Denver Water City Services

Without adequate processes to review charges, the city could overpay Denver Water for the services it receives. Meanwhile, Transportation & Infrastructure cannot be certain that switching sewer service billing to an in-house service is the best method of providing billing services to Denver customers.

Finding 1 - The City’s Dependence on Denver Water’s Price Setting Could Lead to the City Overpaying for Services

• The city does not check whether the discounted governmental water rate charged to the city is calculated in compliance with the Denver Charter.
• The Department of General Services does not adequately review the city’s monthly water bills.
• The Wastewater Management Division does not adequately check the accuracy of Denver Water’s fees for sewer billing services, which are done on the city’s behalf.

Finding 2 - The Ongoing Analysis to Potentially Discontinue Sewer Billing Services through Denver Water Is Flawed

Transportation & Infrastructure’s analysis to bring sewer billing into its own system does not consider several factors based on government leading practices. Furthermore, its cost analysis does not include all relevant costs, the timing of cash flows, and the riskiness of cash flows.

1.1 Review Annual Discounted Governmental Water Rate – The Wastewater Management Division should develop and document a process to review the annual discounted governmental water rate provided by Denver Water to ensure it aligns with the Denver Charter and excludes prohibited costs. Specifically, the review should confirm:

• The rate charged to the city does not exceed Denver Water’s cost of water furnished to the city.
• The rate charged does not include costs for debt service, betterments, additions, or extensions per city charter.

In the event the rate is incorrect, the Wastewater Management Division should notify city agencies that receive water bills, including the Department of General Services, Denver International Airport, and Denver Parks and Recreation.

Agency Response: Agree, Implementation Date – June 30, 2022

1.2 Review Water Rates Charged on Monthly City Water Bills – The Department of General Services should develop and document a process to review the type of service agreement on all water bills for city properties to ensure Denver Water has charged the correct discounted governmental water rate.

Agency Response: Agree, Implementation Date – July 6, 2022

1.3 Review Denver Water’s Annual Service Fee Cost Estimate – The Wastewater Management Division should develop and document a process to review the annual cost estimate for billing service fees that Denver Water provides to ensure no erroneous costs are present before the city agrees to the annual fee.

This review should include, at a minimum, an evaluation of the direct costs allocated to the city and the number of accounts Denver Water has for the city to ensure costs are proportioned accurately .

Agency Response: Agree, Implementation Date – Sept. 30, 2022

2.1 Revise the Decision Analysis for Sewer Billing to Align with Governmental Best Practice – T he Wastewater Management Division’s analysis to move sewer billing in-house should align with city and county government best practice. At a minimum, this should include the consideration of the following:

1. Strong executive direction.
2. Stakeholder Input.
3. Service Requirements.
4. Flexibility of the arrangement to bill in-house.
5. Reversibility of the arrangement to bill in-house.
6. Transition Costs.
7. Communication.
8. Cost and Service Quality (consideration of qualitative as well as quantitative factors.)

Agency Response: Agree, Implementation Date – Dec. 31, 2022

2.2 Improve Upon the Net Present Value Analysis Tool – In addition to Recommendation 2.1, the Wastewater Management Division should improve upon its net present value analysis to include all incremental costs identified and to ensure cost estimates and discount rates reflect the most current available information. Additionally, the analysis should consider the riskiness of estimated future cash flows. This can be accomplished in two ways :

1. Requiring a higher cost-savings threshold for project acceptance for riskier projects.
2. Using higher discount rates for more risky cash flows.

Agency Response: Agree, Implementation Date – Dec. 31, 2022

A follow-up report is forthcoming.