75 Day Work Plan Frequently Asked Questions
with City Manager Philip Rodriguez
Why do we need a 75 Day Work Plan?
Because the City of Brighton is the only option the majority of residents and businesses have for life-supporting water and sewer services, I believe it is our duty as city management and staff to know and understand every piece of what is happening in our utilities fund. As part of my duties as City Manager, I’m also the CEO of the Utilities area of the City, and in developing my first budget here, I was not satisfied that I had true clarity on our utilities fund operations. I am committed to changing that. It’s an incredible honor to serve our community, and it’s in that public service that we need to start to bring clarity, accountability, and transparency to our utility funds. That is exactly what we are endeavoring to do through the 75 Day Work Plan. In the end, this is what the Council and community expect and deserve.
How did you figure out there was a need to further investigate the management of the utilities enterprise funds?
In my relatively short time in Brighton as City Manager I have had to work through several major budgetary issues including correcting a $4 million shortfall within my first few days here in the City. In my professional opinion, this budgetary gap was a symptom of a larger problem of decentralization across departments that led to communication breakdowns and many inefficiencies and overlaps of service that are unnecessary and unsustainable. Knowing this, I entered into my first budget cycle this summer knowing I was going to have to ask many tough questions, in order to fully understand our spending. This was especially true in our largest funds including our water, wastewater, and stormwater enterprise funds. Throughout our budget process, I was able to ask tough questions, realign priorities, and find millions of dollars in savings for Brighton residents across the City organization across every fund. However, I was never satisfied with the level of clarity and understanding I was being given into the operation of our utilities enterprise funds, where my questions continued to generate more questions than answers. That is why I have designed the 75 Day Work Plan to continue to address what is most important in providing the best possible service to Brighton residents at a fair rate.
What specific red flags drew your attention to the management of the utilities enterprise funds?
One early indicator that raised concern for me, even before the budget process, was the number of calls City Council and myself were receiving asking why it felt like Brighton residents were being overcharged for utilities. As a result, it was clear to me very early in my tenure that water rates were a top concern for our community and I subsequently made sure to be actively involved in preparing the inputs the City would provide to our water rate consultants for 2019. During a meeting this summer intended to begin that process, I was informed by our staff that we would again need a significant rate increase, even though we had kept the rates fairly stable this year. This seemed peculiar to me given the amount of spending reductions we were making across the utilities department, so I began asking even more intensive questions about the inputs and capital projects impacting our municipal water rates. The 75 Day Work Plan includes having an outside firm study our previous rate model and hiring a new rate model consultant to further ensure the ratemaking process can be as transparent and clear as possible both to our community and to Council, whose authority it is ultimately to set rates. The Council needs the best information possible to make informed, beneficial decisions for the entire community.
An additional and significant red flag in the management of our utility funds was revealed during a recent meeting in our Fiscal Year 2019 budget process, where I first learned of the nearly $70 million in accrued utilities funds. I spent the next several weeks seeking answers as to how that money had been acquired and why. Subsequently, in conversations with individual City Council members, the super majority of them were very clear with me that they too were unaware of such a massive net position for the utility fund, even as they were being advised to significantly raise rates, year over year. While there are still many outstanding questions on all of the nuanced policy decisions that led to the accrued funds, the 75 Day Work Plan specifically includes an outside audit of both the previous rate model and our utilities enterprise funds in order to ensure that any outstanding questions are fully addressed in this area.
How did the utilities enterprise funds accumulate nearly $70 million?
That is still something I’m seeking to understand, although what I do know right now is that we are undergoing activities as part of the 75 Day Work Plan that we hope will provide additional clarity and transparency in this area, including an outside analysis of our previous rate model and audit with a special focus on the utilities enterprise funds. At this point, I believe that the primary cause of the $70 million accrual across the utilities enterprise funds was a failure to complete budgeted capital improvement projects over the past four years, especially in the water fund where the largest accrual exists. For example, in 2017 our amended budget included over $65 million in capital improvement projects for our water system but only $12 million was ever expended. This does not mean that the projects that we budgeted for but did not complete are not necessary; in fact, to the contrary. Additionally, it is important to note that many of the projects were carried over from year to year, so an individual cannot calculate the total accrual in the water fund by simply adding up the unspent budgeted dollars between 2012 and 2018, which I know some have attempted to do. Another important step in the 75 Day Work Plan is reevaluating our list of capital improvement projects to ensure that we maintain a safe water system for all of our residents. We are also further investigating how uncompleted projects were reported back into our rate model, and the potential that they compounded the need for additional rate increases.
It is also worth noting that although we are pursuing a new auditor for all City funds and incorporating extra analysis of the utilities enterprise funds, there is nothing that leads us to believe at this time, that there are any funds missing. The Comprehensive Annual Financial Report for 2017 (CAFR) confirms that there are no outstanding concerns for Fiscal Year 2017 beyond the lack of capital spending.
What will happen to the nearly $70 million currently in the utilities funds?
The accrued money is split across the three utilities funds: water, wastewater and stormwater, and is available for use when specific projects are identified and agreed to by the City Council after the 75 Day Work Plan objectives are met. Additionally, a significant portion of the existing funds are earmarked for projects that specifically expand our system to accommodate new users. For residents and businesses, an important part of the 75 Day Work Plan is freezing our current utility rates until we can thoroughly analyze our previous rate model and work with a new rate model consultant. The 75 Day Work Plan also calls for a review of the planned capital improvement projects and the existing utilities master plans. We hope to have a much clearer picture in the new year of City Council’s options for ensuring that the utilities funds are best-managed to balance delivering safe water, wastewater, and stormwater services at affordable rates to our customers. In the interim, we still have major projects underway to ensure that our infrastructure remains safe, secure, and adequate to supply utilities to all of our customers. The proposed 2019 budget lists the current capital Improvement projects planned in each of the utility funds.
What are you doing to ensure that the 75 Day Work Plan leads to ongoing change?
Previously, utilities administration, which has undergone a change in leadership over the past weeks, were the primary individuals who were integrally involved in the utilities budget and ratemaking processes, and had been since at least 2014. Based on my education, experience and understanding of the City’s Charter, I felt that team was incomplete. Under our governance, it is imperative that the City Manager (CEO) and Director of Finance (CFO), along with the rest of the City’s budget team, be an equally integral part of the budget and ratemaking process. From my experience in other cities, it is crucial to have technical experts including a Professional Engineer (PE), Certified Public Accountant (CPA), or Master of Public Administration (MPA) involved in the ratemaking process in order to ensure that technical, fiscal accountability and policy-making minds are all represented, prior to making a final recommendation to the City Council, something we were missing even in the past year. An important part of the 75 Day Work Plan involves identifying and hiring the best personnel possible to be involved in the ratemaking process going forward, and I’m pleased that we’re already making great strides in that area.
What is an enterprise fund?
In managing money for a typical business or family, it is common to keep available cash in one primary account that handles all of the financial transactions. The City has to keep many separate accounts, or funds, that manage specific types of revenues or service provision costs. An enterprise fund, like the City’s water fund for example, is a cost-of-service fund. This means that cost of providing the water service is tracked separately from other city expenses so that the fees that are charged for water service can be specifically tied to the cost of providing that same service.
How are water rates determined and set?
The intention of running the City’s water fund as an enterprise fund is ensuring that water rates are set so that utilities customers pay a rate for water that covers the cost of providing that same water service. Calculating that cost of service can become complicated very quickly, as we must include the cost of maintaining and building systems to acquire, treat, store, and deliver safe drinking water 24/7 to every customer. These calculations include projecting water usage for customers across the system as well as budgeting for operating and maintenance costs for the utilities department. As you can imagine those calculations for a City our size, typically involves hundreds of hours of work and analysis. It is best practice to hire experts or rate consultants to ensure that the ratemaking process is transparent, efficient, and verifiable by an unbiased third party. Subsequently, the ratemaking process involves publishing a request for proposal and vetting responses in order to hire the best consultants at a fair price. City staff then work with the consultants to answer questions about the current system and expected changes for future years. Ultimately, City staff with the help of the hired rate consultant present their findings to the City Council and City Council then adopts water rates for the coming year at their discretion.
An important part of the 75 Day Work Plan is starting this process over again from the very beginning including a full analysis of our previous rate model. Because we want to ensure that the process is allowed to proceed in full before suggesting any changes to the current rate structure, the 75 Day Work Plan also includes proposing to City Council that we freeze rates at their current levels until the full rate analysis can be completed.
Are Brighton residents overpaying for water?
One of the reasons we were prompted to develop the 75 Day Work Plan is because we were uncertain the answer to this very question and wanted the opportunity to fully research our answer before reaching a conclusion. We hope that by identifying the best technical team to lead our ongoing capital improvement program, ratemaking studies, and ongoing department needs; conducting audits of the utilities funds and previous rate models; and by hiring a new ratemaking consultant, we can be sure of the answer to this question before the City Council considers the management of our utilities funds going forward.
Will I receive a refund for past water bills I have paid?
We do not currently have enough information to recommend to the City Council that refunds to residents and businesses would be appropriate. Even though there are accrued funds across the utilities enterprise funds, we also have ongoing operating and maintenance costs to keep our utilities turned on and operating. We hope that all of the information we will gather throughout the 75 Day Work Plan and into the new year will allow us more clarity into the financial management of our utilities funds. Only our City Council can set policy regarding the management of those funds, so if it does become clear that we can provide safe and reliable service to our customers in the near and long-term while also providing for a refund, it would be the City Council’s decision as to whether or not to do so. Before we have all the information that we’re busy gathering though, any discussion of a refund would likely be unwise and not beneficial to the long-term viability of the utility system.
Where does the money from my water bill go?
The City uses an enterprise fund to manage the money collected from utility bills specifically to ensure that those dollars are exclusively used for expenses related to providing water, wastewater and stormwater services to residents and businesses in Brighton. The purpose of an enterprise fund is to both keep the funds associated with utilities separate from other City dollars and to pair-up the expenses of providing those services with rates charged to customers. The ratemaking process in an enterprise fund is intended to ensure that the life-supporting service of water and sewer provision does not become a revenue-generating venture for a City, but rather, that the water rate represents the true cost of providing safe, supportive services to every customer, 24/7.
Will the financial management of our utility funds change now that we have a Director of Infrastructure overseeing both the Utilities Department and the Public Works Department instead of a separate Public Works Director and a Utilities Director?
Appointing Michael Woodruff as the Director of Infrastructure represents an opportunity to increase operational efficiencies and break down silos between departments. In the past, the Utilities department was separate or siloed so much, that there were employees working in the Utilities Department that had duplicative functions to employees in other departments. That’s not good for anyone, especially in light of the fact that we have some of the highest quality public servants in Brighton that I’ve ever had the privilege to work with. While we have not actively eliminated positions, we have worked hard to identify possible efficiencies through increasing collaboration across departments in order to save operational costs and pass those savings on to our customers. In the short time since Michael Woodruff’s appointment as Director of Infrastructure, there have already been examples of City employees from the Public Works department and the Utilities Department working together to make an emergency weekend repair with increased efficiency, and subsequently reducing the cost of the repair to our customers. I did not witness or hear about this type of collaboration prior to Mr. Woodruff’s appointment, so I’m pleased that we’re already improving our services under his leadership.
Despite this staffing change, all of the utilities funds will remain enterprise funds. This legally requires that the funds collected for water, wastewater, or stormwater bills remain in the appropriate enterprise funds and not be combined with the general fund dollars funding the general government. Other examples of this fund accounting can be found with the parks and recreation capital fund, lodging tax, and the Brighton Urban Renewal Authority.
How will new systems that we’re hearing about improve the experience of paying my utility bills?
Once officially launched in 2019, we will have a new Paymentus system that will allow for additional electronic communication via automated calls and text messages to users who have not paid their bill. This enhancement will be in addition to the existing traditional communication methods used with the courtesy letter and mailed bills. This new system will not cost the ratepayers any additional money to participate in the electronic notifications. City staff will continue to investigate ways to improve service to our water customers including investigating streamlining the process for paying from a mobile device and fixing known issues with paying bills online. We are here first and foremost to serve the community, and anything we can do to help our customers know, understand, and pay their bills is to our collective advantage.
Is the city running out of water?
No, the City has enough water to meet its current demands, as long as every customer, including the City, manages our water wisely. We will, however, need to be far more proactive in securing water for future growth. In the discovery of the nearly $70 million in accrued utility funds, was the equally surprising discovery that we have been sitting on several million dollars for water acquisition as well over that same time period. This acquisition is now being proposed in next year’s budget, and we will ensure we have enough water to meet the future demands of the City. If not, then we will have to limit future growth to only that which we can support.
Is our water system at risk if we do not add additional capital improvement projects for next year?
Brighton’s utility system has areas that are only days old, and others that are over a century old. This variation in infrastructure is what we’re actively analyzing and will formulate the necessary plans to address the needs now and into the future. In the 2019 budget, there are tens of millions of dollars in new projects proposed for the new year, with all of them being prioritized as the most urgent to least urgent. To provide context, the City in recent years has struggled to spend more than anywhere from $2 million to $12 million annually on capital improvement projects, another possible reason for the nearly $70 million in accrued funds. However, by more than doubling that proposed spending for 2019, we have an opportunity to address countless projects that were left undone in years past, all while addressing new needs as they arise. That proper planning has been a much-needed part of our strategy, and I’m eager to see us make great advances on that in 2019.