Memorandum

City of Lawrence

Department of Utilities

TO:	Dave Corliss, City Manager Cynthia Boecker, Assistant City Manager Diane Stoddard, Assistant City Manager Casey Toomay, Budget Manager
FROM:	Dave Wagner, Utilities Director
Date:	April 23, 2010
RE:	Utilities Department 2011 Budget Request

The Utilities Department’s 2011 Budget Request and Operating & Maintenance Capital Request Package supports our commitment to provide the Lawrence community with safe, clean drinking water and to return wastewater safely to the environment through cost-effective, efficient, reliable and continuously improving operations. Treatment plants and appurtenances operate continuously, day and night, to provide these essential community services.

All Utilities Divisions as well as the Finance Department/Utility Billing Division are funded by the 501 Water/Wastewater Enterprise Fund. Utilities has developed its 2011 Budget Request based on the results of Rate Plan funding scenario #1 and direction to maintain total expenditures below $22 Million.

The Utilities combined 2011 Operating and Maintenance Budget Request is $20,096,064. The Finance Department’s 2011 Budget Request for its Utility Billing Division is $1,890,760. Together, these Fund 501 Requests total $21,986,824.

The Utilities 2011 Budget Request supports an expanding system currently comprised of two water and one wastewater treatment plants, over 879 miles of water distribution and wastewater collection lines, 33 lift stations, 9 water towers and related infrastructure. It supports 103 Full Time Equivalent employees and 2 Part Time Temporary employees in the Utilities Department. It also supports 6 employees in whole or part (4 Full Time Equivalent positions) and 2 Part Time Temporary seasonal employees in other City departments.

Summary of the 2011 Budget Request

Specifics of the 2011 Budget Request are outlined below.

1. There was a one-time change to the accounting practices used for inventory, resulting in a reported 2009 expenditure reduction of $724,107 to divisions 7210, 7220, 7310, 7410 and 7610 and corresponding increase in inventory assets. The majority of these adjustments were made to division 7610. In addition to the inventory adjustment, reported expenditures were further reduced by $268,493 for fixed asset additions.
2. The Budget Request reflects required increases over 2010 Budget levels totaling $280,989 for raw water costs, Personal Services and General Fund transfers. However, the net increase is only $101,218 (0.5%) relative to the Utilities’ 2010 Adopted Budget due to almost $179,771 in reductions of other O&M expense requests. Baseline 2011 payroll projections used for Personal Services include no funding for merit.
3. The Utilities’ 2011 Budget Request Package was developed using similar criteria as for the 2010 Budget. Accordingly, the Budget Request assumes similar weather conditions and production as in 2009 and addresses budgetary funding for the operation of existing Utilities infrastructure. A particularly dry summer or a wet spring—leading to higher water production and/or wastewater treatment demands—may necessitate budget adjustments.
4. Operational Capital Equipment Outlay requests total $375,000. Of this amount:
1. $320,000 is to replace old and worn out equipment (digester heater, backhoe, generator, clarifier drive and sludge pump).
2. $55,000 is to purchase new equipment for laboratory services. This will allow Utilities to begin performing some of the currently outsourced laboratory testing. These capital outlay costs will be recouped over the estimated life of the equipment through reduced shipping and outside laboratory fees.
3. No funds are budgeted for the approximately $350,000 in equipment costs for needed replacement of large specialty vehicles (dump truck, tractor, skid steer loader and forklift).
4. The Department continues its cost-savings practice of using castoff but still serviceable vehicles from other City departments whenever possible, including in-house retrofits to make the vehicles appropriate for our needs (Unit 277).
5. Transfers to the General Fund have been increased by $139,746 (5%) from the approved 2010 Budget, for a total of $2,934,751.
6. The Request addresses immediate capital needs—not future capital needs. Staff has identified several future capital needs as significant and pressing. Completion of the Wastewater Master Plan late this year and continued forward motion of the Water Master Plan will provide us with the tools to prioritize these future needs and ensure sufficient funding sources through water and wastewater rates and through debt financing.

2009 Utilities Department Accomplishments

Significant accomplishments and activities over the past 12 months include:

1. Expanding use of automation and other technological tools to enable same-level or reduced staffing levels to manage a large and expanding infrastructure. Substantial portions of these technological improvements are increasingly performed by the Department’s Control System Technicians and other staff at significant cost savings.
1. A good example is the recent completion of a project adding 6 elevated water storage tanks to the new water SCADA automated system.
2. In-house activities included design, acquisition of materials, panel fabrication, installation/field wiring, PLC programming, HMI screen development, historical data storage, trending and alarm configuration.
3. Along with upgrading to newer technology and improved reliability, Utilities now has the ability to maintain and repair this equipment with immediately responsive in-house staff on a cost-efficient basis relative to costs previously incurred from outside contractors.
4. The estimated out-of-pocket cost for this project was approximately $10,000 per tank (approximately equivalent to the cost of 2 service calls to repair the old equipment) for a total project cost of $60,000.
5. This total amount is less than it would have cost to have a contractor upgrade just 2 of the tanks, thus leaving us with a savings of over $120,000.
2. Substantial update of the material specifications, design criteria and standard details for water mains and sanitary sewers for use by the construction, engineering and development community and others.
3. Ongoing development of a “pipe condition index” using GIS and work order data to identify aging and/or compromised infrastructure and prioritization of repair and rehabilitation.
4. Extension of water main and current design of sanitary sewer to the Lawrence Municipal Airport for enhanced development opportunities.
5. In conjunction with the recent conversion from chlorine gas to liquid chlorine at the Kaw Water Treatment Plant, maintenance and operation staff relocated chemical storage and feed locations for polymer, bisulfite and fluoride. This project has eliminated several safety concerns (including physical handling of 55-gallon drums by hand and appropriate fluoride storage) and increased operational efficiency.
6. Implementation of a nitrification monitoring program at the water storage tanks, with estimated annual cost savings of $15,000 due to decreased chemical and labor costs otherwise incurred in correcting this recurring issue.
7. Replacement of 2,442 water meters (sized 5/8- inch or 1-inch) and 41 meters larger than 1-inch pursuant to the Meter Replacement Program.
8. Consolidation of all 905 Pay Grade positions into a shared Utility Operator position with work area assignments, thereby enhancing ongoing cross training and deployment of staff resources to meet operational needs quickly and efficiently.
9. Continued recognition of Utilities’ commitment to excellence, quality control and customer service:
1. ISO 9001 Quality Management System Certification.
2. Maintenance of the Department’s Management System for ISO 14001 Environmental Management, OHSAS 18001 Occupational Health & Safety Management and NPB EMS for Biosolids Management, with an annual external audit to occur this fall.

Performance Measurement

Utilities staff continues to focus on its mission to provide safe, clean drinking water and to return wastewater safely to the environment through cost-effective, efficient, reliable and continuously improving operations. Over the past few years, there has been an intentional reinvestment in the City’s water and sewer system, both at the plants and in the water distribution and sewer collection systems throughout the community. Staff has made significant progress in addressing deferred maintenance and improving the reliability of the water distribution and sewer collection systems through targeted and prudent maintenance efforts. The Utilities Department has worked diligently to improve its performance measurement system in order to document these improvements.

Highlights of the Utilities Department 2009 full performance measurements report are provided below:.

1. What is Lawrence doing to ensure good quality and safe drinking water?
2. What is Lawrence doing to ensure properly treated wastewater?
3. What is Lawrence doing to prepare the water system for growth?
4. What is Lawrence doing to prepare the wastewater system for growth?
5. What is Lawrence doing to ensure water costs are reasonable and appropriate?
6. What is Lawrence doing to ensure wastewater costs are reasonable and appropriate?
7. What is Lawrence doing to ensure the reliability of the 444 miles of water distribution system?
8. What is Lawrence doing to ensure the reliability of the 426 miles of wastewater collection system?

Staffing Levels

The delivery of water and wastewater services to the Lawrence community and others requires 24/7 operations, from continuously operating plants and other structures to staff who are ready and able to fix problems day or night in all weather conditions. Recognizing the health and safety components of potable water, fire suppression and treated wastewater, the Department places a premium on its ability to rapidly deploy trained employees who are ready and able to perform tasks safely and efficiently. The Department’s ongoing reorganization across functional lines and increased emphasis on operational tools such as automation, cross training, standardization of procedures and ready access to needed resources prompted an internal assessment of FTE levels in 2009 and subsequent elimination of certain positions.

These FTE changes are shown in the following table. As noted below, Fund 501 funds the Utility Billing Division of the City’s Finance Department as well as other City FTE positions.

	FTEs in Fund 501 - Water and Wastewater
Division		2006	2007	2008	2009	2010
1069	Finance - Utility Billing	21.26	22.26	22.26	22.26	22.26
7100	Utilities - Administration	4.00	6.00	9.00	9.00	9.00
7100	Non-501 FTEs	3.00	3.50	5.00	4.00	4.00
7110	Utilities - Engineering	11.00	13.00	12.00	12.00	9.00
7210	Utilities - Clinton Plant	11.00	11.00	11.00	11.00	11.00
7220	Utilities - Kaw Plant	13.00	16.00	15.00	15.00	13.00
7310	Utilities - WWTP Plant	17.00	20.00	19.00	19.00	19.00
7410	Utilities - WW Collection	14.00	15.00	15.00	15.00	15.00
7510	Utilities - Water Quality	5.00	5.00	5.00	5.00	4.00
7610	Utilities - Water Distribution	20.00	22.00	22.00	22.00	22.00
Combined FTE Total		119.26	133.76	135.26	134.26	128.26
Utilities 7100-7610 Total		95.00	108.00	108.00	108.00	102.00

Significant Issues for the Department

Significant issues for the Utilities Department include:

1. Multiple taste and odor issues due to changing raw water conditions at the aging Clinton Reservoir. These issues have generated increased customer service calls about water quality and increased chemical expenditures for treatment. Additional laboratory analyses are enabling us to flag and react faster to raw water changes, but long-term solutions are yet to be identified.
2. Operational challenges in managing consistent delivery of excellent water and wastewater services given aging and/or compromised infrastructure. Funding reductions to and deferrals of preventive maintenance/rehabilitation programs compromise system reliability, hasten structure deterioration, necessitate more costly emergency point repairs and limit our ability to prioritize work on a proactive, planned basis.
3. Increased funding for General Fund transfers, funding of other City expenditures and provision of no-charge water or services for other City functions. These expenses impact user rates and reduce available revenues for water and wastewater costs of service.
4. Justifying infrastructure expansion, particularly when the growth intended to fund new infrastructure has slowed or is inadequate for recoupment of costs and/or debt incurred.
5. Increasing regulatory requirements for water and wastewater operations.

Summary

Thank you for your consideration of the Utilities Department’s 2011 Recommended Budget Request and Capital Request Package. We believe that this request strikes a balance between being appropriately responsive to the need to control expenditures and the need to continue to provide for adequate maintenance of the utility system to ensure its reliability.  Staff is available to answer questions or provide any additional information you may need.