ACTION REQUESTED:
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Communication from the City Manager with a Request to Approve a CONSTRUCTION AGREEMENT with ILLINOIS AMERICAN WATER COMPANY for a Water Distribution Main on the ORANGE PRAIRIE ROAD EXTENSION PROJECT. (Location Map Attached) [District 5]
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BACKGROUND: Illinois American Water Company (IAWC) provides water service to the City of Peoria and unincorporated areas near the City of Peoria. They hold a certificate of public convenience issued by the Illinois Commerce Commission ("ICC"), granting it the right to furnish water service within a certificated area. The City is installing a new roadway extension to Orange Prairie Road and is currently planning the second phase of this roadway which will run north from Woodsage Road to Rt. 91.
In 2012, IAWC ended their arrangement with the City whereby the Water Company placed the garbage bills on the water bill, alleviating the need for the City to bill residents directly. In closing out this arrangement, City staff discovered that the Water Company was charging more than was provide for in the agreement. This overcharge occurred when the City switched from quarterly to monthly billing. Under quarterly billing, IAWC charged the City $0.60 per bill. When the City switched to monthly billing, the charge was supposed to be $0.20/bill, but instead the City was charged $0.60 per bill. In total, IAWC charged the City $1,283,348 too much.
City staff recommends that Council approve the attached Construction Agreement as the best manner to be reimbursed for the overbilling. This Agreement would do the following:
1. IAWC would install the water distribution main and related facilities for the Orange Prairie extension out of the funds owed the City. By paying for the construction of the main, the City would be eligible for a 10-year capital cost recovery payments as customers connect onto the main, similar to a private developer. The estimated cost of the water main is $611,282.
2. IAWC will file an application before the ICC that will adjust their certificated area to the boundaries of the City of Peoria's current corporate boundaries, and the Water company agrees not to provide water service outside of its certificated areas without the City of Peoria's approval.
3. The remaining $672,066 would be remitted to the City of Peoria.
In March 2010, the City of Peoria entered into an Agreement with IAWC that contemplated the City constructing water mains in identified development zones and receiving cost recovery for that investment. IAWC agreed at that time to modify their certificated areas. This agreement is consistent with the prior Construction Agreement approved in 2010. That agreement and the minutes from that meeting are also attached. Additionally, a map of the Orange Prairie Road extension project is attached.
FINANCIAL IMPACT: $672,066 would be immediately reimbursed to the City and IAWC would use the remaining funds to construct the Orange Prairie main. As customers tap into the water main extension, the City would recuperate this cost.
NEIGHBORHOOD CONCERNS: Not generally applicable, however controlling growth has been a topic of concern to the Council and community in general.
IMPACT IF APPROVED: If approved, the City will received $672,066 in cash, the Orange Prairie main will be extended, and the City of Peoria will have additional methods by which to control growth along the City's corporate boundaries. Additional reimbursement for new users along the Orange Prairie main will allow the City to recover our capital costs.
IMPACT IF DENIED: IAWC would remit to the City $1,283,348 for the overbilling, but the City would forego the opportunity to manage growth in Northwest Peoria in a more orderly fashion.
ALTERNATIVES: None.
EEO CERTIFICATION NUMBER: Not applicable.
WHICH OF THE GOALS IDENTIFIED IN THE COUNCIL'S 2014 - 2029 STRATEGIC PLAN DOES THIS RECOMMENDATION ADVANCE?
1. Grow Peoria: Businesses, Jobs, and Population
2. Financially Sound City Government, Effective City Organization
WHICH CRITICAL SUCCESS FACTOR(S) FROM THE COMPREHENSIVE PLAN DOES THIS RECOMMENDATION IMPLEMENT?
1. Invest in our infrastructure and transportation.
2. Invest in our infrastructure and transportation.
DEPARTMENT: City Manager's Office