§ 126-121. Rates, fees and charges—General.

This section shall apply to Sections 126-122 through 126-129.

(a)

Effective date of current rates. All rates, fees and charges of every Franchisee in effect on the effective date of this article and which have been approved by the Board shall be the lawful rates, fees and charges of that Franchisee and shall continue in effect as lawful rates, fees and charges until changed by the Board as provided in this article.

(b)

Board approval. A Franchisee shall not demand, charge, collect, or receive, directly or indirectly, any rate, fee or charge not approved by, and on file with, the Board for the particular class of service involved. All time frames for Board approval set forth herein are subject to adjustment for scheduled Board recesses.

(c)

Compliance with standards of operation. The Board may condition the granting of new rates, fees, charges, rules and regulations or conditions of service to any Franchisee upon compliance of such Franchisee with the standards of operation required pursuant to the provisions of this article and all other applicable County, State and federal laws.

(d)

Compliance with reporting requirements. Unless otherwise approved by the Board, no Franchisee shall implement a rate increase or decrease unless it has a current Franchise Agreement pursuant to Section 126-114 and has filed with the Board a current Annual Financial Report and/or Audited Financial Statement as required by Section 126-116.

(e)

Test Year/Pro Forma Year data. The data presented in any statement concerning a Test Year shall be limited to actual income and expenses as determined on an accrual basis during the subject period without adjustment or alteration. The data presented in any statement concerning a Pro Forma Year shall be limited to adjustments to the data for the Test Year to account for known changes which are expected to occur during the Pro Forma Year.

(f)

Requests for management and clerical salaries. Requests for management and clerical salaries must be supported by documentary evidence that itemizes all daily work performed by management and clerical staff, including, with particularity, the time spent and the work performed specific to the Franchisee, supported by competent, substantial evidence (such as daily time sheets or time logs) demonstrating that the management and clerical salaries allocated to the Franchisee are fair and reasonable and that the work performed provides a direct benefit to the Franchisee customers. All data provided pursuant to this subsection shall be submitted in affidavit form.

(g)

Allocation of indirect costs. If an allocation methodology is utilized for indirect costs, it must be based upon generally accepted ratemaking standards utilized in Sarasota County and supported by competent, substantial evidence demonstrating that the amounts allocated to the Franchisee are fair and reasonable and provide a specific benefit to the Franchisee customers. Requests predicated on unsupported estimates or speculation shall not be considered.

(h)

Acquisition Adjustment.

(1)

General policy. The purchase of a Public Utility at a premium or a discount shall not affect Rate Base. In extraordinary circumstances, the Board will only consider a request for an Acquisition Adjustment upon a transfer of utility assets. No Acquisition Adjustment will be considered when there is a stock transfer. Any entity that believes a full or partial positive Acquisition Adjustment should be made has the burden of proof to prove the existence of extraordinary circumstances. Upon proof of extraordinary circumstances, a full or partial positive Acquisition Adjustment may be approved at the discretion of the Board.

(2)

Extraordinary circumstances. In determining whether extraordinary circumstances have been demonstrated, the Board shall consider evidence provided to the Board such as anticipated improvements in quality of service, anticipated improvements in compliance with regulatory mandates, anticipated rate reductions, rate stability over a long-term and anticipated cost efficiencies. These factors are not all-inclusive nor are they meant to imply that the Acquisition Adjustment would be automatically granted. Each case is reviewed on its own merits and in light of its specific circumstances.

(3)

Negative Acquisition Adjustments. A negative Acquisition Adjustment shall not be included in rates unless there is proof of extraordinary circumstances or where the purchase price is less than 80 percent of Net Book Value. If the purchase price is less than 80 percent of Net Book Value, then the inclusion of a negative Acquisition Adjustment shall be calculated pursuant to paragraph b. below.

a.

Contested. Any party that believes that a full or partial negative Acquisition Adjustment should be made has the burden to prove the existence of extraordinary circumstances. Under no circumstances, however, shall the purchaser be required to record on its books more than 80 percent of a negative Acquisition Adjustment. In determining whether extraordinary circumstances have been demonstrated, the Board shall consider evidence provided to the Board such as the anticipated retirement of the acquired assets and the condition of the assets acquired.

b.

Uncontested. If the purchase price is less than 80 percent of Net Book Value, then the amount of the difference in excess of 20 percent of Net Book Value shall be recognized for ratemaking purposes as a negative Acquisition Adjustment. The negative Acquisition Adjustment shall not be recorded on the books for ratemaking purposes or used for any earnings review unless the purchaser files for a full rate case pursuant to this article. The negative Acquisition Adjustment shall be amortized over a five-year period from the date of issuance of the order approving the transfer of assets.

(4)

Amortization period. In setting the amortization period for a Board-approved Acquisition Adjustment, the Board shall consider the evidence provided to the Board such as the composite remaining life of the assets purchased and the condition of the assets purchased. Amortization of the Acquisition Adjustment shall begin on the date of issuance of the order approving the transfer of the assets.

(5)

Subsequent modification. Any full or partial positive Acquisition Adjustment approved by the Board may be subsequently modified if the extraordinary circumstances do not materialize or subsequently are eliminated or changed within five years of the date of issuance of the order approving the transfer of assets.

(i)

Notices.

(1)

With the exception of price index and pass through rate applications, when the County Staff determines that a Franchisee has complied with the minimum filing requirements for a rate adjustment application as provided for herein, the Franchisee shall provide each customer with written notice of the rate application. County Staff shall approve the form and content of the notice prior to distribution of the notice by the Franchisee to the customers. The notice shall contain the following:

a.

A statement indicating the Franchisee is applying to the County for an adjustment of its rates, fees and charges, including an explanation for the requested rate adjustments;

b.

Name, address, telephone number and office hours of the location where the rate application is available for public inspection; and

c.

The Franchisee's currently approved rates, fees and charges compared with the rates, fees and charges sought by the Franchisee in the rate application.

(2)

Implementation of new rates. Within ten days following the Board adoption of a Resolution authorizing a rate adjustment, the Franchisee shall notify each customer of the increases or decreases authorized by the Board. The notice shall include the approved rates, the date of implementation of the new rates, and an explanation of the reasons for the increases or decreases. The notice to the customers shall be approved by County Staff prior to sending to the customers and will be sent to the customers via regular USPS mail service.

(j)

Considerations prior to setting rates.

(1)

The Board shall, either upon request or upon its own motion, determine and fix rates for water and/or wastewater service for each customer class which are just, reasonable, compensatory, and not unfairly discriminatory. In all such proceedings, the Board shall consider the value and quality of the service, as well as the rate history and experience of the Franchisee and former owners of the Public Water or Wastewater System, including revenues received and expenses incurred through the operation of non-regulated services which involve the use of utility assets or a co-mingling of revenues received or a sharing of expenses. The Board shall also consider the consumption and demand characteristics of the various classes of customers and public acceptance of rate structures.

The Board shall set rates which take into consideration the cost of providing service, which shall include, but not be limited to; operating and maintenance expenses, depreciation, amortization, taxes other than income and income taxes incurred in the operation of all property used and useful in the public service, and a fair return on Rate Base.

(2)

No Franchisee may collect any sum for depreciation on contributed property or CIAC.

(3)

The Board shall investigate and determine the Rate Base of each Franchisee.

(4)

When a Franchisee's Invested Cost of property has been reduced to zero or below, all additional collections of cash CIAC shall be held by the Franchisee in escrow, with such proceeds to be deposited by the Franchisee in a fully funded, interest-bearing reserve account established with a local financial institution. The monies so deposited shall be fully insured by an agency of the United States government or invested in direct obligation instruments of either the State of Florida or the United States.

The Franchisee may expend monies on deposit in the CIAC fund upon the filing of a letter of Corporate Undertaking by the Franchisee in the amount of the withdrawal and subsequent approval by County Staff. The CIAC fund, including accrued interest, may be expended by the Franchisee only for the following: plant expansion costs, the cost of improvements directly related to such expansion, replacing CIAC retired from service, improvements to CIAC necessitated by advances in technology or by government regulation, or the replacement or relocation of CIAC necessitated by factors beyond the control of the Franchisee. All property replaced, constructed, improved or relocated with funds withdrawn from the reserve account, including accrued interest, thereafter shall be and become CIAC and be eliminated from the Rate Base. "Replacing" shall mean the construction or installation of utility plant in place of property retired utility assets, together with the removal of the retired property, in accordance with the standards of NARUC. A detailed statement of purpose of the withdrawals by the Franchisee during its fiscal year of operation shall be submitted as a part of the Annual Financial Report as required by Section 126-116.

It shall be a violation of this article and of the Franchise Agreement to expend monies from the escrow account for any purpose not approved by County Staff. Any unauthorized expenditure of CIAC cash and accrued interest from the escrow account, not approved by County Staff and not reimbursed to the CIAC escrow account, including interest, shall constitute a violation of this article and be subject to enforcement pursuant to Sections 126-135 and 126-136.

(Ord. No. 2016-041, § 2, 9-21-2016)