprove the award of a consulting contract to Hawksley Consulting in the amount of $99,950 and not authorize a budget amendment of $99,950 from the Stormwater Fund reserves.  This decision would defer the initiative to recommend a rate structure that would provide reliable revenues to support the City’s Stormwater program. 

If the contract award is approved, prepare a budget amendment for $99,950 from the Stormwater contingency account (2700-2900-570000) to the Stormwater Other Professional Services account (2700-2900-520099).

The Stormwater Fund is expected to have sufficient reserves to pay the one-time costs of the recommended study.