Page 20 - Colleyville FY21 Budget

UTILITY FUND

The Utility Fund is a proprietary fund structured and operated as a stand-alone
business or enterprise. It accounts for all the activities required for the provision of
water and sanitary sewer to residents of the city. In fiscal year 2017, the Utility Fund
was split into two funds- the Utility Fund and Utility Capital Projects Fund, although
these funds are rolled together for financial reporting purposes in the Certified Annual
Financial Report (CAFR). The Utility Fund functions as the operating fund. The Utility
Capital Projects Fund is where revenues and expenditures for utility capital projects
are accounted for. This includes water and wastewater impact fees, revenue from the
CIP base rate, and year-end operating surpluses transferred over from the Utility
(operating) Fund. Creation of the Utility Capital Projects Fund has allowed for easier
tracking, communication, and forecasting. The sections below specifically discuss
revenues and expenditures for the Utility Fund.

Revenues
Utility bills include both volumetric and base rates. The City’s operating costs for
delivery of treated water and collection of wastewater are included in the monthly
water and wastewater base rates. The volumetric rate is a direct pass through of the
costs the City pays to Trinity River Authority (TRA) for treated water and wastewater
treatment. Both the base rates and volumetric rates are reviewed and updated on an
annual basis, concurrent with the City’s fiscal year for base rates and TRA’s fiscal
year for volumetric rates. Water and wastewater volumetric charges account for 77
percent of operating revenue and water and wastewater base rates account for 18
percent. Interest, tap fees, and miscellaneous revenues comprise the remainder.

Water Rates
Prior to fiscal year 2016, the Colleyville Utility System operated on a much more
traditional, tiered rate structure. Based on an inclining scale from 1,501 gallons used
to over 50,000 gallons used, the rates were initially intended to encourage water
conservation. In actuality, this resulted in the utility earning far more in revenue than
it needed. The years of cash surpluses built up to a point where it was obvious the
rate philosophy wasn’t working as intended. A consultant was hired and a citizens
rate advisory committee was formed to tackle the issue. The final recommendation
was to cover the utility’s costs with static base rates based on meter size for both
operational and capital expenses and to pass through the Trinity River Authority’s
volumetric costs with a rate based on consumption. The base rates are reviewed
annually during the budget process. This year, staff and Council determined that
modest increases in the operating and capital (CIP) rates were warranted. Below is
a comparison of the monthly rates for fiscal years 2020 and 2021. It should be noted
that approximately 96% of all customers in Colleyville have a meter size of 1” or less.

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