This is a discussion item for the workshop. Formal action by way of a Resolution is on tonight's City Council meeting agenda.

Supported Strategic Priorities

• Financial Sustainability
• Asset Management

On April 13, 2020, Council authorized a Settlement Agreement with Ferguson Waterworks which outlined a water meter replacement plan to upgrade to new technology due to failing existing infrastructure.  This agreement is attached for reference. The settlement was based on the last full meter replacement program in 2013.  The components include water meters, radios and collectors.  There are approximately 7500 total single family accounts.

Pricing was set for purchasing the new components and for installation by Ferguson if requested by the City.  This pricing was locked in for three years, with inflationary price increases each year after that.

Since that time the six collectors have been installed, plus one additional to fill a gap in coverage.  So we currently have both old tech collectors and new tech collectors up and active.  One of the old tech collectors failed and needed replacement, which was recently done.

The City was planning on utilizing utility staff to perform the needed meter/radio replacements, which would occur over a 6-8 year period.  Staff (1 FTE) can effectively replace four meters per day.  We have replaced approximately 500 radios with the new tech.  This number is fairly low due to the impacts of the COVID-19 pandemic and the City halting all in-home operational activities along with other utility operational priorities.  This in-home work resumed back in early February.

We currently have approximately 200 radios that have failed and new failures are happening with each passing day.  The failures mean that we lose the ability to automatically read the usage and rely on estimates for billing purposes.  Failure rate is expected to escalate as time goes on.

Staff is recommending that the City engage Ferguson Waterworks to perform the remaining meter/replacements based on the following merits:

• New meters more accurately measure the usage rates and most always result in increased revenue
• Currently we have a mix of two different technology resulting in two sets of assets to maintain, once all radios are replaced, the old technology can be decommissioned
• Reducing the stress of other utility operational needs...keeping one FTE solely on meter replacements is not sustainable
• Upon full build-out of the new technology, we could potentially transition to a monthly billing scenario, which would help with water conservation (leak detection), monthly budgeting for our customers, and improved cash flow for the City
• The administration of the meter replacements (managing schedule, etc.) diverts finance administrative staff from working on other needs
• The benefit of leveraging fixed costs for the materials and installation, which are both very favorable based on current market conditions
• Having consistent infrastructure across the City helps with operational efficiencies and future buildout programs (the average life-cycle of the water meter and radios is approximately 15 years)
• This is a proactive measure, rather reactive (waiting for radios to fail)

The following financing plan shows the net financial benefit of having Ferguson perform the remaining water meter replacements.  The funding would be financed via bonding and would be supported by a 50/50 split from the water and sewer enterprise funds.  These numbers do not include the impacts of inflation or increased revenue from more accurate usage reads which would both increase the financial benefit.