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Home My WebLink About[07] Utility Rate Study GettingGreatRatesxom Creating Informed Ratesetting Decisions November 25,2015 The Honorable Rick Schultz,Mayor City of St.Joseph P O Box 688 St.Joseph,MN 56374 Subject:User Charge Analysis Report Dear Mayor Schultz: Attached is your rate analysis report package.Before I address that,I want to say this to you,the council and all others who will read this. Lori Bartlett,your finance director,was my contact with the City for this project.She really made it go nicely.Lori thoroughly acquired data and information and sent it to me quickly without any fuss.And when I asked,a few times,for second and third iterations of the same data sets to verify some things or make new calculations,she sent those without a fuss,too. She back checked many things for me and was always wonderful to work with.I know she went to other staff for some of the data and information and they obviously were prompt and got it right,too.It's always a joy to work with people like this.The folks of St.Joseph should count themselves lucky to have such high-quality,responsive City staff to serve them. As for the report package,it is a bit long and parts of it are complex.Fortunately,the majority of the analysis models are the same for both utilities except for the actual data for each.Thus,once you have read through and get a fair understanding of the water rate analysis model,you should be able to move through the sewer model pretty quickly and easily.And,whatever seems to be a bit difficult to figure out now,I can describe in person when I meet with you and the council next month. Finally,I am sure you and the council members know of other cities and districts that also need rate setting help.I bet some of them are your neighboring towns and cities. As you run into these folks,I hope you will tell them about me.I get almost all of my business by referrals from past clients and I hope to be able to trace several future clients back to my work with St.Joseph. Best regards, GettingGreatRates.com C*k- Carl E.Brown President Enclosures Getting6reatRates.com 1014 Carousel Drive Jefferson City Missouri 65101 carlegettinggreatrates.com www.carlbrownconsulting.com (573)619-3411 GettingGreatRates.com Creating Informed Ratesetting Decisions Water and Sewer Rate Analysis Report City of St. Joseph, Minnesota Prepared November 25, 2015 Carl Brown, President GettingGreatRates.Com, LLC Executive Summary GettingGreatRates.com analyzed the water and sewer rates of the City of St. Joseph, Minnesota. Both utilities' revenues are significantly too low to cover all operating and debt payment costs. Therefore, overall rates should be increased and rates should be restructured somewhat. This report lays out how rates should be adjusted to achieve these goals. GettingGreatRates.com 1014 Carousel Drive Jefferson City Missouri 65101 cart@gettinggreatrates.com www.carlbrownconsulting.com (573)619-3411 1 St.Joseph,MN Rate Analysis Report, 11/25/15,Page 2 of 15 Table of Contents ExecutiveSummary...................................................................................................................................1 Introduction................................................................................................................................................3 Principles.....................................................................................................................................................4 General and Over-arching Issues............................................................................................................4 Action Recommendations for Policy and General Issues....................................................................6 WaterUtility Discussion...........................................................................................................................7 WaterConservation...............................................................................................................................7 RatePremiums........................................................................................................................................8 System Improvements and Debt Service............................................................................................8 Tap-on (Access) Charges and Minimum (Line) Charges .................................................................8 UnitCharge Rate Structure...................................................................................................................9 TargetReserve Levels............................................................................................................................9 RateAffordability...................................................................................................................................9 BillCity Properties...............................................................................................................................10 Recommendations for Water Rates....................................................................................................10 Action Recommendations for Rates and Fees: .............................................................................10 Table 1: St.Joseph, MN Bi-monthly Water Line Charge,MDS Test Fee and Unit Charge....11 Closing...................................................................................................................................................11 SewerUtility Discussion.........................................................................................................................12 SystemImprovements.........................................................................................................................12 Tap-on (Access) Charges and Minimum (Line) Charges ...............................................................12 TargetReserve Levels..........................................................................................................................12 Retain the Current Unit Charge Structure........................................................................................12 College of St. Benedict Rates...............................................................................................................13 Consumptive Use of Water Exempted From Sewer Billing...........................................................13 RateAffordability.................................................................................................................................14 BillCity Properties...............................................................................................................................14 Recommendations for Sewer Rates....................................................................................................14 Action Recommendations for Rates and Fees: .............................................................................14 Table 2: St.Joseph, MN Bi-monthly Sewer Line Charge and Unit Charge..............................15 Closing...................................................................................................................................................15 RateAnalysis Models..................................................................................................................Attached Getting6reatRates.com 1014 Carousel Drive Jefferson City Missouri 65101 carlegettinggreatrates.com www.carlbrownconsulting.com (573)619-3411 2 St.Joseph,MN Rate Analysis Report, 11/25/15,Page 3 of 15 Introduction In 2015, the City of St.Joseph, Minnesota,later called "the City" or "you,"hired GettingGreatRates.com,later called "me" or "I" to perform rate analyses as guidance for the City in its efforts to set and maintain adequate and fairly structured user charges for its water and sewer utilities. As a result, I analyzed the financial condition of each utility, considering operating costs, capital improvement needs over the next 10 years,equipment repair and replacement needs over the next 20 years and many other issues. In your case,the most significant driver of the need for higher rates is already substantial debt service,which is slated to grow significantly over the next few years. It appears there is no alternative to building the improvements you are planning so unless very large grants appear in your future, rates will simply need to rise significantly to pay for these improvements. Quite importantly, the rate structures available for me to model are limited.You have in place a monthly minimum charge structure (water access and sewer access charges) that is well established. You also have in place water and sewer line charges. As a result, to make up the revenue shortfall, only unit charges are available for me to adjust. Thus, in the models I continued the previously mentioned fees, including already planned increases in those fees. I then modeled unit charges to increase as needed to cash flow the utilities properly. As to the structure of the narrative report, it will cover water first and sewer last. Many things or issues that apply to one utility also apply to the other utility. In the interest of brevity, when an issue applies to the sewer utility, too, I will only mention it in coverage of that issue in the sewer subsection of the report. The report package is composed of two sections.The first section is a narrative report that tells readers what should be done to each utility's rates and why. The narrative report will cover issues in this order: principles, general issues and general action recommendations that apply to both utilities;then a water subsection that covers general issues, discussion of significant specific issues and presentation of rate and policy recommendations, followed by a sewer subsection that covers the same issues. The second section of the report package is composed of printouts of the spreadsheet models. These are simply a set of integrated calculations that mathematically depict or "model" the utilities' situations in order to arrive at the recommended rates for each. The models are named "St.Joseph, MN,Water Rates Scenario 1015-1" and "St.Joseph, MN, Sewer Rates Scenario 1015-1." Later in this report these names will be shortened to "Water Scenario 1" and "Sewer Scenario 1," respectively. Within each subsection the applicable model will often simply be referred to as "the model." As you read this report, please keep this in mind. This report does not direct the City to do anything. Actions you take or do not take are strictly up to you. The report is meant to inform and educate so you can then make well-informed decisions about actions to take.And the report and model are not legal recommendations.For legal issues consult your attorney. GettingGreatRates.com 1014 Carousel Drive Jefferson City Missouri 65101 cart@gettinggreatrates.com www.carlbrownconsulting.com (573)619-3411 3 St.Joseph,MN Rate Analysis Report, 11/25/15,Page 4 of 15 Principles I use several guiding principles when I help systems set their utility rates, fees and policies. As you read the report and the analysis model, keep in mind that my recommendations have been weighed against these principles: 1. Water, sewer and all other utilities are businesses, regardless of who owns them. Businesses must cash flow properly. 2. In addition to functioning in a business-like manner, a utility has a responsibility to its customers to nearly guarantee its long-term prosperity for their benefit. The customers expect the service to be there whenever they want to use it. Thus, a utility must err on the conservative side by maintaining strong reserves that will enable it to weather financial storms. 3. If a service costs the utility money, the utility should recover that cost from the most logical "person' if that makes good business and community administration sense. For example, generally "growth should pay for growth." Developers should fairly pay for their consumption of utility capacity by paying commensurate tap fees. Likewise, service users should pay for their use. Each user or class of users should pay their fair share of service costs. 4. Sometimes contradicting point 3 above, if adjusting a rate, fee or policy will turn currently "good" customers into "bad" customers, consider the necessity of the change carefully before making it. For example, while it may be warranted, raising the minimum charge markedly to your residential customers may make it very difficult for fixed, low-income customers to pay their water bills. That may cause more of them to pay late or not pay at all. That would trigger the utility's bill collection process;by nature, an inefficient way of paying a utility's costs. Thus, in the attempt to generate more net revenue by raising rates, net revenues may actually go down due to non- payment and payment collection costs. General and Over-arching Issues The most significant issue is that your current rates are inadequate to fully fund the utilities. That needs to change. Reserves are shown near the bottom of Table 6 of each model.You will see in both models that, the "Sum of All Reserves" amount is now what I would consider to be adequate.With unit charge increases, reserves will continue to grow stronger over time. This is due to three main factors: • You are currently subsidizing the water and sewer utilities with general revenues and in the case of water, ad valorem tax receipts, as well. This enabled you to maintain good reserves into the test year. • You already intend to increase water and sewer access fees substantially. I have included those increases in my model, too. GettingGreatRates.com 1014 Carousel Drive Jefferson City Missouri 65101 cart@gettinggreatrates.com www.carlbrownconsulting.com (573)619-3411 4 St.Joseph,MN Rate Analysis Report, 11/25/15,Page 5 of 15 • I have modeled very substantial unit charge rate increases for both water and sewer that will replace the subsidies that are now coming from other fund sources. These increased fees will fund the utilities adequately. Concerning construction of the models, for both utilities the models are essentially the same, only being customized as needed to fit the differences of the different types of utilities. The models were built to match the systems' actual financial statements as much as possible. However,the intent of rate modeling is to see to it that the resulting rates are adequate to pay all system expenses for the next 10 years and build and maintain responsible reserves. Because incomes and expenses in your financial statements were not always grouped in such a way as to enable proper rate calculation, the models do not always match your statements. For modeling purposes, it does not matter whether funds are held in the general system account, a debt service sinking fund, repair and replacement fund,etc. Therefore,the model accounts for funds in a more simplified way than you do. When it comes to segregating funds, staff knows best how to do that so the model does little in this regard and leaves the segregating up to staff. Several line graph charts in the analysis models graphically depict some things which would be difficult to pick out of the tables. In all the charts the blue line represents what would happen under the recommended rates and the red line under the current rates. Trends for the red lines are (generally)bad. Those for the blue lines are (generally) good.Review the definitions section of the model to learn the meaning of terms used in the charts. In a chart, when you do not see all of the lines separately, that means they run on top of each other. For example, once the projected operating reserve has reached its goal, the goal level line will "cover up' the reserve level line. As you set and later reset rates I suggest you follow the guidance I give in my book, "How to Get Great Rates." I gave a copy to Lori Bartlett so check with her about reviewing it. I suggest you also use the "Replacement Scheduler°" spreadsheet available for free on my Website for future equipment replacement scheduling. GettingGreatRates.com 1014 Carousel Drive Jefferson City Missouri 65101 cart@gettinggreatrates.com www.carlbrownconsulting.com (573)619-3411 5 St.Joseph,MN Rate Analysis Report, 11/25/15,Page 6 of 15 Action Recommendations for Policy and General Issues Use the following as a checklist of"to-do"tasks. Many if not all of these things you are already doing but they bear repeating. 1. Determine how long, on average, it takes to perform the various services you provide in the field, such as after-hours service, meter disconnects and reconnects, special meter readings, etc. Be sure to include all the time you actually pay staff for performing these services. Then determine how much it costs the utility per hour, on average, to have staff perform these services. This includes benefits, taxes, use of utility vehicles, tools and minor equipment, etc. It should also include a fair amount to cover the time that office staff devotes to working on these services to track them, bill for them, etc. This should be the hourly rate you will charge for these services.In addition, set a minimum that you will charge for showing up, whether the service takes 30 minutes to perform or only 10 minutes. In essence, set your fees in the same way plumbers and similar technicians do —a set fee for showing up, which buys the customer a set amount of time, and an hourly rate if the job takes longer than the show up charge will cover. While accounting for time and other investments in the various functions is important, do not make the process burdensome. For many functions you likely can just estimate your time occasionally and charge fees based upon those estimates. 2. Retain required funds in interest bearing debt service and debt reserve accounts when required by your lender(s). 3. Modify your current late payment/non-payment ordinance language so that it effectively accomplishes what is described in the following bullet points: • If payment is insufficient to cover all amounts billed for water, sewer and any other services, plus any other fees assessed by the City, the payment will first be applied to non-water services and last to water service. • A late payment penalty of 10 percent of the outstanding balance or$10.00, whichever is greater, will be assessed to the customer's account each month. • Water service, and any other service that is in arrears, will be shut off in accordance with, and at the earliest time allowed by State law. • Reconnection after non-payment will only be done after the customer has paid all fees and penalties owed,plus a reconnection fee that is 50 percent higher than the usual reconnection fee after shutoff to make repairs, transfer property to a new owner, change tenants and similar events not related to non-payment. 4. If a customer is disconnected for non-payment a second time in a one-year period, in addition to the above fees and penalties, you should collect an additional deposit from that customer in an amount you deem appropriate. Such deposit should only be expended to pay the customer's outstanding bill,fees and penalties in the case where the outstanding bill,fees and penalties cannot be collected. A customer moving away without paying is such a circumstance this deposit is meant to guard against. Getting6reatRates.com 1014 Carousel Drive Jefferson City Missouri 65101 carlegettinggreatrates.com www.carlbrownconsulting.com (573)619-3411 6 St.Joseph,MN Rate Analysis Report, 11/25/15,Page 7 of 15 5. Have me conduct a full rate analysis again when your actual financial performance and my projections diverge significantly. That may be up to five years from now or whenever a new, large financial upset or change is looming. Since I retain all final models indefinitely, if something changes enough that you think it might affect the rates you charge a year or two from now,you can even have me "tweak"the model and advise you on how to adjust rates accordingly. 6. Start adopting management strategies that are included in what is most commonly called, "advanced asset management."These strategies can yield better service and reduced costs for utilities, especially those looking to build new facilities or replace existing facilities soon. Visit gettinggreatrates.com/for more information on asset management or call me to discuss how the utility can move into asset management. 7. Continue to track your volume usage, incomes and expenses on a regular basis so the data and information you generate will support future rate adjustments. 8. As a reminder, check with your attorney for language and legality of all charges and issues discussed. Water Utility Discussion Water rate revenues are currently too low so overall,rates need to go up moderately. Water Conservation Water conservation is the law in Minnesota. It also simply makes good sense to use resources wisely. To that end, in the case of water unit charges, the increases I have modeled will cause most customers to more carefully consider how important it is to use water more conservatively. We all respond to some degree to price signals when we make purchases. In Table 7, page 28, you will see that on a dollar and a percentage basis,the overall bill increases rise as the volume of water goes up. On a percentage basis, the bills for the highest volume customers will increase three times more than those for very low volume customers, if they do not reduce their use. While the cost of water is not and will not be an important percentage of some customers' incomes, the more water a customer uses, the more opportunity they have to be conservative. Given the opportunity to conserve, and the price signal to conserve, many will conserve, at least a little. I estimate that, due to increased unit charges, customers will collectively use approximately five percent less water volume. That savings, a loss of revenue for the utility, appears on the bottom of Table 2, page 23. Thus, unit charges were set marginally higher again to make up for this revenue shortfall in water sales. Some customers might also conserve a bit of water on the wastewater side.However, I did not include a conservation factor on the wastewater side. That is because for most, it is harder to use less wastewater than it is to use less "consumed" water—that which is generally used outdoors to water lawns,wash cars and houses,hose off driveways and the like. GettingGreatRates.com 1014 Carousel Drive Jefferson City Missouri 65101 cart@gettinggreatrates.com www.carlbrownconsulting.com (573)619-3411 7 St.Joseph,MN Rate Analysis Report, 11/25/15,Page 8 of 15 Finally,water conservation will marginally decrease the cost to produce and distribute water. As less water is used, less electricity and treatment chemicals and a few other inputs are needed to produce it. I expect this savings to be small so I did not model any cost savings. But whatever the savings turn out to be, that savings will be available to build reserves faster and cover other expenses with less need for rate increases in the future. Rate Premiums It is common for cities to assess higher connection fees, minimum charges and unit charges for out of city customers,if they serve out of the city limits at all. That "premium" is usually between 25 and 100 percent. Most commonly it is 50 percent. I recommend such premiums because it almost always costs more to provide utility service outside of the city than in the city and the utility does not have as many revenue sources available to it from out of city customers as it does from in-city customers.And, quite simply, the city does not have a responsibility to serve out of city properties like it does in-city properties. Such service is on a voluntary basis for both parties. If and when you serve out of city properties, you should charge them higher rates for that service. System Improvements and Debt Service You recently completed large water system improvements, with more to come soon. Debt service is a substantial expense and it will grow in the next few years. That pushes your total operating costs higher,meaning rates need to go up to match. Debt service is and will remain the major driver of the need for rate increases for some time.All of these issues are modeled in Table 4, page 25. Tap-on (Access) Charges and Minimum (Line) Charges You have had and expect a rather rapid growth rate to continue.Thus, you should make a substantial number of new connections in the coming years. This is significant because you assess fairly substantial tap-on charges that will generate substantial income if growth comes as projected. The downside is, if growth is substantially lower than projected, revenues will be substantially lower, too.You will need to monitor growth and tap-on charges closely to make sure the utility will be adequately funded. If growth is slowed for a couple of years or more, you will probably need to accelerate inflationary rate increases to make up the income shortfall. I normally make recommendations concerning tap-on charges and capacity surcharges, both based upon water meter size. I have not done that in your case for this reason. You currently handle tap-on of new customers with connection fees based upon the flows you expect from each customer. That is somewhat analogous to a meter size-based tap-on charge, my normal recommendation.You also assess a minimum or "line" charge to recover additional costs on an on-going basis. That sort of minimum charge is somewhat analogous to the base minimum charge plus a meter size-based minimum surcharge that I normally calculate. GettingGreatRates.com 1014 Carousel Drive Jefferson City Missouri 65101 cart@gettinggreatrates.com www.carlbrownconsulting.com (573)619-3411 St.Joseph,MN Rate Analysis Report, 11/25/15,Page 9 of 15 Because you already handle such costs in ways somewhat similar to those that I recommend, and because I have been told that this strategy is well-established and accepted in St.Joseph, I did not want to "upset the apple cart" to make what is largely a technical change. So, I simply incorporated your current tap-on and line charges, and the increases you already expect to make to these charges into my rates model. Thus, the only part of your rates that I have modeled to change, compared to what you are already slated to do, is adjustment to your unit charges. The outcome of these fees—revenues—are shown in Table 2 of the model on page 23. Unit Charge Rate Structure In almost all water utilities, unit charges should generate the lion's share of rate revenues because most costs are variable—related to the volume of service received.Your current unit charges generate far less than half of your total revenues.After rate adjustment they will generate about half of total revenues. I also recommend you assess the same unit charge to all types of in-city customers, which you do now, and more for out of city customers of all types. Target Reserve Levels Most systems serving fewer than 5,000 connections should have reserves at least as high as the sum of the following: • Unobligated cash and cash equivalent reserves equal to at least 35 percent of the annual operating costs,not including debt service; • A 20 year repair and replacement (R&R) schedule reserve,in the 20th year equal to at least one average year's cost of R&R; and • Capital improvement reserves in the tenth year that are adequate to cover the next year's debt payments, the debt coverage requirement and at least 10 to 20 percent of the capital improvements expected during that 10 year period. Your reserves are not that strong right now so I modeled rates that will enable you to amass such a level of total reserves by the tenth year. Lines on the bottom of Table 6, page 27, of the model show your reserve balances expected for the next 10 years. Rate Affordability As shown near the top of Table 6, page 27 and Affordability Index: The monthly charge for graphically in Chart 4, page 31, the affordability (typically) 5,000 gallons of residential service index of your current rates, at 0.78 percent, is lower divided by the median monthly household income for the area served by the system. An than the approximate national average of 1.0 index of 1.0, meaning a household pays one percent. The rates I think you should adopt from percent of its income to pay its bill for 5,000 gallons of service, is generally considered Water Scenario 1 would raise the affordability index affordable. Affordability index is a primary to 0.98 percent, about the national average. Such factor in determining grant and loan eligibility rates are considered by most who track such things and grant amount. to be "affordable." GettingGreatRates.com 1014 Carousel Drive Jefferson City Missouri 65101 cart@gettinggreatrates.com www.carlbrownconsulting.com (573)619-3411 9 St.Joseph,MN Rate Analysis Report, 11/25/15,Page 10 of 15 The standard affordability index only shows part of the affordability picture. Table 7, on page 28, shows how customers' bills will be affected by the recommended rates. Increases for low volume customers will be modest and escalate as volume use goes up. Bill City Properties You currently do not bill City Hall or other City-owned facilities for water use. That makes some practical sense because even if you did "bill yourself," no money would actually change hands. Not billing yourself makes your recordkeeping easier. However,we all make better resource use decisions when there is a cost associated with that use. Therefore, I recommend you assess user charges to City facilities just like you would any other water user. It is not necessary that you actually send a bill to each City department for water use and mail a check to the City to pay for it. However, you should include the estimated cost of water use in each functional area's budget. An example should illustrate this. You have parks that probably include ball fields and other grassy areas that are irrigated or are otherwise plumbed for water. You should include the estimated cost of water use for these areas in the budget that covers them. Then, as staff make decisions about water use, they will factor in cost. If the grass really needs irrigation, they will irrigate and the cost will come out of the budget.But if it rained one inch last night and the lawn does not need watering, or it doesn't need as much water as they would normally apply, staff will conserve. Staff may decide that it is simply not worth watering some areas at all, allowing the City to better allocate its water resources. If staff conserves enough water through the year, they will save the Department some money and should then be allowed to use those savings on something else the Department needs. In that way staff has the incentive to make better use of its budgeted funds. The same thing applies to City Hall, the City Shop and other facilities.Just as you do all other customers, give staff a price signal about water use and they will use it more conservatively. Water use by City departments is a small part of total water use,but conservation by departments will move you closer to the conservation goal embedded in State law, too. Recommendations for Water Rates Water Scenario 1 contains all of my rates-related recommendations and shows what they are built upon. However, the model is complex, plus it does not cover policy issues. Therefore, I have summarized my recommendations as follows. Action Recommendations for Rates and Fees: 1. You should assess to in_citu customers the line and unit charges shown in Table 1 that follows this list. 2. The calculations assumed you will make these adjustments early enough to enable you to collect at these rates for the January 1, 2016, billing(you would pass a revised ordinance at least one billing cycle before that). If you miss this date by a month or two, your reserves will be drawn down slightly more than currently projected, but they will remain adequate enough during the transition. GettingGreatRates.com 1014 Carousel Drive Jefferson City Missouri 65101 cart@gettinggreatrates.com www.carlbrownconsulting.com (573)619-3411 10 St.Joseph,MN Rate Analysis Report, 11/25/15,Page 11 of 15 3. I recommend you continue with the planned changes to your current tap-on fees. 4. If all goes as modeled, on the one-year anniversary of making the rate adjustments called for above, and for several years thereafter, raise all rates and fees across the board by 4.0 percent. This is an inflationary increase intended to match inflation in the cost to own and operate the utility. 5. You should examine your shut off and reconnection, meter charges and similar fees to determine if they are high enough to recover the related costs. Revenue generation is not the goal for such programs. It is a fairness issue because if these fees do not recover their related fnll costs, regular customers will have to make up the difference in the form of higher user fees. Table 1: St.Joseph, MN Bi-monthly Water Line Charge,MDS Test Fee and Unit Charge Table 1:St.Joseph, MN Bi-monthly Water Line Charge, MDS Test Fee and Unit Charge Water Line MDS Test Fee Unit Charge per Customer Class Charge per Unit per Customer 1,000 Gallons Residential, G-01, 02,03, 04, 05, 07, 09 $22.00 $1.10 $5.09 Commercial, G-06 $22.00 $1.10 $5.09 Industrial, G-08 $22.00 $1.10 $5.09 College Townhomes, G-12 $22.00 $1.10 $5.09 Senior Housing Addition, G-13 $22.00 $1.10 $5.09 City, G-10 $22.00 $1.10 $5.09 Closing You would do well to pursue the rates calculated in Water Scenario 1. These rates will enable you to build appropriately strong reserves, cover increasing costs and repay debt using a structure that is essentially the same as your current rate structure. Finally, as you address issues raised in this report and the analyses, you will have questions. Ask them. My goal is to help you set and keep adequate,fair and appropriately simple or complex rates. That takes time and effort and it may stretch out beyond the "conclusion" of the project. I'm in it for the long haul with you. Unless you ask for something that takes substantial or very different work, you will owe me no extra fees for that help. GettingGreatRates.com 1014 Carousel Drive Jefferson City Missouri 65101 cart@gettinggreatrates.com www.carlbrownconsulting.com (573)619-3411 11 St.Joseph,MN Rate Analysis Report, 11/25/15,Page 12 of 15 Sewer Utility Discussion Your sewer rate structure is the same as your water rates with only a couple of slight differences.You do not have a testing fee like the "MDS test fee" you have for water. And, for residential customers, you assess sewer unit charges based upon the average water use by each customer during two winter months. This is called, "winter-averaged billing" and it is recommended by me and most other rate analysts and practitioners for residential customers in situations where it is feasible. The sewer utility is currently being underfunded even more than is the water utility. Like your water rates, your sewer rate revenues need to go up,but even more. System Improvements Sewer system improvement needs are almost as great as those of the water system. Like the water rates, improvement needs, and the related debt service, will be the major driver of higher rates.Improvements and how they will be paid for are shown in Table 4, page 49. Tap-on (Access) Charges and Minimum (Line) Charges As was detailed in the water subsection, I recommend you continue using the same fee structures for tap-on and line charges for sewer that you currently have and as you currently plan to adjust them in the future. The outcome of these fees—revenues—are shown in Table 2 of the model on page 46. Target Reserve Levels I recommend you target sewer reserves in the same way as described for water. Lines on the bottom of Table 6, page 50, of the model show your reserve balances expected for the next 10 years. Retain the Current Unit Charge Structure Your current sewer unit charges for residential customers are based upon winter-averaged water use, which is what I normally recommend. Staff already know how to make the required bill calculations.You should continue using that structure. Your current sewer unit charges for non-residential customers are based upon water use metered every two months of the year, which is also what I normally recommend.You should continue that structure, too. GettingGreatRates.com 1014 Carousel Drive Jefferson City Missouri 65101 cart@gettinggreatrates.com www.carlbrownconsulting.com (573)619-3411 12 St.Joseph,MN Rate Analysis Report, 11/25/15,Page 13 of 15 College of St. Benedict Rates Rates for the College of St. Benedict, later just called, "St. Benedict," are a special case. St. Benedict does not receive metered water service from the City. Therefore, City staff must do special calculations to determine the minimum and unit charges that St. Benedict should pay each billing period based upon calculated flows of St. Benedict. Once those calculations are done, the bill arrived at is the same as what the bill would have been were St. Benedict receiving metered water from the City. Thus, the calculations are not done to charge St. Benedict a different rate. They are done to charge St. Benedict the same rate as all other customers. In the analysis model the calculated volume used by St. Benedict is included in the total volume used for calculating all customers'bills. St. Benedict's volume is not shown separately. Therefore, in the rate table that will follow, St. Benedict should be assessed the same rates as all other customers. Consumptive Use of Water Exempted From Sewer Billing Some commercial or similar customers may use large volumes of water that do not get returned to the sewer system. This is called, "consumptive use." The City should offer commercial and similar customers the opportunity to avoid paying sewer fees on metered water that they do not put back into the sewer system. That can be done by allowing them to segment their internal water piping systems into two parts, as approved by the City, and then assessing sewer bills that do not include water volume that is consumed (not returned to the sewer system). One part of the piping system would serve consumptive use facilities. The other part would serve the company's or other customer's restroom and similar facilities that are plumbed for sewer service. Such customers could then install a second water meter, as approved by the City, from which consumptive water use could be determined. This meter is often called the "deduct"meter. When billing these customers, the City would assess water rates based upon the readings from the meter that meters all water use and sewer rates only on the net volume that serves the restrooms and similar facilities that are plumbed into the sewer system. One minimum for water service and one minimum for sewer service should be assessed to the bill. Obviously, configuring piping systems in this way can more conveniently and cheaply be done as a new facility is being designed. For that reason, I suggest that you have the City department that handles planning and construction permits, in its application process, make applicants aware of this billing procedure. That will enable them to take advantage of it if it will help them control their costs better. Irn so doing, the City government and developers of properties within the city would be working together to try to optimize how the city works as an integrated system. GettingGreatRates.com 1014 Carousel Drive Jefferson City Missouri 65101 cart@gettinggreatrates.com www.carlbrownconsulting.com (573)619-3411 13 St.Joseph,MN Rate Analysis Report, 11/25/15,Page 14 of 15 Retrofitting most existing piping systems would not actually be cost effective, so the policy described above simply would not help most commercial establishments. But, some would still find it to be cost effective to separate their piping systems. The prime example is a plant nursery that uses 90 percent of its water to irrigate plants and 10 percent for inside plumbing needs. The amount of consumed water in this situation is very large. And, the piping system is probably easy to separate, too. Thus, the payback period for doing such a retrofit would be short. Similar establishments that "consume'high volumes of water would also find it cost effective to retrofit so I recommend you adopt such a policy to allow them to do it. Rate Affordability As shown near the top of Table 6, page 50, and graphically in Chart 4, page 54, the affordability index of your current rates, at 0.67 percent, is lower than the approximate national average of 1.0 percent. The rates I think you should adopt from Sewer Scenario 1 would result in an affordability index of 1.29 percent,noticeably higher,but unless you acquire substantial grants to pay for capital improvements, such rates are unavoidable. Table 7 of Sewer Scenario 1, page 51, shows how customers'bills will be affected by the recommended rates. Bills for low volume customers would go up the least. Increases accelerate as volume use rises. Bill City Properties I recommend you bill City properties for sewer use like previously recommended for water. Recommendations for Sewer Rates Sewer Scenario 1 contains all of my rates-related recommendations and shows what they are built upon. I have summarized my recommendations as follows. Action Recommendations for Rates and Fees: 1. You should assess to in-citu customers the line and unit charges shown in Table 1 that follows this list. 2. The calculations assumed you will make these adjustments early enough to enable you to collect at these rates for the January 1, 2016, billing(you would pass a revised ordinance at least one billing cycle before that). If you miss this date by a month or two, your reserves will be drawn down slightly more than currently projected, but they will remain adequate enough during the transition. 3. I recommend you continue with the planned changes to your current tap-on fees. 4. If all goes as modeled, on the one-year anniversary of making the rate adjustments called for above, and for several years thereafter, raise all rates and fees across the board by 4.0 percent. This is an inflationary increase intended to match inflation in the cost to own and operate the utility. GettingGreatRates.com 1014 Carousel Drive Jefferson City Missouri 65101 cart@gettinggreatrates.com www.carlbrownconsulting.com (573)619-3411 14 St.Joseph,MN Rate Analysis Report, 11/25/15,Page 15 of 15 5. You should examine your shut off and reconnection, meter charges and similar fees to determine if they are high enough to recover the related costs. Revenue generation is not the goal for such programs. It is a fairness issue because if these fees do not recover their related full costs, regular customers will have to make up the difference in the form of higher user fees. Table 2: St.Joseph, MN Bi-monthly Sewer Line Charge and Unit Charge Table 2: St.Joseph, MN Bi-monthly Sewer Line Charge and Unit Charge Sewer Line Unit Charge per Customer Class Charge per Unit 1,000 Gallons Residential $27.00 $7.34 Commercial $27.00 $7.34 Industrial $27.00 $7.34 CSB Student Housing $27.00 $7.34 City, G-10 $27.00 $7.34 Closing You would do well to pursue the rates calculated in Sewer Scenario 1. These rates would enable your sewer utility to achieve the same level of financial results as the water utility. GettingGreatRates.com 1014 Carousel Drive Jefferson City Missouri 65101 cart@gettinggreatrates.com www.carlbrownconsulting.com (573)619-3411 15 16 St. Joseph, MN; Water Rates Scenario 2015-1 Modeling Results This document contains the calculations that were performed to arrive at new user rates and fees for the next 10 years.These calculations are complex so key issues are also described in a narrative report that accompanies this model. This analysis was conducted so as to establish user rates that are adequate to pay all reasonably expectable costs while charging rates that are fairly structured and appropriately simple or complex. Scenario Description: This analysis model assumes subsidies from ad valorem taxes will be discontinued in 2016. General fund subsidies,which in the past have been substantial, will be minimal in 2016 and cease after that. The increases already slated for the water line charge will continue. In addition, unit charges will be increased initially to cash flow the utility properly and build responsible reserves by the end of 10 years.After initially setting rates as described and as shown in the table in the narrative report, inflationary rate increases would be done annually, primarily to match inflation. For most,the best way to read and understand what this model means is this.Scan the"Index of Tables,Charts and Other Results" to see how the model is laid out.Scan the"Definitions"for any terms you are not already familiar with. Read and even ponder Table 1 and the line graph charts.These will show you how the proposed rate adjustments will affect ratepayers and the system. If you need more detail than that,review the entire model. Finally,rate setting involves much more than just rates so you need to read the accompanying narrative report to understand what you need to do and why. Several tables in this model depict volume usage and user rates for the various customer classes.The model includes a continuum of volumes but many volume categories had no users. Most of these lines have been hidden simply to make the tables less voluminous. However,all volume classes that had use or that are break points for rate blocks are shown. For volume classes that are not shown,rates will be the same as the previous rate that is shown. November 25,2015 This rate analysis scenario was produced by Carl E. Brown,Getting GreatRates.com 1014 Carousel Drive,Jefferson City,Missouri 65101 (573)619-3411 www.gettinggreatrates.com carl(a-)gettinggreatrates.com CBGreatRates©Version 7.2 17 Index of Tables, Charts and Other Results Note: When a numbered table or chart is missing from the list below and this model package, that was not a mistake. It simply means that table or chart from our master program was not needed in this situation. Name What Each is or Does Definitions The meaning of terms used in this report and in rate setting generally Return on Investment A summary of financial outcomes produced by the proposed rates Table 1 -Modeled Rates User rates depicted in this model for each user class Table 2-User Base Data and Operating Basic user statistics and operating revenues, projected for next 10 years, based upon Incomes adopting modeled rates and future inflationary increases Table 3-Operating Costs and Net Income Operating costs projected for next 10 years,excluding debt service Table 4-Capital Improvement Program Capital improvements and how they will be paid over next 10 years, including debt service Table 5-Capacity Cost; Its Amount and Capacity costs incurred on behalf of new connections, if applicable How it Will be Recovered Table 6-Financial Capacity Indicators and Balances and financial health indicators as a result of adopting the modeled rates Reserves Table 7-Bill Comparisons Before and After Illustrates effects of modeled rates on bill increases or decreases for use at various Rate Adjustments levels Table 8-User Statistics Depicts usage and revenue statistics brought on by the modeled rates Chart 1 -Operating Ratio Graph of operating ratio for next 10 years if modeled rates are adopted Chart 2-Coverage Ratio Graph of coverage ratio for next 10 years if modeled rates are adopted Chart 3-5,000 Gallon Residential User's Graph of bill for a 5,000 gallon per month residential user,with smallest available meter Bill size,for next 10 years at modeled rates(used in grant and loan eligibility determinations) Chart 4-Affordability Index Graph of affordability index of residential user's bill for next 10 years at modeled rates (used in grant and loan eligibility determinations) Chart 5-Working Capital vs Goal Graph of total (unobligated)cash assets for next 10 years at modeled rates compared to the goal for total cash assets Chart 6-Value of Cash Assets Before Graph of total (unobligated)cash assets NOT adjusted for inflation for next 10 years at Inflation modeled rates Chart 7-Value of Cash Assets After Graph of total (unobligated)cash assets adjusted for inflation for next 10 years at Inflation modeled rates Table 9-Tap Fees Based on Meter Size Calculation of tap fees based upon meter or connection size, if applicable Table 10-Capacity Charges Based on Calculation of surcharges to apply to minimum charges, based upon meter or connection Meter Size size,that will recoup part or all of the costs incurred to provide high-flow capacity, if applicable Table 11 -Initial Rate Adjustments and Recitation of current rates, and calculation of modeled rates and blended revenues they Resulting Revenues will produce during the year following the test year(usually this year in real time) Table 12-Test Year Usage Compilation of actual volume of service used by customers during the test year Table 13-Rates at End of Test Year The user rate table in effect at the end of the test year Table 14-Average Cost Classification Sumation of a specified year's costs and calculation of"cost of service"basis for recovery of fixed costs and variable costs. Incremetal (marginal)costs that would be incurred if the system produced incrementally Table 15-Marginal Cost Classification more volume of service,the system brought on a new customer or did something similar, if applicable Table 16-Equipment Replacement Detailed schedule of equipment replacements for next 20 years, if applicable Schedule Table 17-Equipment Replacement Annuity Calculation of the annual annuity(yearly savings amount)needed to pay for all Calculation equipment replacements as they come due and end with a desired balance 18 Definitions The monthly charge for(typically)5,000 gallons of residential service divided by the median monthly household income for the area served by the system.An index of 1.0, Affordability Index meaning a household pays one percent of its income to pay its bill for 5,000 gallons of service,is generally considered affordable.Affordability index is a primary factor in determining grant and loan eligibility and grant amount. A charge that buys a new customer system capacity.This is a charge levied on a new Capacity Charge,also commonly called an customer that recovers all or part of the capital costs to build capacity to be able to Impact Fee or Availability Charge serve that customer's actual or potential demand.This charge may be a few thousand dollars for a residential customer to many thousands of dollars for a large industrial customer. A schedule of anticipated capital improvements.These are the more expensive items Capital Improvement Plan or Program(CIP) such as water towers,treatment plants and lines that generally require bond or grant funding.They do not include equipment replacement items. Capital Improvement Reserves Cash reserves dedicated to funding the CIP A thorough examination of a system's operating,capital improvement,equipment replacement and all other costs,revenues,current rates,number of users and their use of the system,growth rates and all other issues surrounding the system.This examination will determine how rates and fees should be set in the future to cash-flow Comprehensive Rate Analysis the system properly,to build appropriate reserves and to be fair the ratepayers. It also will determine how policies should be adjusted to enable the system to operate well now,operate well in the medium-range future(about 10 years)and prepare for expected and expectable events such as capital improvements and equipment replacement. A charge that buys a new customer connection to the system.This charge is levied on a new customer to recover all or part of the costs a system incurs in the course of connecting the new customer to the system.This may include labor costs for staff or Connection Charge others on-site;equipment sold by the system to the new customer for making the connection;equipment,tools and supplies used by system staff for making the connection;and the like.This charge may be a few hundred dollars for a residential customer to thousands of dollars for a large industrial customer. Conservation(Inclining)Rates Unit charges that go up as the volume used goes up There are several ways to define cost to produce.Each is acceptable for different purposes.Generally,cost to produce is the total of all variable costs required to get Cost to Produce service to a utility's customers during one year divided by the total units of service delivered during that year. In a proportional to use rate structure,this will be the variable cost.See"Cost Calculations"at the bottom of Chart 19. Cost to Serve Rates Rates where fixed and variable costs generated by each user class are paid by that class with minimum and unit charges,respectively. The two main types of costs are fixed-those that are related to the fact that someone is Cost Types; Fixed and Variable a customer;and variable-those that are related to the volume of the commodity delivered to customers.Generally,fixed costs should be recovered with minimum charges and variable costs with unit charges. Incomes available to pay debt divided by the amount of the debt for that year.Most Coverage Ratio(CR) systems should have a CR of 1.25 or higher.Note:the CR in this model also includes reserves available to pay debt in the CR calculation,which is a more realistic approach to debt coverage. For a year,the sum of all incomes and undedicated reserves minus all current financial Current Position obligations for that year. Future obligations(next year's loan payments)and depreciation are not included.Current position is a good measure of overall financial health. Declining Rates Rates where unit charges go down as the volume used goes up Flat Rates Rates where all users pay exactly the same fee regardless of the volume of service they use Based upon number of water using fixtures,average flow,potential flow or similar Equivalent Dwelling Unit(EDU)or criteria;the consumption rate of the average single family home is rated at one EDU.All Equivalent Residential Unit(ERU) other types of customers are then compared on this measuring basis and the EDUs are calculated.Generally the purpose of this exercise is to calculate fees that each EDU must pay. Rate increases done,generally annually,following the initial rate adjustment.The goal Incremental Rate Adjustments of these rate increases is to keep the system's income and reserve levels on track. Rate structure fairness is a small issue,if it is an issue at all.Such increases are usually small,in the two to five percent per year range. 19 Definitions Rate adjustments done in follow up on the comprehensive rate analysis.Generally,the Initial Rate Adjustments goal of such adjustments is to establish rates that put the system's income and reserve levels on track with the system's financial needs and do it with a structure that is fair to the ratepayers. Inflow&Infiltration(I&I) In a sewer system,water that gets into the collection system by way of illicit connections (inflow)such as gutter downspouts and leaks in manholes and sewer lines(infiltration) Infrastructure Hard assets,such as water towers,treatment plants and lines needed to provide service to customers connected to the system The total cost to design,build,operate,maintain and eventually dispose of an asset. Life-cycle Cost One asset may cost less to build but be more expensive to operate and maintain, yielding a higher life-cycle cost. i ne part or rixea anaior vaname costs inai are unavoiaaoie snouia use go up marginally,should an additional large-volume customer be added at a discounted but Marginal Costs still profitable fee or for other reasons.Generally marginal costs are less than the average fixed and variable costs but when extra use requires a system upsizing,they can be greater.These costs are especially useful when considering selling service at �nihnlcc�lc Definitions and calculations vary. For rate setting purposes operating costs are costs Operating Costs incurred because a system is operated.Such costs are generally recovered through unit charges. Operating Revenues Revenues generated by user fees Current incomes divided by current expenses,not including debt.An OR of 1.0 is "break even."Most systems should have an OR of 1.25 or higher.Note:the OR Operating Ratio(OR) calculation in this model also included undedicated reserves,which is a more realistic approach to covering operating costs.However,most lenders,for example,disallow reserves from being considered in the operating ratio calculation. Payback Period Time required for the investment made to get this analysis to return that investment through increased user and other fees The volume of service that a user could demand for a short period of time at full volume Potential Demand use.The potential demand limiting factor is usually the size of the customer's meter or service line. Rates where the minimum charge recovers all fixed costs,the unit charge recovers all Proportional to Use Rates variable costs,the unit charge is the same for all volume sold,and there is no usage allowance in the minimum charge. A timetable that describes equipment replacement and important repairs that are too Replacement Schedule infrequent and/or too expensive to cover as annual operating costs but not so expensive that they need to be covered as capital improvements. Replacement Reserves Cash reserves used to fund the Replacement Schedule Return on Investment The dollar amount or percentage of revenue gain enabled by this analysis A charge that gives a new customer the right to connect to the system.This fee may include the costs of administering the connection program,such as staff time to'sign Tap Fee,also called a Hook up Fee or up'new customers,get them into the system's billing program,do an inspection of the Connection Fee service connection to assure that it meets the system's standards and the like.This charge is usually minimal for a residential customer and maybe a few thousand dollars for a large industrial customer.Capacity and connection fees are commonly added to tap fees and the total fee is just called a'tap'fee. Test Year The one year period from which data was gathered to be the basis of the rate analysis The volume,if any,that is"given away"with the minimum charge. Most systems give Usage Allowance away no volume.Those that give away an unlimited volume have what are called"flat rates." User Fee, User Charge,User Rates Fees assessed to customers for use of the system.Does not include tap,capacity or connection fees,late payment penalties or other types of charges. Measured by volume or percent,the part of a water system's net water production that Water Loss does not get to customers.This loss also includes billable volume lost due to under- registering customer meters. Working Capital, Net Income The amount left in the operating fund after paying all costs due during that month,year or other time period.Working capital of$0 is"break even." The desired percentage in excess of"break even"for the operating fund.Small systems (a few hundred connections)generally should target 35 percent or greater.Larger Working Capital Goal systems can target less,down to a minimum of about 20 percent for systems with 5,000 or more connections but the goal for each system should be based upon the needs of that system. 20 Return on Investment St. Joseph, MN; Water Rates Scenario 2015-1 The rates depicted in this model will produce various returns on investment or paybacks. Usually the most important payback, at least to ratepayers, is a rate structure that is demonstrably fair. For the system, however, making sure that revenue will be adequate to pay all expected,expectable and many unexpectable costs is the the most important return. If revenue will increase as a result of this analysis,which is almost always the case, one can calculate a return on investment. The following calculations show what was invested and what the returns will be over two periods;five years and 10 years. Five years is a reasonable period for return projections.Ten years is a good basic planning horizon but you should not bank on amounts or returns projected that far out. Besides, most systems should have their analyses redone long before then. Consider these key points about return on investment. Higher rates will fund more improvements, better repair and replacement and more. Most increases in revenue end up being used for such expenses.Thus,few systems end up with a dramatic increase in their cash reserves but they do markedly improve their financial position. In addition,fairer and higher rates generally enable systems to qualify for grant and loan funding that they otherwise would not.That increases the importation of"other people's money,"which is a drain on the state and federal levels,where the money comes from, but it is very desirable at the utility level. Also note that rates in this model have been modeled to be adjusted during the year following the test year or even later.That year is included in the first five-year return on investment calculation.Thus,the first year of returns calculated below include most or all of one year where rates will not have been changed yet, lowering the calculated return on investment but not the real rate of return. Calculations $7,731 Fees to GettingGreatRates.com $500 Estimated value of system staff time and incidentals to assemble needed information $8,231 Total Investment for This Analysis $1,202,962 Five-year Increase in Revenue Due at Least Partly to This Analysis 14615% Five-year Return on Investment(increase in revenues/investment) $3,836,481 Ten-year Improvement in Cash Position Due at Least Partly to This Analysis 46610%Ten-year Return on Investment(increase in revenues/investment) This analysis was produced using the program CBGreatRates, copyright 2015.You are encouraged to distribute this report to others so long as credit is ascribed to the author, Carl E. Brown of GettingGreatRates.com. CBGreatRates©Version 7.2 21 Table 1 - Modeled Rates St. Joseph, MN; Water Rates Scenario 2015-1 Modeled unit charges are shown in this table. Other rate components are shown in the narrative report. Customer Class, Bottom of Volume Top of Volume Usage Allowance in Unit Charge Rate Class or Range in 1,000 Range in 1,000 1,000 Gallons per 1,000 Gallons Meter Size Gallons Gallons Residential, G-01, 0 999 0.000 $5.09 02, 03, 04, 05, 07, 1,000 1,999 0.000 $5.09 09 160,000 99,999,999 0.000 $5.09 0 999 0.000 $5.09 Commercial, G-06 1,000 1,999 0.000 $5.09 160,000 99,999,999 0.000 $5.09 0 999 0.000 $5.09 Industrial, G-08 1,000 1,999 0.000 $5.09 160,000 99,999,999 0.000 $5.09 0 ggg 0.000 $5.09 College 1,000 1,999 Townhomes, G-12 0.000 $5.09 160,000 99,999,999 0.000 $5.09 0 999 0.000 $5.09 Senior Housing 999000 1, Addition, G-13 1, 0.000 $5.09 160,000 99,999,999 0.000 $5.09 0 999 0.000 $5.09 City, G-10 1,000 1,999 0.000 $5.09 160,000 99,999,999 0.000 $5.09 CBGreatRates©Version 7.2 22 co CV to V OO o o O O m O O m N O O O O O O O O m O O O O m W N N N ER O W EA m m N EA O Ef3 O O O ER Ef3 N m m O ER N O m O O N O m m O m N O W O O (h N d o (p N Co V V V (h m N m O m f9 m fA fA fA (h N fA W U N 00 UJ O fA fA V fA N m fA E9 C Y� � fA f9 fA fA } m O o 0 1 O O O O WV W 0 0 0 0 0 0 0 0 0 O O O O N NN W m O mO aNmOmOOOm mNm mOmmm tf W m W N m O N N O m m m } jr� �7 coN u6rm ER M m M 0 OO 1 O O O O V H3 N N � EA } C) pl il to N O O o o W N O O V O O V m 0 0 0 0 0 0 0 0 m O O O O M m tll C c N mV m m O N m fA W m fA O fA O O O m fA N m m O m 0 m 0 O) O m V - - N m N O 0 N O m O I� m N (h (h m m ER N M O N N Fa LL N N fR EA E9 O N L N O LL to d d r i0 N to m O o o m O O (h O O N 0 0 o 0 o o o 0 0 N O O O O m N c N N m O) o o fA O EA fA N V fA O fA O O O fA fA N fA f9 O EA N - N y" N +� d) N O N t` O O N t` W N O m N O W O (O m F .L.. 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X O C m 6 N N 00 r (00 V LLJJ U3 61) Vf 613 U3 613 } O E O 0) n O LC) c T O V m (.0 (0 a) c 1- O V V V Co N S p C LC) co m s CD a) U) U O M O co N O O \J+ N r \ N (fl � a m m 0) N N O O (0 C) Cl) O LO O m C M Lo N Co N N (0 M U3a) co NCJ N Cl) ((0 (MO M O (� p a) > lL Ef3 U3 Efl U3 (f3 U3 Q > p 0 T O 0) (0 0) N c C N r a) (fl Y a) c (D 0) co r N co LC) (, C \ V 0 O O( C LO C (0 U O \ O N LO LO co cu (1)) -E \ O V LO —7O -O a) T 0) V M 1� (fl N 0 m M N (0 Co C Cl) co N O p) V V •V m M O ` N C m C N U3 U3 U3 Pf3 613 613 (� } O.N a) C - uvi 00 a)(° o E m m rn > Q o Lo r- o �_ �_ v LL c co Y of °) D-.— Y m r) Lri L6 r of -o c EiT LO O p.0 m'6 N00 (MO (MO N Fp N W U3 U3 Efl EH U3 H3 O:E a> } O Q N L) O O N ac n Lo co N N OO N 'T 00 (D Cl) O O O O LO Ma) -E 6 Lf) (0 Cl)M 1- p) U_ C Cl) (0 co LO LO Cl) N T— o Cn 61) � O O m N n (MO N W W Q :F -p O N lL Ef3 U3 U361) U3 N m a) a)-o _ } s OL c voi 2 ami y C m aNiO aNi (o) o Cl) 0) � rn C) � r- -5 o CU LL CU 00 LL (Uc d m Q Q as o as �o v m o N o 0 0 0 V m m m E m o � c wo 4 m oo<d` uy3 Cl) o0 � $ a) 79 CO o Q� (j U) 0)U) 0 � oOQ OT d OU O o 0� 0sU0- a . a) Q) m mEm (D L «O wT > L w m N aa'i m 3i— O m °� a a m wm czn m .N m e O N m e a LU d p).�'y — ++ o E c E m U o Q = m c c o° o U)m `o i -o 0 m Tcu aai mU a>4 °U .� U Q v 2 m E a) TU Y N a) -O a) X°d i 7 Z 0 �_ � m O a) m m � wa° a° a CO m axi � mm O s� U () w +Nc � m Y U N C O 2 .N a) m m 0-' N 0 N t o c Q ° m � m om m o U O6 Qv m Q o C y Q zn U E m E U j5 `C cu Qa) C Q N U) N U N D W! � m LL w a) =o N m (tea '> o (D 46 0 m Q) +-� N m L� ¢ Q)fn � U Table 7 - Bill Comparisons Before and After Rate Adjustments St. Joseph, MN; Water Rates Scenario 2015-1 This table compares bills for various volumes at the current rates and billing frequency with what the same volumes would cost at the equivalent modeled rates for that same billing frequency.(An"apples to apples"comparison.)Minimum charge surcharges were calculated for these same classes of users and these bills include those surcharges. Note:The weighted-average bill increase for all customers combined will be: 34.8% Customer or Rate Gallons of Customers Above This Cumulative Bill Increase or Percent Increase Class,or Meter Size Use Volume and Below Next Customers Current Bill Modeled Bill Decrease(-) or Decrease(-) 0 0 0 $20.10 $23.10 $3.00 15% 1,000 0 0 $23.55 $28.19 $4.64 20% 2,000 0 0 $27.00 $33.28 $6.28 23% 3,000 0 0 $30.45 $38.37 $7.92 26% 4,000 0 0 $33.90 $43.46 $9.56 28% 5,000 0 0 $37.35 $48.54 $11.19 30% 6,000 0 0 $40.80 $53.63 $12.83 31% 7,000 0 0 $44.25 $58.72 $14.47 33% 8,000 0 0 $47.70 $63.81 $16.11 34% 9,000 0 0 $51.15 $68.90 $17.75 35% 10,000 1,577 1,577 $54.60 $73.99 $19.39 36% 15,000 0 1,577 $71.85 $99.43 $27.58 38% 20,000 0 1,577 $89.10 $124.88 $35.78 40% All Customers Except City 30,000 0 1,577 $123.60 $175.76 $52.16 42% 40,000 0 1,577 $158.10 $226.65 $68.55 43% 50,000 0 1,577 $192.60 $277.54 $84.94 44% 60,000 0 1,577 $227.10 $328.43 $101.33 45% 70,000 0 1,577 $261.60 $379.31 $117.71 45% 80,000 0 1,577 $296.10 $430.20 $134.10 45% 90,000 0 1,577 $330.60 $481.09 $150.49 46% 100,000 0 1,577 $365.10 $531.98 $166.88 46% 110,000 0 1,577 $399.60 $582.86 $183.26 46% 120,000 0 1,577 $434.10 $633.75 $199.65 46% 130,000 0 1,577 $468.60 $684.64 $216.04 46% 140,000 0 1,577 $503.10 $735.53 $232.43 46% 150,000 0 1,577 $537.60 $786.41 $248.81 46% 160,000 0 1,577 $572.10 $837.30 $265.20 46% 0 0 0 $0.00 $23.10 $23.10 N.A. 1,000 0 0 $0.00 $28.19 $28.19 N.A. 2,000 0 0 $0.00 $33.28 $33.28 N.A. 3,000 0 0 $0.00 $38.37 $38.37 N.A. 4,000 0 0 $0.00 $43.46 $43.46 N.A. 5,000 0 0 $0.00 $48.54 $48.54 N.A. 6,000 0 0 $0.00 $53.63 $53.63 N.A. 7,000 0 0 $0.00 $58.72 $58.72 N.A. 8,000 0 0 $0.00 $63.81 $63.81 N.A. 9,000 0 0 $0.00 $68.90 $68.90 N.A. 10,000 0 0 $0.00 $73.99 $73.99 N.A. 15,000 0 0 $0.00 $99.43 $99.43 N.A. 20,000 0 0 $0.00 $124.88 $124.88 N.A. City..G-10 30,000 17 17 $0.00 $175.76 $175.76 N.A. 40,000 0 17 $0.00 $226.65 $226.65 N.A. 50,000 0 17 $0.00 $277.54 $277.54 N.A. 60,000 0 17 $0.00 $328.43 $328.43 N.A. 70,000 0 17 $0.00 $379.31 $379.31 N.A. 80,000 0 17 $0.00 $430.20 $430.20 N.A. 90,000 0 17 $0.00 $481.09 $481.09 N.A. 100,000 0 17 $0.00 $531.98 $531.98 N.A. 110,000 0 17 $0.00 $582.86 $582.86 N.A. 120,000 0 17 $0.00 $633.75 $633.75 N.A. 130,000 0 17 $0.00 $684.64 $684.64 N.A. 140,000 0 17 $0.00 $735.53 $735.53 N.A. 150,000 0 17 $0.00 $786.41 $786.41 N.A. 160,000 0 17 $0.00 $837.30 $837.30 N.A. CBGreatRates©Version 7.2 28 Table 8 - User Statistics St.Joseph, MN;Water Rates Scenario 2015-1 This table shows measures of equitability of the rates as modeled in Table 11. If your rates are absolutely proportional to use on a volumetric basis,your%of usage and%of revenues figures will be the same within all the classes.That is not possible if you have any minimum charge and having no minimum charge is almost unheard of. Normally,the%of usage figure will be lower than the%of revenue for the lower volumes of use.That will switch for the higher volumes of use.Even for declining rate structures,this switch should occur near the volume of the average residential user,typically near 5,000 gallons/month(668 cu ft). In urban and suburban areas the average monthly use for residential or general customers can be twice that used by their rural and"old town"counterparts.Use is largely dependent upon who lives in a community.Older people living in longer established neighborhoods tend to use less volume than younger people living in more recently developed areas.As you make comparisons between different customers and customer classes,keep that,and the following in mind: 11,996 in 1,000 Gallons Billable units-This is the average residential customer's usage per Bi-monthly billing cycle. Usage allowance is the volume"given away"with the minimum charge.The higher the allowance,the less volume the utility can sell to generate income. 136,274,000 in 1,000 Gallons Billable units-This is the volume metered through customer meters that was available to be sold by the utility during the test year- 0 in 1,000 Gallons Billable units-This is the volume metered through customer meters that was given away as a usage allowance during the test year. $0 At the unit charge rate in effect during the test year,this was what it cost the utility to give away this volume. $0 At the unit charge rates modeled,this is what the current usage allowance(if any is included in the modeled rates)would cost the utility for a full year. Bottom of Top of Average Volume Total Annual Cumulative Cumulative Volume Volume Used Within Use Within Use in This Use in This Customer or Range in Range in Each Volume Each Volume Customers Class From Class From %Revenue %Revenue Rate Class,or 1,000 1,000 Range in 1,000 Range in Within This Low to High High to Low at Current at Modeled Meter Size Gallons Gallons Gallons Gallons Volume Range %Users %Usage Volume Volume Rates Rates Residential,G- 0 999 0.000 0.0 0.0 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% 01,02,03,04, 10,000 14,999 11.996 113,517,636.0 1,5772 91.7% 83.3% 100.0% 100.0% 85.5% 83.3% 05,07,09 160,000 99,999,999 0.000 0.0 0.0 0.0% 0.0% 100.0% 0.0% 0.0% 0.0% Totals for Class 113,517,636.0 1,5772 91.7% 83.3% 85.5% 83.3% 0 999 0.000 0.0 0.0 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% Commercial,G- 30,000 39,999 31.041 15,644,801.0 84.0 4.9% 11.5% 100.0% 100.0% 11.8% 11.5% 06 160,000 99,999,999 0.000 0.0 0.0 0-0% 0-0% 1000% 0-0% 0-0% 0.0 Totals for Class 15,644,801.0 84.0 4.9% 11.5% 11.8% 11.5% 0 999 0.000 0.0 0.0 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% Industrial,G-08 10,000 14,999 11.675 2,101,569.0 30.0 1.7% 1.5% 100.0% 100.0% 1.6% 1.5% 160,000 99,999,999 0.000 0.0 0.0 0.0% 0.0% 100.0% 0.0% 0.0% 0.0% Totals for Class 2,101,569.0 30.0 1.7% 1.5% 1.6% 1.5% College 0 999 0.000 0.0 0.0 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% Townhomes,G- 20,000 29,999 23.159 1,389,524.0 10.0 0.6% 1.0% 100.0% 100.0% 1.0% 1.0% 12 160,000 99,999,999 0.000 0.0 0.0 0.0% 0.0% 100.0% 0.0% 0.0% 0.0% Totals for Class 1,389,524.0 10.0 0.6% 1.0% 1.0% 1.0% 0 999 0.000 0.0 0.0 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% Senior Housing 6,000 6,999 6.562 104,990.0 2.7 0-2 0.1% 100.0% 100.0% 0.1% 0.1 Addition,G-13 160,000 99,999,999 0.000 0.0 0.0 0-0% 0.0% 1000% 0-0% 0.0% 0.0 Totals for Class 104,990.0 2.7 0-2 0-1% 0-1% 0.1 0 999 0.000 0.0 0.0 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% City,G-10 30,000 39,999 35.155 3,515,480.0 16.7 1.0% 2.6% 100.0% 100.0% 0.0% 2.6% 160,000 99,999,999 0.000 0.0 0.0 0-0% 0-0% 1000% 0-0% 0-0% 0.0 Totals for Class 3,515,480.0 16.7 1.0% 2.6% 0.0% 2.6% Grand Totals 136,274,000.0 100.00% 100.00% 100.00% 100.00% CBGreatRates©Version 7.2 29 St. Joseph, MN Water Rates Scenario 2015-1 Chart 1 - Operating Ratio 2.50 -0.Proposed Rates ❑Current Rates 2.00 —Breakeven 1.50 1.00 0.50 0.00 Iry -0.50 -1.00 -1.50 -2.00 -2.50 Chart 2 - Coverage Ratio 4.00 Proposed Rates - Current Rates 3.00 —Breakeven 2.00 1.00 0.00 Cb 0 -1.00 -2.00 -3.00 -4.00 CBGreatRates©Version 7.2 30 St. Joseph, MN Water Rates Scenario 2015-1 Chart 3 - 5,000 Gal Residential User's Bill $80.00 Proposed Rates Current Rates $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 Cb C1 �OIV Chart 4 -Affordability Index 1.20% 1.00% 0.80% 0.60% Proposed Rates ED Current Rates 0.40% 0.20% 0.00% z ^h 110 r^ 1� 1121 CBGreatRates©Version 7.2 31 St. Joseph, MN Water Rates Scenario 2015-1 Chart 5 - Working Capital vs Goal $300,000 Proposed Rates -❑Current Rates $250,000 Goal $200,000 $150,000 $100,000 $50,000 $0 1110 1 IN Chart 6 - Value of Cash Assets Before Inflation $2,000,000 Proposed Rates Current Rates $1,000,000 $0 -$1,000,000 -$2,000,000 -$3,000,000 -$4,000,000 -$5,000,000 CBGreatRates©Version 7.2 32 St. Joseph, MN Water Rates Scenario 2015-1 Chart 7 - Value of Cash Assets After Inflation $2,000,000 $1,000,000 $0 "IV` 1h 1O �'\ IO (v � � �O� �O� �O� �O -$1,000,000 -$2,000,000 -o-Proposed Rates C]Current Rates -$3,000,000 -$4,000,000 -$5,000,000 CBGreatRates©Version 7.2 33 Table 11 - Initial Rate Adjustments and Resulting Revenues St. Joseph, MN; Water Rates Scenario 2015-1 This table depicts how rates would be set and the revenues they would generate. Out of City Multiplier 200% 12/31/15 Date when fees will first be collected at adjusted rates.Actual adjustment should occur one billing period earlier. After rate adjustments are made,general customers will be billed every other month. Sales to be billed this year:Sales at the current(Test Year)rates(gray highlighted column)will apply until rates are adjusted.Sales at the modeled rates(yellow highlighted column)would apply if the modeled rates are adopted.The grand total"blended"sales revenues are the total revneues generated by the two different sets of rates.Those show in the right-most column. Bottom of Customer Volume Top of New New Unit Class,Rate Range in Volume Sales This Customers Above Minimum New Usage Charge Sales This Grand Total Class or Meter 1,000 Range in Year at This Volume and Charge Base Allowance in per 1,000 Year at 'Blended"Sales Size Gallons 1,000 Gallons Current Rates Below Next Rates' 1,000 Gallons Gallons Modeled Rates This Year Residential,G- 0 999 $0 0 $0.00 0.000 $5.09 $0 $0 01,02,03,04, 10,000 14,999 $390,563 1,577 $0.00 0.000 $5.09 $1,583 $392,146 05,07,09 160,000 99,999,999 $0 0 $0.00 0.000 $5.09 $0 $0 0 999 $0 0 $0.00 0.000 $5.09 $0 $0 Commercial, 30,000 39,999 $53,827 84 $0.00 0.000 $5.09 $218 $54,045 G-06 160,000 99,999,999 $0 0 $0.00 0.000 $5.09 $0 $0 0 999 $0 0 $0.00 0.000 $5.09 $0 $0 Industrial,G- 08 10,000 14,999 $7,231 30 $0.00 0.000 $5.09 $29 $7,260 160,000 99,999,999 $0 0 $0.00 0.000 $5.09 $0 $0 College 0 999 $0 0 $0.00 0.000 $5.09 $0 $0 Townhomes, 20,000 29,999 $4,781 10 $0.00 0.000 $5.09 $19 $4,800 G-12 160,000 99,999,999 $0 0 $0.00 0.000 $5.09 $0 $0 Senior 0 999 $0 0 $0.00 0.000 $5.09 $0 $0 Housing 6,000 6,999 $361 3 $0.00 0.000 $5.09 $1 $363 Addition,G-13 160,000 99,999,999 $0 0 $0.00 0.000 $5.09 $0 $0 0 999 $0 0 $0.00 0.000 $5.09 $0 $0 City,G-10 30,000 39,999 $0 17 $0.00 0.000 $5.09 $49 $49 160,000 99,999,999 $0 0 $0.00 0.000 $5.09 $0 $0 Total Rate Rev at Current Rates $456,762 Total Rate Rev at Modeled Rates $1,900 Total Blended Rate Revenues for the Year 2 $458,662 Note 1,New Minimum Charge Base Rates:If meter or connection size-based minimum charges are to be used,and the user classes modeled above include meter or connection sizes,the amounts shown in this column include meter or connection size surcharges as calculated in Table 10.Otherwise,use the rates in the"Total Minimum Charge per Billing Period"column of Table 10 when setting minimum charges for each customer when their minimums will be based upon meter or connection size. Note 2,Blended Rate Revenues:During the year when rates will be adjusted,rate revenues generated will be"blended"revenues-part collected at the current rates and part collected at the adjusted rates.The table above calculates both kinds of revenue and totals them in the right-most column.Therefore,the anticipated timing of rate adjustment shown at the top of this table will cause rates to be charged as follows: 12.0 months at the old user charge rates and 10.0 months at the new user charge rates. CBGreatRates©Version 7.2 34 Table 12 - Test Year Usage St.Joseph, MN;Water Rates Scenario 2015-1 This table shows usage by all customers during the test year. Date this scenario created: 11/3/2015 Test year,the one-year period being analyzed starts:1/1/2014 Meter Readings per year: 6 Bills sent per year: 6 Average Count of Bills Volume of Only Number of %of Bottom of Top of Volume Used Count of Bills Total Annual Only Where Those Bills Customers With Customers Volume Volume Within Each With ANY Use Within Volume Where Volume Volume That That %of Total Customer or Rate Range in Range in Conversion Volume Range Volume Each Volume "Maxed Out' "Maxed Out' "Maxed Out' Averaged Use at This Class,or Meter 1,000 1,000 Factor for in 1,000 Within Each Range in Within Each Within Each Within Each This Volume Average Size Gallons Gallons Billable Units Gallons Range Gallons Range Range Range of Use Volume 0 999 1,000 0.000 9,463 0 0 0 0 0.0% 0.0% 1,000 1,999 1,000 0.000 9,463 0 0 0 0 0.0% 0.0% 2,000 2,999 1,000 0.000 9,463 0 0 0 0 0.0% 0.0% 3,000 3,999 1,000 0.000 9,463 0 0 0 0 0.0% 0.0% 4,000 4,999 1,000 0.000 9,463 0 0 0 0 0.0% 0.0% Residential,G-01, 5,000 5,999 1,000 0.000 9,463 0 0 0 0 0.0% 0.0% 02,03,04,05, 07,09 6,000 6,999 1,000 0.000 9,463 0 0 0 0 0.0% 0.0% 7,000 7,999 1,000 0.000 9,463 0 0 0 0 0.0% 0.0% 8,000 8,999 1,000 0.000 9,463 0 0 0 0 0.0% 0.0% 9,000 9,999 1,000 0.000 9,463 0 0 0 0 0.0% 0.0% 10,000 14,999 1,000 11.996 9,463 113,517,636 9,463 113,517,636 1,577 91.7% 83.3% Monthly and Annual Subtotals: 104,093 113,517,636 9,463 113,517,636 1,577 91.7% 83.3% 0 999 1,000 0.000 504 0 0 0 0 0.0% 0.0% 1,000 1,999 1,000 0.000 504 0 0 0 0 0.0% 0.0% 2,000 2,999 1,000 0.000 504 0 0 0 0 0.0% 0.0% 3,000 3,999 1,000 0.000 504 0 0 0 0 0.0% 0.0% 4,000 4,999 1,000 0.000 504 0 0 0 0 0.0% 0.0% 5,000 5,999 1,000 0.000 504 0 0 0 0 0.0% 0.0% 6,000 6,999 1,000 0.000 504 0 0 0 0 0.0% 0.0% Commercial,G- 7,000 7,999 1,000 0.000 504 0 0 0 0 0.0% 0.0% O6 8,000 8,999 1,000 0.000 504 0 0 0 0 0.0% 0.0% 9,000 9,999 1,000 0.000 504 0 0 0 0 0.0% 0.0% 10,000 14,999 1,000 0.000 504 0 0 0 0 0.0% 0.0% 15,000 19,999 1,000 0.000 504 0 0 0 0 0.0% 0.0% 20,000 29,999 1,000 0.000 504 0 0 0 0 0.0% 0.0% 30,000 39,999 1'00031,041 504 15,644,801 504 15,644,801 84 4.9% 11.5% Monthly and Annual Subtotals: 7,056 15,644,801 504 15,644,801 84 4.9% 11.5% 0 999 1,000 0.000 180 0 0 0 0 0.0% 0.0% 1,000 1,999 1,000 0.000 180 0 0 0 0 0.0% 0.0% 2,000 2,999 1,000 0.000 180 0 0 0 0 0.0% 0.0% 3,000 3,999 1,000 0.000 180 0 0 0 0 0.0% 0.0% 4,000 4,999 1,000 0.000 180 0 0 0 0 0.0% 0.0% Industrial,G-08 5,000 5,999 1,000 0.000 180 0 0 0 0 0.0% 0.0% 6,000 6,999 1,000 0.000 180 0 0 0 0 0.0% 0.0% 7,000 7,999 1,000 0.000 180 0 0 0 0 0.0% 0.0% 8,000 8,999 1,000 0.000 180 0 0 0 0 0.0% 0.0% 9,000 9,999 1,000 0.000 180 0 0 0 0 0.0% 0.0% 10,000 14,999 1,000 11.675 180 2,101,569 180 2,101,569 30 1.7% 1.5% Monthly and Annual Subtotals: 1,980 2,101,569 180 2,101,569 30 1.7% 1.5% 0 999 1,000 0.000 60 0 0 0 0 0.0% 0.0% 1,000 1,999 1,000 0.000 60 0 0 0 0 0.0% 0.0% 2,000 2,999 1,000 0.000 60 0 0 0 0 0.0% 0.0% 3,000 3,999 1,000 0.000 60 0 0 0 0 0.0% 0.0% 4,000 4,999 1,000 0.000 60 0 0 0 0 0.0% 0.0% 5,000 5,999 1,000 0.000 60 0 0 0 0 0.0% 0.0% College 6,000 6,999 1,000 2 0.000 60 0 0 0 0 0.0% 0.0% Townhomes,G- 7.000 7,999 1,000 0.000 60 0 0 0 0 0.0% 0.0% 8,000 8,999 1,000 0.000 60 0 0 0 0 0.0% 0.0% 9,000 9,999 1,000 0.000 60 0 0 0 0 0.0% 0.0% 10,000 14,999 1,000 0.000 60 0 0 0 0 0.0% 0.0% 15,000 19,999 1,000 0.000 60 0 0 0 0 0.0% 0.0% 20,000 29,999 1,000 23.159 60 1,389,524 60 1,389,524 10 0.6% 1.0% Monthly and Annual Subtotals: 780 1,389,524 60 1,389,524 10 0.6% 1.0% 0 999 1,000 0.000 16 0 0 0 0 0.0% 0.0% 1,000 1,999 1,000 0.000 16 0 0 0 0 0.0% 0.0% 2,000 2,999 1,000 0.000 16 0 0 0 0 0.0% 0.0% Senior Housing 3,000 3,999 1,000 0.000 16 0 0 0 0 0.0% 0.0% Addition,G-13 4,000 4,999 1,000 0.000 16 0 0 0 0 0.0% 0.0% 5,000 5,999 1,000 0.000 16 0 0 0 0 0.0% 0.0% 6,000 6,999 1,000 6.562 16 104,990 16 104,990 3 0.2% 0.1% Monthly and Annual Subtotals: 112 104,990 16 104,990 3 0.2% 0.1% 0 999 1,000 0.000 100 0 0 0 0 0.0% 0.0% 1,000 1,999 1,000 0.000 100 0 0 0 0 0.0% 0.0% 2,000 2,999 1,000 0.000 100 0 0 0 0 0.0% 0.0% 3,000 3,999 1,000 0.000 100 0 0 0 0 0.0% 0.0% 4,000 4,999 1,000 0.000 100 0 0 0 0 0.0% 0.0% 5,000 5,999 1,000 0.000 100 0 0 0 0 0.0% 0.0% 6,000 6,999 1,000 0.000 100 0 0 0 0 0.0% 0.0% City,G-10 7,000 7,999 1,000 0.000 100 0 0 0 0 0.0% 0.0% 8,000 8,999 1,000 0.000 100 0 0 0 0 0.0% 0.0% 9,000 9,999 1,000 0.000 100 0 0 0 0 0.0% 0.0% 10,000 14,999 1,000 0.000 100 0 0 0 0 0.0% 0.0% 15,000 19,999 1,000 0.000 100 0 0 0 0 0.0% 0.0% 20,000 29,999 1,000 0.000 100 0 0 0 0 0.0% 0.0% 30,000 39,999 1,000 35.155 100 3,515,480 100 3,515,480 17 1.0% 2.6% Monthly and Annual Subtotals: 1,400 3,515,480 100 3,515,480 17 1.0% 2.6% Monthly and Annual Grand Totals: 115,421 136,274,000 10,323 1,721 100% 100% CBGreatRates©Version 7.2 35 Table 13 - Rates at End of Test Year St. Joseph, MN; Water Rates Scenario 2015-1 This table shows user unit charges at the end of the test year. Rates for volume ranges that are not shown are the same as the next lowest volume range rates. Bottom of Customer or Volume Range Top of Volume Usage Rate Class, or in 1,000 Range in 1,000 Allowance in Unit Charge Meter Size Gallons Gallons Minimum Charge 1,000 Gallons per 1,000 Gallons Residential, G- 0 999 $0.00 0.000 $3.45 01, 02, 03, 04, 1,000 1,999 $0.00 0.000 $3.45 05, 07, 09 160,000 99,999,999 $0.00 0.000 $3.45 0 999 $0.00 0.000 $3.45 Commercial, G 06 11000 1,999 $0.00 0.000 $3.45 160,000 99,999,999 $0.00 0.000 $3.45 0 999 $0.00 0.000 $3.45 Industrial, G- 08 1,000 1,999 $0.00 0.000 $3.45 160,000 99,999,999 $0.00 0.000 $3.45 College 0 999 $0.00 0.000 $3.45 Townhomes, G 1,000 1,999 $0.00 0.000 $3.45 12 160,000 99,999,999 $0.00 0.000 $3.45 Senior 0 999 $0.00 0.000 $3.45 Housing 1,000 1,999 $0.00 0.000 $3.45 Addition, G-13 160,000 99,999,999 $0.00 0.000 $3.45 0 999 $0.00 0.000 $0.00 City, G-10 1,000 1,999 $0.00 0.000 $0.00 160,000 99,999,999 $0.00 0.000 $0.00 CBGreatRates©Version 7.2 36 Table 14 - Average Cost Classification St. Joseph, MN; Water Rates Scenario 2015-1 This table distributes costs from a representative year(the"target'year)to fixed and variable categories(see Definitions)in order to calculate the"proportional to use"or"cost of service"rate structure based upon the cost breakdown for that year. The rate structure target year runs from 1/1/2016 through 12/31/2016 Variable Capacity Fixed Cost Variable Capacity Fixed Cost Cost Cost Operating Costs Amount % Cost% Cost% Amount Amount Amount DEPART 47100 Bond Payment(P&1)Except 413 MN DOT R-O-W Lease Payments CIP Below 33.3% 66.7% 0.0% $0 $0 $0 710 Loss on Disposal of Assets $0 33.3% 66.7% 0.0% $0 $0 $0 720 Transfers to Other Funds $46,800 33.3% 66.7% 0.0% $15,584 $31,216 $0 DEPART 49410 Power and Pumping $22,828 0.0% 100.0% 0.0% $0 $22,828 $0 Purification Operating Supplies $23,400 0.0% 100.0% 0.0% $0 $23,400 $0 Purification R&R $18,200 33.3% 66.7% 0.0% $6,061 $12,139 $0 Purification Professional Services&Engineering $3,016 33.3% 66.7% 0.0% $1,004 $2,012 $0 Purification Tests $1,664 100.0% 0.0% 0.0% $1,664 $0 $0 Purification Telephone $8,237 100.0% 0.0% 0.0% $8,237 $0 $0 Purification Electric&Gas $54,050 0.0% 100.0% 0.0% $0 $54,050 $0 Purification Other Equipment $15,600 33.3% 66.7% 0.0% $5,195 $10,405 $0 Purification Software and Small Tools $931 33.3% 66.7% 0.0% $310 $621 $0 DEPART 49430 Distribution $10,400 33.3% 66.7% 0.0% $3,463 $6,937 $0 DEPART 49434 Wellhead Protection $2,080 33.3% 66.7% 0.0% $693 $1,387 $0 220 Repair and Maintenance $2,080 33.3% 66.7% 0.0% $693 $1,387 $0 300 Professional Services $312 33.3% 66.7% 0.0% $104 $208 $0 303 Engineering Fee $500 33.3% 66.7% 0.0% $167 $334 $0 304 Legal Fees $500 100.0% 0.0% 0.0% $500 $0 $0 381 Electric Utilities $3,749 0.0% 100.0% 0.0% $0 $3,749 $0 530 Improvements Other than Bldgs $10,400 33.3% 66.7% 0.0% $3,463 $6,937 $0 101 Salaries $98,363 33.3% 66.7% 0.0% $32,755 $65,608 $0 111 OPEB Liability $3,120 33.3% 66.7% 0.0% $1,039 $2,081 $0 121 PERA Contributions $7,275 33.3% 66.7% 0.0% $2,423 $4,852 $0 122 FICA Contributions $5,179 33.3% 66.7% 0.0% $1,725 $3,455 $0 123 Deferred Comp-Employer $406 33.3% 66.7% 0.0% $135 $271 $0 125 Medicare Contributions $1,212 33.3% 66.7% 0.0% $403 $808 $0 130 H S A-Employer Contribution $3,120 33.3% 66.7% 0.0% $1,039 $2,081 $0 131 Health Insurance $18,668 33.3% 66.7% 0.0% $6,216 $12,452 $0 132 Dental Insurance $3,203 33.3% 66.7% 0.0% $1,067 $2,137 $0 133 Life Insurance $250 33.3% 66.7% 0.0% $83 $166 $0 134 Disabilty Insurance $666 33.3% 66.7% 0.0% $222 $444 $0 151 Workers Comp.Insur.Prem. $3,817 33.3% 66.7% 0.0% $1,271 $2,546 $0 171 Clothing Allowance $686 33.3% 66.7% 0.0% $229 $458 $0 200 Office Supplies $156 100.0% 0.0% 0.0% $156 $0 $0 210 Operating Supplies $1,820 0.0% 100.0% 0.0% $0 $1,820 $0 212 Safety Program $1,456 33.3% 66.7% 0.0% $485 $971 $0 215 Software Support $172 33.3% 66.7% 0.0% $57 $114 $0 220 Repair and Maintenance $1,820 33.3% 66.7% 0.0% $606 $1,214 $0 230 Vehicle Repair&Maintenance $1,560 33.3% 66.7% 0.0% $519 $1,041 $0 235 Motor Fuel $9,360 33.3% 66.7% 0.0% $3,117 $6,243 $0 240 Small Tool&Minor Equipment $208 33.3% 66.7% 0.0% $69 $139 $0 300 Professional Services $520 33.3% 66.7% 0.0% $173 $347 $0 303 Engineering Fee $0 33.3% 66.7% 0.0% $0 $0 $0 304 Legal Fees $0 100.0% 0.0% 0.0% $0 $0 $0 317 Other fees $0 33.3% 66.7% 0.0% $0 $0 $0 319 Gopher State Notification $1,248 33.3% 66.7% 0.0% $416 $832 $0 322 Postage $130 100.0% 0.0% 0.0% $130 $0 $0 331 Travel&Conference Expense $936 33.3% 66.7% 0.0% $312 $624 $0 CBGreatRates©Version 7.2 37 Table 14 - Average Cost Classification Variable Capacity Fixed Cost Variable Capacity Fixed Cost Cost Cost Operating Costs Amount % Cost% Cost% Amount Amount Amount 361 General Liability Insurance $13,385 33.3% 66.7% 0.0% $4,457 $8,928 $0 410 Rentals $0 33.3% 66.7% 0.0% $0 $0 $0 433 Dues&Memberships $660 33.3% 66.7% 0.0% $220 $440 $0 437 Real Estate Taxes $910 33.3% 66.7% 0.0% $303 $607 $0 442 Water Permit $2,080 100.0% 0.0% 0.0% $2,080 $0 $0 444 Annual Water Connection Fee $11,440 33.3% 66.7% 0.0% $3,810 $7,630 $0 446 License $312 33.3% 66.7% 0.0% $104 $208 $0 550 Motor Vehicles $2,080 33.3% 66.7% 0.0% $693 $1,387 $0 580 Other Equipment $0 33.3% 66.7% 0.0% $0 $0 $0 581 Computer Hardware $0 100.0% 0.0% 0.0% $0 $0 $0 DEPART 49490 Administration and General $40,000 100.0% 0.0% 0.0% $40,000 $0 $0 DEPART 49970 Depreciation Expense $0 33.3% 66.7% 0.0% $0 $0 $0 413 MN DOT R-O-W Lease Payments CIP Below 33.3% 66.7% 0.0% $0 $0 $0 Temporary Adjustment of R&R Annuity $0 33.3% 66.7% 0.0% $0 $0 $0 Annual Payment to Repair and Replacement(Table 17) $163,061 33.3% 66.7% 0.0% $54,299 $108,762 $0 User Charge Analysis Services $0 33.3% 66.7% 0.0% $0 $0 $0 CIP Spending Net of Grant/Loan Proceeds and Other External Incomes(Table 4) $911,350 33.3% 41.7% 25.0%1 $303,4801 $380,0331 $227,838 Grand Total Costs,Weighted Avg Percentages $1,535,375 33.3% 51.9% 14.8%1 $511,2281 $796,3091 $227,838 "Proportional to Use" Rate Structure Cost Basis 100% $1,535,375 Average Fixed Cost/User Every Other Month= $49.52 Water Loss is Estimated at 0% Cost of Water Loss is Estimated at 52% Average Variable Cost to Produce/1,000 Gallons= $5.84 Resulting Cost of Water Loss $0 Gallons/Billing Cycle Used by Average Residential Test Year Customer Metered Usage(in Gallons) 136,274,000 Customer= 11,996 + Test Year Water Loss 0 Total Test Year Volume 136,274,000 CBGreatRates©Version 7.2 38 Table 15 - Marginal Cost Classification St. Joseph, MN; Water Rates Scenario 2015-1 The utility incurs unavoidable,or marginal,costs.Thus,the utility must collect minimal fees from various customers to"break even"on a marginal cost basis.Costs vary by customer type and volume used. In the calculations below it is assumed that marginal costs are being calculated for: Snowbirds The rate structure target year runs from 1/1/2016 through 12/31/2016 Marginal Marginal Marginal Marginal Marginal Marginal Variable Capacity Fixed Cost Variable Capacity Fixed Cost Cost Cost Operating Costs Amount % Cost% Cost% Amount Amount Amount DEPART 47100 Bond Payment(P&I)Except 413 MN DOT R-O-W Lease Payments $0 100% 100% 100% $0 $0 $0 710 Loss on Disposal of Assets $0 100% 100% 100% $0 $0 $0 720 Transfers to Other Funds $46,800 100% 100% 100% $15,584 $31,216 $0 DEPART 49410 Power and Pumping $22,828 0% 0% 100% $0 $0 $0 Purification Operating Supplies $23,400 50% 50% 100% $0 $11,700 $0 Purification R&R $18,200 50% 50% 100% $3,030 $6,070 $0 Purification Professional Services&Engineering $3,016 100% 100% 100% $1,004 $2,012 $0 Purification Tests $1,664 100% 100% 100% $1,664 $0 $0 Purification Telephone $8,237 100% 100% 100% $8,237 $0 $0 Purification Electric&Gas $54,050 0% 0% 100% $0 $0 $0 Purification Other Equipment $15,600 100% 100% 100% $5,195 $10,405 $0 Purification Software and Small Tools $931 100% 100% 100% $310 $621 $0 DEPART 49430 Distribution $10,400 100% 100% 100% $3,463 $6,937 $0 DEPART 49434 Wellhead Protection $2,080 100% 100% 100% $693 $1,387 $0 220 Repair and Maintenance $2,080 50% 50% 100% $346 $694 $0 300 Professional Services $312 100% 100% 100% $104 $208 $0 303 Engineering Fee $500 100% 100% 100% $167 $334 $0 304 Legal Fees $500 100% 100% 100% $500 $0 $0 381 Electric Utilities $3,749 0% 0% 100% $0 $0 $0 530 Improvements Other than Bldgs $10,400 100% 100% 100% $3,463 $6,937 $0 101 Salaries $98,363 50% 50% 100% $16,377 $32,804 $0 111 OPEB Liability $3,120 50% 50% 100% $519 $1,041 $0 121 PERA Contributions $7,275 50% 50% 100% $1,211 $2,426 $0 122 FICA Contributions $5,179 50% 50% 100% $862 $1,727 $0 123 Deferred Comp-Employer $406 50% 50% 100% $68 $135 $0 125 Medicare Contributions $1,212 50% 50% 100% $202 $404 $0 130 H S A-Employer Contribution $3,120 50% 50% 100% $519 $1,041 $0 131 Health Insurance $18,668 50% 50% 100% $3,108 $6,226 $0 132 Dental Insurance $3,203 50% 50% 100% $533 $1,068 $0 133 Life Insurance $250 50% 50% 100% $42 $83 $0 134 Disabilty Insurance $666 50% 50% 100% $111 $222 $0 151 Workers Comp.Insur.Prem. $3,817 50% 50% 100% $635 $1,273 $0 171 Clothing Allowance $686 50% 50% 100% $114 $229 $0 200 Office Supplies $156 50% 50% 100% $78 $0 $0 210 Operating Supplies $1,820 50% 50% 100% $0 $910 $0 212 Safety Program $1,456 100% 100% 100% $485 $971 $0 215 Software Support $172 100% 100% 100% $57 $114 $0 220 Repair and Maintenance $1,820 50% 50% 100% $303 $607 $0 230 Vehicle Repair&Maintenance $1,560 50% 50% 100% $260 $520 $0 235 Motor Fuel $9,360 50% 50% 100% $1,558 $3,122 $0 240 Small Tool&Minor Equipment $208 50% 50% 100% $35 $69 $0 300 Professional Services $520 100% 100% 100% $173 $347 $0 303 Engineering Fee $0 100% 100% 100% $0 $0 $0 CBGreatRates©Version 7.2 39 Table 15 - Marginal Cost Classification Marginal Marginal Marginal Marginal Marginal Marginal Variable Capacity Fixed Cost Variable Capacity Fixed Cost Cost Cost Operating Costs Amount % Cost% Cost% Amount Amount Amount 304 Legal Fees $0 100% 100% 100% $0 $0 $0 317 Other fees $0 100% 100% 100% $0 $0 $0 319 Gopher State Notification $1,248 100% 100% 100% $416 $832 $0 322 Postage $130 100% 100% 100% $130 $0 $0 331 Travel&Conference Expense $936 100% 100% 100% $312 $624 $0 361 General Liability Insurance $13,385 100% 100% 100% $4,457 $8,928 $0 410 Rentals $0 50% 50% 100% $0 $0 $0 433 Dues&Memberships $660 100% 100% 100% $220 $440 $0 437 Real Estate Taxes $910 100% 100% 100% $303 $607 $0 442 Water Permit $2,080 100% 100% 100% $2,080 $0 $0 444 Annual Water Connection Fee $11,440 100% 100% 100% $3,810 $7,630 $0 446 License $312 100% 100% 100% $104 $208 $0 550 Motor Vehicles $2,080 50% 50% 100% $346 $694 $0 580 Other Equipment $0 50% 50% 100% $0 $0 $0 581 Computer Hardware $0 100% 100% 100% $0 $0 $0 DEPART 49490 Administration and General $40,000 100% 100% 100% $40,000 $0 $0 DEPART 49970 Depreciation Expense $0 100% 100% 100% $0 $0 $0 413 MN DOT R-O-W Lease Payments $0 100% 100% 100% $0 $0 $0 Temporary Adjustment of R&R Annuity $0 50% 50% 100% $0 $0 $0 Annual Payment to Repair and Replacement(Table 17) $163,061 50% 50% 100% $27,150 $54,381 $0 User Charge Analysis Services $0 100% 100% 100% $0 $0 $0 CIP Spending Net of Grant/Loan Proceeds and Other External Incomes(Table 4) $911,350 100% 100% 100% $303,480 $380,033 $227,838 Offset for Capacity Surcharges(Table 10) $0 100% 100% 100% $0 $0 $0 Grand Total All Costs $1,535,375 89% 74% 100% $453,819 $588,237 $227,838 Marginal Costs per Customer, Volume Unit and Capacity Share The system would suffer a net revenue loss if it set minimum and unit charges lower than the marginal costs at the right. It would make a"profit"on a marginal cost basis if it charged more. Capacity costs, however,are a bit Marginal Marginal Marginal Capacity different.They can be recovered over time,as modeled here,or all at once in Volume in Fixed Cost Variable the case of connection(tap-on)fees or by using a combination of both Cost per Number of 1,000s of per Cost per AWWA methods. Customers Gallons Customer 1,000 Capacity 1,721 136,274 $43.96 Gallons Share Bi- Marginal Fixed Cost as a Percent of Average Fixed Cost(Table 14): 89% $4.32 monthly Marginal Variable Cost as a Percent of Average Variable Cost(Table 14): 74% $18.06 Marginal Capacity Cost as a Percent of Average Capacity Cost(Table 10): 100% CBGreatRates©Version 7.2 40 N o 0 0 o O O O O O O O O O O O O O O O O 0 N o o o O O O O O O O O O O O O O O c E o O O O o c� O O o o O O O O O O O O U M ,6ri o m 0 0 0 0 0 ,0 o 0 o o O 0000 Q U M M Cn In of In In 1� 0 O of N d) of d) W W CA M � a7 U) ER ER Efl ER Ndj EA EH EH ER MFJ � EA Vdj ER ER ER EH EH Efl � O p" H� O O O O O O O O O O O O O O O O O O O O O ER ER ER ER ER EA EA EA EA EA EA EA Efl Efl Efl ER ER ER ER ER ER O O O O O O O O O O O O O O O O O O O O O C a) � � EA ER � ER ER EA EA ER ER EA EA EA � ER ER EA EA EA EA Efl Efl E O_ O_ _ E. O O o 0 o O V3 O O O O O O O EO EO O EO EO EO EO EO EO O O O co 0 0 V) % 0 0 U 1 L w U) - � E � 0 N ' o0 ami 0 — m o 0 m U rn� U a n }� r a7 00 00 O0 O0 O OOU) ER ER EA EA EA C:l V) C�l O O O V) ERO N 00 V) a7 N {j7 O m O r ~ c � i» O a a N N x m G1 O a L o y c OO O O O O O O O O O O O O O O O O O O O - c 12 N EA O O O O O O O O O O O O O O O O O O O O L cz (Q Q O O O O O O O O O O O O O O O O O O O O ^V C a p O_ O_ O O In In LO LO O O LO LO O O O O O CL C `p N N EA N N N N M M M M V V V V V V V V EA EA EA ER ER EA EA ER ER EA EA EA EA ER ER Efl Efl W N T r � a O a O U N C OC O O O O O O O O O O O O O O O O O O O O O N }� }moil 3 In ER O O O O O O O O O O O O O O O O O O O E A�✓, aLI p O O O O O O O O O O O O O O O N Lu O O O n to to o O O In In In O O O O O O N8V r (6 5 O a) a) O O O O O O O EA Efl Efl O O O EA O Efl O Efl O O O EA O EA O ER O ER O EA O ER O U •� L a O EA ER ER ER ER ER ER 00 EA - N Cr Z �� 0 0 W 20 coc t E y m 0 0 0 0 o Oo o 0 o O O O O O O O O O O O O N1 c m 3 c va cs> cs> va v> v> e» e» E» E» E» cs> va v> c» c» cs> cs> va o c LO Q 0 a N N � 'm L a o 0 0 0 0 0 0 0 0 o O O O O O O O O O ofl 2 0 r a) U 3 c EA ER ER Efl Efl EA EA ER ER EA 00 U3 Efl EA EA EA EA ER ER E - a 0 0 a c 'm �m � w 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o v> cs> cs> e» e» cs> cs> cs> cs> E» E» v> v> cs> cs> cs> cs> 0 - U r j CO ER a p O m N Q U a � � d d a v> cs> cs> cs> cs> va o v> v> e» e» va v> e» e» E» E» E» E» cs> cs> a� o - L o o N t NEFJ � Y m 0 OJ Table 17- Equipment Replacement Annuity Calculation St. Joseph, MN; Water Rates Scenario 2015-1 This schedule calculates the annual annuity needed to fund all replacement and refurbishment from Table 16,the detailed schedule. 2.00% Average Inflation Rate for the Following Water System Equipment for the Term of This Replacement Schedule 3.00% Average Interest Rate on Balances Invested for the Term of This Replacement Schedule 3.00% Average Interest Rate on Amounts Borrowed for the Term of This Replacement Schedule Minimum This Year's Future Annual Interest Earned End of Year Desired End of Year Costs in Current Inflated Net on Prior Balance in Future Year Balance in Beginning Item Description Dollars Costs Balance Dollars Future Dollars 1/1/14 Last year's replacements $13,000 $13,000 $0 -$13,000 $129,175 1/1/15 Total of replacements from detailed replacement $35,000 $35,700 -$390 $113,971 $131,759 schedule 1/1/16 Total of replacements from detailed replacement $35,750 $37,194 $3,419 $243,258 $134,394 schedule 1/1/17 Total of replacements from detailed replacement $90,000 $95,509 $7,298 $318,108 $137,082 schedule 1/1/18 Total of replacements from detailed replacement $56,750 $61,428 $9,543 $429,285 $139,823 schedule 1/1/19 Total of replacements from detailed replacement $295,000 $325,704 $12,879 $279,521 $142,620 schedule 1/1/20 Total of replacements from detailed replacement $80,250 $90,375 $8,386 $360,594 $145,472 schedule 1/1/21 Total of replacements from detailed replacement $50,000 $57,434 $10,818 $477,039 $148,381 schedule 1/1/22 Total of replacements from detailed replacement $50,000 $58,583 $14,311 $595,828 $151,349 schedule 1/1/23 Total of replacements from detailed replacement $70,000 $83,656 $17,875 $693,108 $154,376 schedule 1/1/24 Total of replacements from detailed replacement $360,000 $438,838 $20,793 $438,125 $157,464 schedule 1/1/25 Total of replacements from detailed replacement $105,000 $130,554 $13,144 $483,776 $160,613 schedule 1/1/26 Total of replacements from detailed replacement $80,750 $102,411 $14,513 $558,940 $163,825 schedule 1/1/27 Total of replacements from detailed replacement $425,000 $549,783 $16,768 $188,987 $167,102 schedule 1/1/28 Total of replacements from detailed replacement $90,000 $118,753 $5,670 $238,965 $170,444 schedule 1/1/29 Total of replacements from detailed replacement $80,000 $107,669 $7,169 $301,526 $173,853 schedule 1/1/30 Total of replacements from detailed replacement $95,000 $130,415 $9,046 $343,218 $177,330 schedule 1/1/31 Total of replacements from detailed replacement $80,000 $112,019 $10,297 $404,557 $180,876 schedule 1/1/32 Total of replacements from detailed replacement $80,000 $114,260 $12,137 $465,495 $184,494 schedule 1/1/33 Total of replacements from detailed replacement $95,000 $138,397 $13,965 $504,125 $188,184 schedule 1/1/34 Total of replacements from detailed replacement $330,000 $490,363 $15,124 $191,947 $191,947 schedule Notes:This schedule covers items in the City's replacement Starting Account Balance $0 $129,175 schedule with several assumed repeat cycles.A Discretionary Minimum Desired Annuity amount was added so that at the end of the 20-year Balance in Today's modeling period,the balance will equal the average of the annual Minimum Annual Annuity $155,918 Dollars replacement cost amounts. Discretionary Annuity $7,143 Required Annual Deposit (Annuity)to Replacement Account $163,061 This amount is entered into Table 3 as an operating cost of the system. CBGreatRates©Version 7.2 42 St. Joseph, MN; Sewer Rates Scenario 2015-1 Modeling Results This document contains the calculations that were performed to arrive at new user rates and fees for the next 10 years.These calculations are complex so key issues are also described in a narrative report that accompanies this model. This analysis was conducted so as to establish user rates that are adequate to pay all reasonably expectable costs while charging rates that are fairly structured and appropriately simple or complex. Scenario Description: This analysis model assumes that, starting in 2016, general fund subsidies will be gradually decreased over several years and then discontinued. The increases already slated for the sewer line charge will continue. In addition, unit charges will be increased initially to cash flow the utility properly and build responsible reserves by the end of 10 years.After initially setting rates as described and as shown in the table in the narrative report, inflationary rate increases would be done annually, primarily to match inflation. For most,the best way to read and understand what this model means is this.Scan the"Index of Tables,Charts and Other Results" to see how the model is laid out.Scan the"Definitions"for any terms you are not already familiar with. Read and even ponder Table 1 and the line graph charts.These will show you how the proposed rate adjustments will affect ratepayers and the system. If you need more detail than that,review the entire model. Finally,rate setting involves much more than just rates so you need to read the accompanying narrative report to understand what you need to do and why. Several tables in this model depict volume usage and user rates for the various customer classes.The model includes a continuum of volumes but many volume categories had no users. Most of these lines have been hidden simply to make the tables less voluminous. However,all volume classes that had use or that are break points for rate blocks are shown. For volume classes that are not shown,rates will be the same as the previous rate that is shown. November 25,2015 This rate analysis scenario was produced by Carl E. Brown,Getting GreatRates.com 1014 Carousel Drive,Jefferson City,Missouri 65101 (573)619-3411 www.gettinggreatrates.com carl(a-)gettinggreatrates.com CBGreatRates©Version 7.2 43 Return on Investment St. Joseph, MN; Sewer Rates Scenario 2015-1 The rates depicted in this model will produce various returns on investment or paybacks. Usually the most important payback, at least to ratepayers, is a rate structure that is demonstrably fair. For the system, however, making sure that revenue will be adequate to pay all expected,expectable and many unexpectable costs is the the most important return. If revenue will increase as a result of this analysis,which is almost always the case, one can calculate a return on investment. The following calculations show what was invested and what the returns will be over two periods;five years and 10 years. Five years is a reasonable period for return projections.Ten years is a good basic planning horizon but you should not bank on amounts or returns projected that far out. Besides, most systems should have their analyses redone long before then. Consider these key points about return on investment. Higher rates will fund more improvements, better repair and replacement and more. Most increases in revenue end up being used for such expenses.Thus,few systems end up with a dramatic increase in their cash reserves but they do markedly improve their financial position. In addition,fairer and higher rates generally enable systems to qualify for grant and loan funding that they otherwise would not.That increases the importation of"other people's money,"which is a drain on the state and federal levels,where the money comes from, but it is very desirable at the utility level. Also note that rates in this model have been modeled to be adjusted during the year following the test year or even later.That year is included in the first five-year return on investment calculation.Thus,the first year of returns calculated below include most or all of one year where rates will not have been changed yet, lowering the calculated return on investment but not the real rate of return. Calculations $7,731 Fees to GettingGreatRates.com $500 Estimated value of system staff time and incidentals to assemble needed information $8,231 Total Investment for This Analysis $2,747,062 Five-year Increase in Revenue Due at Least Partly to This Analysis 33375% Five-year Return on Investment(increase in revenues/investment) $7,779,869 Ten-year Improvement in Cash Position Due at Least Partly to This Analysis 94519%Ten-year Return on Investment(increase in revenues/investment) This analysis was produced using the program CBGreatRates, copyright 2015.You are encouraged to distribute this report to others so long as credit is ascribed to the author, Carl E. Brown of GettingGreatRates.com. CBGreatRates©Version 7.2 44 Table 1 - Modeled Rates St. Joseph, MN; Sewer Rates Scenario 2015-1 Modeled unit charges are shown in this table. Other rate components are shown in the narrative report. Customer Class, Bottom of Volume Top of Volume Usage Allowance in Unit Charge Rate Class or Range in 1,000 Range in 1,000 1,000 Gallons per 1,000 Gallons Meter Size Gallons Gallons 0 999 0.000 $7.34 Residential 1,000 1,999 0.000 $7.34 160,000 99,999,999 0.000 $7.34 0 999 0.000 $7.34 Commercial 1,000 1,999 0.000 $7.34 160,000 99,999,999 0.000 $7.34 0 999 0.000 $7.34 Industrial 1,000 1,999 0.000 $7.34 160,000 99,999,999 0.000 $7.34 0 999 0.000 $7.34 CSB Student 1,000 1,999 Housing 0.000 $7.34 160,000 99,999,999 0.000 $7.34 CBGreatRates©Version 7.2 45 O) V V O 0 0 V V 0 0 M O m O O LO 0 O O O O O O O O O f� a7 c N I— 0 LO LO O ER I— 6c) EF) M m VA O VR O O O VA VA LO a) a) O O Lo O) ococ oc M oc N I� O In N O 0 a) N M co 0 co co r to CA oo l() 3 O.0. O V N I-- � VR Co VR ER 0) = L(') EA LQ L(') Efl H3 N Iq O NN N N Efl Efl Efl V> a a a) O } w a 0 Cl) 0 O 0 0 to O LO LO 0 O M O O O O O O O O O O O 0 3 ao E c N I� In r-. O N In r— r— M V) 0 H> EA CO M U( ER O ER O O O EA EA I-. 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w V o (A w V N m N V m N M O w V fA fA fA w N H7 fA H7 V7 fA CO V7 fA V7 fA m V7 V p ~ V7 fA (A H7 fA V7 H7 H7 H7 fA Ga A m r m M V o o m r M V M M o m N r M m M o m V m V w V m M M V m r o m w m m m m V O C N O O m m m N M w V m m Vr V 10 M V r V r m m m N N r mm w m m O N V r O m r O N m m w N M M M m m m O w m V m N w m M w m N LO r r M O O r m o L m (p m m M m r w V Ln V w V3 1n w N O m O w co w V 69 w � N V N V LO m N m t F w M w w w w w N 67 (fl w V7 fA CO K7 fA V7 Efl r f/-7 M m m fA fA VJ fA fA VJ fA fA � fA Q) VT A Q) } C_ VO mm m M m m V m N 0 CO V 0 r V r M m m CO � m M r N O N M m r V mw m ; O C N O o m 1n V m r O m N mo r N N w N w 1n m m m w M w O V mm O r L r m , CO m m m O V M m V m m LO N LO N m M O m N N CO N M m m O m O r L o m m m M m CO V V V w w Lo O m O u M (!T 3 ua 6a m N V N M M m N r w N fH fR 69 fH w N HJ (A fH HJ fH m ff3 V) fA CO fA M (n N ~ 69 fE3 ff3 EA H-J ER fR fR ua ul A m r m m V o N r M (O M r N o o m m m V m o M M M M M m o m M m o m V m m V m O m m N C N m M V m m M N m M V V m m N N m N m m M CO N r m M M w w m V w m m r tf N r m O N m V m m V O M m N r m O N w w N o o N m In (O N r m m m m m M OO CO> w M N M N N N Lo N HJ fR H7 HJ fR N fA H7 fA V7 HJ 1n w w w CO w M r to ~ V) V) fA 6a w w w VJ VJ 6a w 6a } O m o V O m O m M V m N M m V In M V m m M r M M r m r O V M m M O O m O N V r o O C N Y O O r N m M r r r w r O m Vo N M w M V CO O O Lo V V M w V N m m w m r L LO V m m m M V r LO M m O r m r r N CO N O In N r V m m m N m M L m U r O N m m w M N M w f/7 1n w m m V m w N w M w w V N M N M m N V N H7 fA fA HJ fA N fR fA HJ fA fR HJ HJ m ff3 V-J fA � In ff3 M � T E } L ID O m m m V O M m (O m m r Lo m N V m m m m m m V m m O O N V V O O V r O r m r (O O C O O V N N m N m m V N Lo m r Lo M m m r O M M V V w M V r m Lo m m m \ C m m m m o m m m O V V m w r N r m r r M m M N m m o m N w M m O m m m N V m L (� U r m N m(f) w (h (h w w V w w m V m w w N 69 w N N N N M 69 O O N N Ln m ~ fH fH 69 fR w VT VT fH � N L1 VT fA N m M m -O V O m O r m m r r � M V CO r r r m m m LO m N m m N m m O O m m LO V r m O Z O C C O O O O m M (O moo m m o (O m m O m m m N V m N N m w V w r V m r m N (� LO _ I� N m V M V m u) w m w m V m N N 1n O 1n N m N m M m L (� f(� L m N m m M O M V m V m N O N N co 69 O V N V) fA (A fH fA N EH (A fH (A HJ fH m w V) w V wM v of ~ in (n (» <» <» (n N I� (� a) C m r N V O m m O N V M m m O m M N M M w M m m N r N CO N M O M m O m O C m O M m O M N o m V r N m r N O m N m V m m m r CO w m m V O N m O O m m m m V M M O V N r V COm m M m N m m V N CO CO m " m V m N Lc) (n N N o w N In w (+ o (+ w w R VJ N V N O O u N V h (3) N N o E2 1n O fA fR fA fR N fA fA H7 fA HJ V fA fR fA M fR co N in o v> v> i» i» (n in w m <n <n r Y � U m O T V Lo w m M w V V N O r Lo O mO O O m O O O N M m O O O N O O O O O m C M N m m O w N m w m V w m N CO N O O N V r O w m w M N N m m O N }� mtf m m r V o V V N N N M N m M w o ca M M N V m O V N O N_ m r CO m N M V' m a) �O N N rl Lo M m M V m V m o N M m m N m C (n m F Lo O w w 69 HJ w - V 69 V) 6963, w H7 w H7 w W, w fA fA CO N N L m 69 Lo N v o Lo o Lo Lo o Ln o Lo Lo o o Lo o o o o o o o o o o o o o o o o o o o o Lo o o o m m m r O O O m O V m Lo r V N O m O O O O O O O m m O O O w O Lo O o M V N O (� Y/ O V M N M N LO N (O m Lo w O O O N O Lo O w V " O O m O O V N /1 mLn m N I� Lo w M m M m V m w w V w w O w O w w Ln N O M m m N m ii L (0 F EA w wEA fR EA Efl EA Efl EA EA EA fR EA fR EA N EA O > m M N m V p V O r m m N O m Ln m (O r m V N m V V O o O r m o M r O O O V O m O m m a) O C m O Ln V N V m CO CO O V m r N r M V N O m m M m w m m r m w w m m O M V w M M m M V m N m O cm m m M w m m m M r m V M w m w w m r V V m A, r (0 r r N w V 6 M V N w N w N W 1n m Ln O 6 m o N w (O I� Y/ N u) to F V mw w w d3 w EH w w w w w w HJ d3 w w ER N m (n w (n (n (» (n m m p `v O O Y m O m o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o Qt m o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 I (6 0 m Y o o V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V -LLrn C C m C m O o O T p O d m o Op N (0 (0 (0 m —a - L1 m m m m (0 m m L m L (0 m F to Q L W p L1 L d (1 p C C L1 d U L1 C L1 (Q Y m F J L L E L Ul to to to o p (n P2 y0 p m C X m J C m p m fp/1 7 C 7 m fA C m m W C C C C C C C O m m W C w > Q C_ � O m O O O d O O L1 O () Y N m Y C m m N '� '� W C C U Y m '. y0 W m C F Y U '_' (� (n Co O O O O E O m C J C � O O O Co m Q Q O N m m m L1 L -O o5 N C 'N C N L L -O to M W L m (n ' N K (� U `m o T 0 mn E o o in m g w J O o O m a� ri J O M m O U C d lL N 0 U O O Ln ` US O O O j C m O o O C C (1 (0 Y a) m m W m N N oa o d M U 0 m Lo oa d m g a m (� O m Y N m o O aS' C M E m O C C E m ` m O F m Q — O m M m O m m m L1 0 O O U (`) m O` > O M O N > C E axi E o CO o v o — r Cn F m p- C d J O m C o OM 10 O O M Co M J d co C Ul Q M V M o p (0 to o O d C O W N N M Lo 0 L cZ X 'O U 0 Cn J m to o C m m N 0 Y U Y J Q m o o m u J N U E (n m 0 m O J 0 m u) F E m O > Z U V N (1) O O O N N O O C N N O m N [R (R O N N N (h r \ r r (o O m oh N W CO Ga o o m m L (0 r O O m O r V N Iq [f7 O " Lo Ga CO N O p N K7 H7 (i7 m V 69 N VJ (9 r m (h V r V N V co O OO co O N O C N x N N (o CO o w w Ow r O o r o In o m o O In (h m L m w r w O N V m O) (7 w V m In (o Ln u),N u), w O (h 0 69 V) N 6q R r m N cn cn cn v m o o o v LO O C N m M In O N r ca 69 O V-) 1n O m r r m N co o m m o LO m m L (p 6a r w m W N r N w ('7 m 1n (O N r r 0 [fl w fE3 o (R fR Q) fi r a) m ( O C N m(h o) (('7 m r N [f) (9 O O) ( O o) r o o Co o)r O o W(o m Y (� (» (o (V o'7 m m m Injt� V (V fH N w V CO (-F) (o io) r `m »Ga o 69 w ID rfl r m o OD N N N N O O O In N (o O C N O m O (h O o w wO w r O N r :E (o (o m r o O o r r L w w CO w V N m N In r 6a m V w N r In (O N6, V-) H7 (fl o_ fA w } w O m m In Vo Q m m O O O fA r LO V O C x m m m O w O H-) m O N r \ In V In N r N O L (� fn (o w o m (o m m O w O V V (o N m V (0 � 6a w H) w 69 6a (U m m N r N (o r N O O (1) m m In Z O C (o [p (o r O M w w O N N O r In o m m V O IO r CO o L � \ m r m N N (h O OO m m r Q C m o m m N [f) (9 O wV O N N r � � m m In (h m r O CO O N m m w O m N m O m (p L9 m V V CO (o m O � Um (o 0 0 0 0 0 0 0 0 O V h m Q Q) C N N N u) O N w w Ow V LO In M tf In r 0 O 0 O O V r In \ w , V V (mo m 1n o N(h w fA N N (h 69 w w w Q L m LO o o o o o o o m m DO O O O O O w O O M N (h (7 U Y/ (n u) o O o u) O O I N (O I C2 - w In w w N m m m I� I� O ii EA I: V M CO CO (w V m (O O L 69 [f) w r V N F 69 w HJ (fl w (U Mm y LO v O H0 O LO O O C � r m w w O O w m r r t N m (o(1) N O O (h CO (o A, (� Ln w m m m m m q N U A V F � (-9 EA H) (1) � fR U fl p o o O o 0 0 0 o O O o o I O LL V V V V V V V O O 1n J L 0 N to (U (0 C (0 O T to NID o N (0 O J F o [ifd (U d C (U 0 OC 0 N d (U O j Q CC L o 'U O E C Q (n u) O d (U N N W m m N to N E d m C J _ to E O O (IfL J C O -O m -O 'O U O '- Q m Q C (U u) (0 p V T W Q m o) ~ (0 Ln J J J V d O_ � (h F z Q 0 F o d a) U � o Q D E ., Q T Q N a m � U � C C V, Q m V O O O O O O O O O O 0 N O O O O m O O O O O O O O O O O m O O O m m VJ C N - - - - - - - - - - W V fA fA fA fR m - f9 fA O fA fR O fA f9 O O m O 0 O 0 0 M C �} m O O O V M O m O m m m V `m v iri Eh v r ro iri Eh iri iri m o p yy Om 1,2 M EA m N M N 1� m m m UJ fA 1� fA M f9 fA fA m m m N fA � � fA fA fA EA fA f9 O � fR fA m } T m M O O O O O O O O O O N N V O O O O m O O O O O O O O O O O m O O O m m m n C N - - - - - - - - - - M V m fA fR fA ER m ER fR fA O fA ER O f9 ER O O m O m O 0 m W M N O O O O V M O m O m m M y L m V M E9 m N r m N N N 0 to p) M O f9 V f9 N fA EA fA m m m � fA � � fA fA fA fA fA fA T } N m N O O O m O O O O O O MV m1� O O O O O O O O O O O O O O m O O O m m N O - - - - R OmN R O OmOm - O OOmOm - N M m O O O M O m �— m N N coL M r EA m m M m O O O O M mm in En in m EH N E» E9 r r M o » O } N m O O O O O O O O O O m } '+c� N fA f9 fA fA fR f9 EA fA fA f9 V N O O O W O O O O O O O O O O O W O O O W O wAAA R9OOOOOAROOmOWA 0W m 0 O O N O O O N O M O m N N M N O W m 1� O M N V m O N N I- to to yy E9 m E» EA V N m M N M N N (0 r � fR Ela fA Ela fR f9 fR f9 fR � U } T N N [A O O O O O O O O O O O m m N O O O O O O O O O O O O O O O W O O O f9 m0 w W L_ O c N ER fH fA f9 fR f9 fA f9 EA ER W O m m f9 EA O O O O O mO O O m O W m1(J N M O m O O N O O O O O m O m (0 M V � O m m 1� N V O m V O Ol -° C yy M m ER O Ela E» V N m N N M N M V V M N � fR EA fA fA fA f9 fA f9 C N N � N L c OI W O O O O O O O O O O N O O O m O O O O O O O O O O O W O O O m — O .= EA fA fA fA fA fA fA f9 EA f9 m m m fA f9 f9 N fA m O O O O O O O O m O W fA 0 m 0 m W '� N O O N O O O O O M O m W W V — � N W MV I� m 1� r r V 10 M m V m 10 yy � O EA m }L}�� f9 fR EA fA fA f9 fA f9 fA t VI ° } N d O m m O O O O O O O O O O ^ EA ER fA EA fR fA fA fA EA fR O O O O m O O O O O O O O O O O m O O O m 0 m mOOOOOOOOOmOm N m N V O O N M O O O O O M O m m m V N `m iri o r r Eh o iri v v co iri r Eri V V lA Ela ER V N m N M IO W M M M IO N o � fA fA � fA fA fA f9 fA f9 f9 m r 0 0 0 0 0 0 c EH 0 0 M m m 0 o 0 0 0 0 0 0 0 0 0 o m 0 0 o m rn E O m o m m m m m o 0 0 0 0 0 0 0 0 o m m m m 0 'm N 0 0 0 N m 0 0 0 0 0 M 0 O M E U m m N Eh 0 Eh iri m r N o o m v ro m Y r N O N M W N IO W IO M EA ER V N m N M N W m 'o N � O � N V V m EA V m EA ER fH � fR f9 N f9 m m M O N fA (V f9 fR (V � fA f9 fA f9 fR fA U () L � L fA f9 fR EA C } m O OI m m O O O O O O O O m N M V m IO O O O O O O O O O O O O O O O O O m C \ -° m OfA N O m m m M M M N m V m O O O O O O O O O O m m m - O O V O.° n m V m r W O mw N O O N N O O O O O N N IO O N EO ! Ol Ol M N V IO M V N N IO r r r M O r V m m LL X IO I(1 M m M O EH m M M EA fl3 V N m O N N IO IO N a) N EA M m E» N M EA EA E» r fl3 EA N 1� r V Z M � � fA ER ER � � � N EA EA EA fA f9 EA �0 N — fR fR fA EA N— •CL y co m M O O O O O O O O O O V M m O O O O O O O O O O O O O O O O O N m 01 N M R O O O O O O O O O O R A R A O O M c U O O O N N O O O O O `m 0 0 0 M m o 0 0 0 o v v v v iri y > m O M O O M m F p_ fA f9 fA fA fA fA fA f9 � (a 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o n 0 0 o 0 Y) n r v fR f9 fA fR fR fR EA fR EA EA EA fR m O O m O O O O O O O m m m m V V V ~ y C O OO O O N IO O O O O O m m m V aj N W m M O N r r m O O m V m O O m L ill fR V ff3 V N 1° O N I(J EH m m N O r f0 ER EA ER fR fA EA f9 fA fA ER fR T— TlrA NN ❑>-_Ea 5N �. r = o OmccM ( ° CNOd O0 J J J J UO OL OO o CO (n d >> O > O N /O1 O (( d NY O o U oN EO E N co co m Nm 0 IL m o Z (5 — yo o Qa ' U oo Uao o If o W n rn Ym ❑ rE_ Wad E s mE ° N w oo ( (D❑ o m YF y y .. >. m Y O O o oN OQ V N OF Q O E E O= c N , O O E nN co c o U F o U a U d m '� O a U_ U >.r E Q U O o m E �j a J U O m of m° v No m ao a J U O ° m.N L E E m U m m U -o � ° O cl ° -N° M ° -.0 � a .°� y o � a O co (� � y U ~ C7 �O NN o m o O U o 'ol E n U d ~ U ° U -No m a>i rn 0 J .N o N E U m 65 5 6) a O >O Cl) O o d af m m° 1 od m a n ma U E m O E ° 6 3 m E c7 o f Z m a a U > > ° o O `o. > 00 O m a `mn a m m " E 0 Z QE ani cl ° O m of U) a1 n ._ d U N N r m a n c N O N L U) > ti ❑ (>) O O y y.i y d ❑ a a 0 0 C7 a fA F U U U O O Z° O V V 1- c (fl co a) C V O 1- r LO M O r N a) a N C O N LV O O L) O V m C M N N r LO N O M 'IT LO 61) w m_° N - 00 N O eA Cl) 61) 61) w ' a) U3 O V9 b4 c } N � O Cl) M c '6'° N m a) C Cl) N o) C N N M a (fl E N C ° N O M N O V CN r r r (0 co M m— O N M N O O O) o) M U3 O O T m e iE5N M ((00 O W O (0 O N w U3 6% 6% a) -p > E U3 U3 > (0 C N M OU C (`M') O O U O N (`N') N (`O') lf) r O N N E C M O cc r M M T N N m O _ (0 co (fl a) `° C M co (0 V m CO M U3 N 5- a) m N CU L5 M coM r- (MO � n (9 C w 61) 613 Efl 613 63 a) a) } O)TE a O N yC0 N Ow O) ° L) a) C ra) M M " M O (q U O (o a) a) (O r LCOO Cr) L) L) O r � Mm N� C M N 1- O o) O O) m EH Cp N m. N M LL) LO V V cj N E w U3 U3 Efl ER V� E!) > O O M M c j 1� N O a) C O (0 f` O) LO N y C N V V C Q M O LL') U O N N M LL) V O) E n M a q C r V � O N M (0 O CO Lp (m0,c M 1- O) r r N V L O M E O O m C N M 6 V (`n') M � a) (0 w U3 6% 613 � 613 N O > O 7 O U 0) O\ c Cl)O a) C o) V O) 1� (0 LL X � n O � V U O � N O N N O C r V cyiM o f N LL) C O M V M M O N N C M (o LO N N M Y U3 cq � O N m C N M n O O a) w 613 613 6% 613 m O a) o Q a) co O N O co (q 00O 9 O O t s °CO V V N V O N Ifzm LO O cu a Co'— C) Y U3 Qx 0 mw N M V V N (14 U) 613 Efl 613 � 61) O N LT r- co LL) aC Ic 0 M W M N co O N (fl LO I- m 0Vco (O CO _ O LQ i� (6 (0 M O m 0c M (o r O r O U) 61)V M � a) mCU ° N (`M') �7 (n0 (0 r O N a) > C U3 U) U361) U3 (6 LO � w Q j O2 co 4 UO (0 M N c C N a) (fl a) C (0 Lo O V N M r- - N (0 O O C C O U0 - Lo V O N N I- LL) Ln M N M 61)N M Lo 61) ` y '6 C m C N OM V r- r O (fl U � L O O 4) w 61) U3 U3 63 61) U3 } O.N a a) (MO O E (4 (MO ... M 0 LO > U O M O O V (.0'E M N a.V '� a) Z� r M (D co r (9 (D O 'O O Y C M LO (fl (fl N M -o M 61) p.0 m'6 N N N N Ln N N �5 N S W EH U3 U3 U3 (1) } O w °' A2 O G) T LT V LO (.0 c O : M O C,4 a) C V O V M M Cl) O r rn C 1� V C O Y r U O r V LL) (0 L a) r N com m N C 0) (fl V r O O L Y (0 M 1- m U U_ C M N co LO (0 r Q ° co O _iT C ol m N n M ol V V w EA EH U3 EH K3 N a)-0 O m O } m ai 2 ami ° aNi ° aNi Qo M m Ocs� m m O(fl m O C Q C Y .� a) i m N Ef3 U3 U3 U3 o o ° o o a) w (0'6 O O Q .• .. Q N Q T C O N ° a) c U o m e o E o o Y s c C o N +; g� La` -_ Via` Via` > ° .° m °LO -Cii a U m o U o m ° o E m L w ° m Ym .3� Om �� m w 0 a) � c m (D 0 `o o m N � m � of m � .Q w a o � — — � E m � E m sNm �mm O � ° ° m m ° ° fn m T D mU a>4 m�U .� U Q U) v ° m E a) T U Z ° � UX am a) ° maaX ui ° Y a°da° CO O ° Ua a 7 t N � C Q ° m � m oN m o U o� Q Nm Q a C w _T Q tT U E m E U `C in N U 7 w w m (Uo '> o ani m 4i N m Ls fn � U Table 7 - Bill Comparisons Before and After Rate Adjustments St. Joseph, MN; Sewer Rates Scenario 2015-1 This table compares bills for various volumes at the current rates and billing frequency with what the same volumes would cost at the equivalent modeled rates for that same billing frequency.(An"apples to apples"comparison.)Minimum charge surcharges were calculated for these same classes of users and these bills include those surcharges. Note:The weighted-average bill increase for all customers combined will be: 97.7% Customer or Rate Gallons of Customers Above This Cumulative Bill Increase or Percent Increase Class,or Meter Size Use Volume and Below Next Customers Current Bill Modeled Bill Decrease(-) or Decrease(-) 0 0 0 $17.00 $27.00 $10.00 59% 1,000 0 0 $19.95 $34.34 $14.39 72% 2,000 0 0 $22.90 $41.67 $18.77 82% 3,000 0 0 $25.85 $49.01 $23.16 90% 4,000 0 0 $28.80 $56.35 $27.55 96% 5,000 0 0 $31.75 $63.68 $31.93 101% 6,000 0 0 $34.70 $71.02 $36.32 105% 7,000 0 0 $37.65 $78.36 $40.71 108% 8,000 0 0 $40.60 $85.69 $45.09 111% 9,000 0 0 $43.55 $93.03 $49.48 114% 10,000 1,579 1,579 $46.50 $100.37 $53.87 116% 15,000 0 1,579 $61.25 $137.05 $75.80 124% 20,000 0 1,579 $76.00 $173.73 $97.73 129% All Customers Except City 30,000 0 1,579 $105.50 $247.10 $141.60 134% 40,000 0 1,579 $135.00 $320.47 $185.47 137% 50,000 0 1,579 $164.50 $393.83 $229.33 139% 60,000 0 1,579 $194.00 $467.20 $273.20 141% 70,000 0 1,579 $223.50 $540.57 $317.07 142% 80,000 0 1,579 $253.00 $613.93 $360.93 143% 90,000 0 1,579 $282.50 $687.30 $404.80 143% 100,000 0 1,579 $312.00 $760.67 $448.67 144% 110,000 0 1,579 $341.50 $834.03 $492.53 144% 120,000 0 1,579 $371.00 $907.40 $536.40 145% 130,000 0 1,579 $400.50 $980.76 $580.26 145% 140,000 0 1,579 $430.00 $1,054.13 $624.13 145% 150,000 0 1,579 $459.50 $1,127.50 $668.00 145% 160,000 0 1,579 $489.00 $1,200.86 $711.86 146% 0 0 0 $0.00 $27.00 $27.00 N.A. 1,000 0 0 $0.00 $34.34 $34.34 N.A. 2,000 0 0 $0.00 $41.67 $41.67 N.A. 3,000 0 0 $0.00 $49.01 $49.01 N.A. 4,000 0 0 $0.00 $56.35 $56.35 N.A. 5,000 0 0 $0.00 $63.68 $63.68 N.A. 6,000 0 0 $0.00 $71.02 $71.02 N.A. 7,000 0 0 $0.00 $78.36 $78.36 N.A. 8,000 0 0 $0.00 $85.69 $85.69 N.A. 9,000 0 0 $0.00 $93.03 $93.03 N.A. 10,000 0 0 $0.00 $100.37 $100.37 N.A. 15,000 0 0 $0.00 $137.05 $137.05 N.A. 20,000 0 0 $0.00 $173.73 $173.73 N.A. City..G-10 30,000 0 0 $0.00 $247.10 $247.10 N.A. 40,000 0 0 $0.00 $320.47 $320.47 N.A. 50,000 0 0 $0.00 $393.83 $393.83 N.A. 60,000 0 0 $0.00 $467.20 $467.20 N.A. 70,000 0 0 $0.00 $540.57 $540.57 N.A. 80,000 0 0 $0.00 $613.93 $613.93 N.A. 90,000 0 0 $0.00 $687.30 $687.30 N.A. 100,000 0 0 $0.00 $760.67 $760.67 N.A. 110,000 0 0 $0.00 $834.03 $834.03 N.A. 120,000 0 0 $0.00 $907.40 $907.40 N.A. 130,000 0 0 $0.00 $980.76 $980.76 N.A. 140,000 0 0 $0.00 $1,054.13 $1,054.13 N.A. 150,000 0 0 $0.00 $1,127.50 $1,127.50 N.A. 160,000 0 0 $0.00 $1,200.86 $1,200.86 N.A. CBGreatRates©Version 7.2 51 Table 8 - User Statistics St.Joseph,MN; Sewer Rates Scenario 2015-1 This table shows measures of equitability of the rates as modeled in Table 11. If your rates are absolutely proportional to use on a volumetric basis,your%of usage and%of revenues figures will be the same within all the classes.That is not possible if you have any minimum charge and having no minimum charge is almost unheard of. Normally,the%of usage figure will be lower than the%of revenue for the lower volumes of use.That will switch for the higher volumes of use.Even for declining rate structures,this switch should occur near the volume of the average residential user,typically near 5,000 gallons/month(668 cu ft). In urban and suburban areas the average monthly use for residential or general customers can be twice that used by their rural and"old town"counterparts.Use is largely dependent upon who lives in a community.Older people living in longer established neighborhoods tend to use less volume than younger people living in more recently developed areas.As you make comparisons between different customers and customer classes,keep that,and the following in mind: 8,144 in 1,000 Gallons Billable units-This is the average residential customer's usage per Bi-monthly billing cycle. Usage allowance is the volume"given away"with the minimum charge.The higher the allowance,the less volume the utility can sell to generate income. 133,352,218 in 1,000 Gallons Billable units-This is the volume metered through customer meters that was available to be sold by the utility during the test year- 0 in 1,000 Gallons Billable units-This is the volume metered through customer meters that was given away as a usage allowance during the test year. $0 At the unit charge rate in effect during the test year,this was what it cost the utility to give away this volume. $0 At the unit charge rates modeled,this is what the current usage allowance(if any is included in the modeled rates)would cost the utility for a full year. Bottom of Top of Average Volume Total Annual Cumulative Cumulative Volume Volume Used Within Use Within Use in This Use in This Customer or Range in Range in Each Volume Each Volume Customers Class From Class From %Revenue %Revenue Rate Class,or 1,000 1,000 Range in 1,000 Range in Within This Low to High High to Low at Current at Modeled Meter Size Gallons Gallons Gallons Gallons Volume Range %Users %Usage Volume Volume Rates Rates 0 999 0.000 0.0 0.0 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% Residential 10,000 14,999 8.144 77,158,517.0 1,579.0 92.6% 57.9% 100.0% 100.0% 57.9% 57.9% 160,000 99,999,999 0.000 0.0 0.0 0.0% 0.0% 100.0% 0.0% 0.0% 0.0% Totals for Class 77,158,517.0 1,579.0 92.6% 57.9% 57.9% 57.9% 0 999 0.000 0.0 0.0 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% Commercial 15,000 19,999 18.434 12,829,761.0 116.0 6.8% 9.6% 100.0% 100.0% 9.6% 9.6% 160,000 99,999,999 0.000 0.0 0.0 0-0% 0-0% 1000% 0-0% 0-0% 0.0 Totals for Class 12,829,761.0 116.0 6.8% 9.6% 9.6% 9.6% 0 999 0.000 0.0 0.0 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% ndustrial 80,000 89,999 82.240 1,973,770.0 4.0 0.2% 1.5% 100.0% 100.0% 1.5% 1.5% 160,000 99,999,999 0.000 0.0 0.0 0.0% 0.0% 100.0% 0.0% 0.0% 0.0% Totals for Class 1,973,770.0 4.0 0-2 1.5% 1.5% 1.5% 0 999 0.000 0.0 0.0 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% CSB Student 150,000 159,999 0.000 0.0 0.0 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% Housing 160,000 99,999,999 1,149.727 41,390,170.0 6.0 0.4% 31.0% 100.0% 100.0% 31.0% 31.0% Totals for Class 41,390,170.0 6.0 0.4% 31.0% 31.0% 31.0% Grand Totals 133,352,218.0 100.00% 100.00% 100.00% 100.00% CBGreatRates©Version 7.2 52 St. Joseph, MN Water Rates Scenario 2015-1 Chart 1 - Operating Ratio 3.00 Proposed Rates Current Rates 2.00 —Breakeven 1.00 0.00 -1.00 -2.00 -3.00 -4.00 -5.00 Chart 2 - Coverage Ratio 4.00 2.00 0.00 .<0 r.(° A .C� O ry -2.00 \^ Proposed Rates -4.00 Current Rates —Breakeven -6.00 -8.00 -10.00 CBGreatRates©Version 7.2 53 St. Joseph, MN Water Rates Scenario 2015-1 Chart 3 - 5,000 Gal Residential User's Bill $100.00 Proposed Rates $90.00 Current Rates $80.00 $70.00 $60.00 $50.00 $40.00 ❑ ❑� ❑ ❑ ❑ ❑ ❑ $30.00 $20.00 $10.00 $0.00 Cb C1 Chart 4 - Affordability Index 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% Proposed Rates 0.40% o.Current Rates 0.20% 0.00% z ^h 110 r^ 1� 1121 CBGreatRates©Version 7.2 54 St. Joseph, MN Water Rates Scenario 2015-1 Chart 5 - Working Capital vs Goal $500,000 Proposed Rates -❑Current Rates $400,000 Goal $300,000 $200,000 $100,000 $0 -$100,000 Chart 6 - Value of Cash Assets Before Inflation $2,000,000 $0 "IV � 110 -$2,000,000 -$4,000,000 Proposed Rates ❑Current Rates -$6,000,000 -$8,000,000 -$10,000,000 CBGreatRates©Version 7.2 55 St. Joseph, MN Water Rates Scenario 2015-1 Chart 7 - Value of Cash Assets After Inflation $2,000,000 $0 -$2,000,000 -$4,000,000 -$6,000,000 -o-Proposed Rates C]Current Rates -$8,000,000 -$10,000,000 -$12,000,000 CBGreatRates©Version 7.2 56 Table 11 - Initial Rate Adjustments and Resulting Revenues St. Joseph, MN; Sewer Rates Scenario 2015-1 This table depicts how rates would be set and the revenues they would generate. Out of City Multiplier 200% 12/31/15 Date when fees will first be collected at adjusted rates.Actual adjustment should occur one billing period earlier. After rate adjustments are made,general customers will be billed every other month. Sales to be billed this year:Sales at the current(Test Year)rates(gray highlighted column)will apply until rates are adjusted.Sales at the modeled rates(yellow highlighted column)would apply if the modeled rates are adopted.The grand total"blended"sales revenues are the total revneues generated by the two different sets of rates.Those show in the right-most column. Bottom of Customer Volume Top of New New Unit Class,Rate Range in Volume Sales This Customers Above Minimum New Usage Charge Sales This Grand Total Class or Meter 1,000 Range in Year at This Volume and Charge Base Allowance in per 1,000 Year at 'Blended"Sales Size Gallons 1,000 Gallons Current Rates Below Next Rates' 1,000 Gallons Gallons Modeled Rates This Year 0 999 $0 0 $0.00 0.000 $7.34 $0 $0 Residential 10,000 14,999 $226,994 1,579 $0.00 0.000 $7.34 $1,551 $228,545 160,000 99,999,999 $0 0 $0.00 0.000 $7.34 $0 $0 0 999 $0 0 $0.00 0.000 $7.34 $0 $0 Commercial 30,000 39,999 $0 0 $0.00 0.000 $7.34 $0 $0 160,000 99,999,999 $0 0 $0.00 0.000 $7.34 $0 $0 0 999 $0 0 $0.00 0.000 $7.34 $0 $0 Industrial 10,000 14,999 $0 0 $0.00 0.000 $7.34 $0 $0 160,000 99,999,999 $0 0 $0.00 0.000 $7.34 $0 $0 CSB Student 0 999 $0 0 $0.00 0.000 $7.34 $0 $0 Housing 20,000 29,999 $0 0 $0.00 0.000 $7.34 $0 $0 160,000 99,999,999 $121,766 6 $0.00 0.000 $7.34 $832 $122,598 Senior 0 999 $0 0 $0.00 0.000 $7.34 $0 $0 Housing 6,000 6,999 $0 0 $0.00 0.000 $7.34 $0 $0 Addition,G-13 160,000 99,999,999 $0 0 $0.00 0.000 $7.34 $0 $0 0 999 $0 0 $0.00 0.000 $7.34 $0 $0 City,G-10 30,000 39,999 $0 0 $0.00 0.000 $7.34 $0 $0 160,000 99,999,999 $0 0 $0.00 0.000 $7.34 $0 $0 Total Rate Rev at Current Rates $392,311 Total Rate Rev at Modeled Rates $2,680 Total Blended Rate Revenues for the Year 2 $394,992 Note 1,New Minimum Charge Base Rates:If meter or connection size-based minimum charges are to be used,and the user classes modeled above include meter or connection sizes,the amounts shown in this column include meter or connection size surcharges as calculated in Table 10.Otherwise,use the rates in the"Total Minimum Charge per Billing Period"column of Table 10 when setting minimum charges for each customer when their minimums will be based upon meter or connection size. Note 2,Blended Rate Revenues:During the year when rates will be adjusted,rate revenues generated will be"blended"revenues-part collected at the current rates and part collected at the adjusted rates.The table above calculates both kinds of revenue and totals them in the right-most column.Therefore,the anticipated timing of rate adjustment shown at the top of this table will cause rates to be charged as follows: 12.0 months at the old user charge rates and 10.0 months at the new user charge rates. CBGreatRates©Version 7.2 57 Table 12 - Test Year Usage St.Joseph, MN; Sewer Rates Scenario 2015-1 This table shows usage by all customers during the test year. Residential meter readings per year: 1 Date this scenario created: 11/17/2015 Test year,the one-year period being analyzed starts: 1/1/2014 Other customer meter readings per year: 6 Bills sent per year: 6 Average Count of Bills Volume of Only Number of %of Bottom of Top of Volume Used Count of Bills Total Annual Only Where Those Bills Customers With Customers Volume Volume Within Each With ANY Use Within Volume Where Volume Volume That That %of Total Customer or Rate Range in Range in Conversion Volume Range Volume Each Volume "Maxed Out" "Maxed Out" "Maxed Out" Averaged Use at This Class,or Meter 1,000 1,000 Factor for in 1,000 Within Each Range in Within Each Within Each Within Each This Volume Average Size Gallons Gallons Billable Units Gallons Range Gallons Range Range Range of Use Volume 0 999 1,000 0.000 9,474 0 0 0 0 0.0% 0.0% 1,000 1,999 1,000 0.000 9,474 0 0 0 0 0.0% 0.0% 2,000 2,999 1,000 0.000 9,474 0 0 0 0 0.0% 0.0% 3,000 3,999 1,000 0.000 9,474 0 0 0 0 0.0% 0.0% 4,000 4,999 1,000 0.000 9,474 0 0 0 0 0.0% 0.0% Residential 5,000 5,999 1,000 0.000 9,474 0 0 0 0 0.0% 0.0% 6,000 6,999 1,000 0.000 9,474 0 0 0 0 0.0% 0.0% 7,000 7,999 1,000 0.000 9,474 0 0 0 0 0.0% 0.0% 8,000 8,999 1,000 0.000 9,474 0 0 0 0 0.0% 0.0% 9,000 9,999 1,000 0.000 9,474 0 0 0 0 0.0% 0.0% 10,000 14,999 1,000 8.144 9,474 77,158,517 9,474 77,158,517 1,579 92.6% 57.9% Monthly and Annual Subtotals: 104,214 77,158,517 9,474 77,158,517 1,579 92.6% 57.9% 0 999 1,000 0.000 696 0 0 0 0 0.0% 0.0% 1,000 1,999 1,000 0.000 696 0 0 0 0 0.0% 0.0% 2,000 2,999 1,000 0.000 696 0 0 0 0 0.0% 0.0% 3,000 3,999 1,000 0.000 696 0 0 0 0 0.0% 0.0% 4,000 4,999 1,000 0.000 696 0 0 0 0 0.0% 0.0% 5,000 5,999 1,000 0.000 696 0 0 0 0 0.0% 0.0% Commercial 6,000 6,999 1,000 0.000 696 0 0 0 0 0.0% 0.0% 7,000 7,999 1,000 0.000 696 0 0 0 0 0.0% 0.0% 8,000 8,999 1,000 0.000 696 0 0 0 0 0.0% 0.0% 9,000 9,999 1,000 0.000 696 0 0 0 0 0.0% 0.0% 10,000 14,999 1,000 0.000 696 0 0 0 0 0.0% 0.0% 15,000 19,999 1,000 18.434 696 12,829,761 696 12,829,761 116 6.8% 9.6% Monthly and Annual Subtotals: 8,352 12,829,761 696 12,829,761 116 6.8% 9.6% 0 999 1,000 0.000 24 0 0 0 0 0.0% 0.0% 1,000 1,999 1,000 0.000 24 0 0 0 0 0.0% 0.0% 2,000 2,999 1,000 0.000 24 0 0 0 0 0.0% 0.0% 3,000 3,999 1,000 0.000 24 0 0 0 0 0.0% 0.0% 4,000 4,999 1,000 0.000 24 0 0 0 0 0.0% 0.0% 5,000 5,999 1,000 0.000 24 0 0 0 0 0.0% 0.0% 6,000 6,999 1,000 0.000 24 0 0 0 0 0.0% 0.0% 7,000 7,999 1,000 0.000 24 0 0 0 0 0.0% 0.0% 8,000 8,999 1,000 0.000 24 0 0 0 0 0.0% 0.0% Industrial 9,000 9,999 1,000 0.000 24 0 0 0 0 0.0% 0.0% 10,000 14,999 1,000 0.000 24 0 0 0 0 0.0% 0.0% 15,000 19,999 1,000 0.000 24 0 0 0 0 0.0% 0.0% 20,000 29,999 1,000 0.000 24 0 0 0 0 0.0% 0.0% 30,000 39,999 1,000 0.000 24 0 0 0 0 0.0% 0.0% 40,000 49,999 1,000 0.000 24 0 0 0 0 0.0% 0.0% 50,000 59,999 1,000 0.000 24 0 0 0 0 0.0% 0.0% 60,000 69,999 1,000 0.000 24 0 0 0 0 0.0% 0.0% 70,000 79,999 1,000 0.000 24 0 0 0 0 0.0% 0.0% 80,000 89,999 1,000 82.240 24 1,973,770 24 1,973,770 4 0.2% 1.5% Monthly and Annual Subtotals: 456 1,973,770 24 1,973,770 4 0.2% 1.5% 0 999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 1,000 1,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 2,000 2,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 3,000 3,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 4,000 4,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 5,000 5,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 6,000 6,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 7,000 7,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 8,000 8,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 9,000 9,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 10,000 14,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 15,000 19,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 20,000 29,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% CSB Student 30,000 39,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% Housing 40,000 49,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 50,000 59,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 60,000 69,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 70,000 79,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 80,000 89,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 90,000 99,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 100,000 109,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 110,000 119,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 120,000 129,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 130,000 139,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 140,000 149,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 150,000 159,999 1,000 0.000 36 0 0 0 0 0.0% 0.0% 160,000 99,999,999 1,000 1,149.727 36 41,390,170 36 41,390,170 6 0.4% 31.0% Monthly and Annual Subtotals: 972 41,390,170 36 41,390,170 6 0.4% 31.0% Monthly and Annual Grand Totals: 113,994 133,352,218 10,230 1,705 100% 100% CBGreatRates©Version 7.2 58 Table 13 - Rates at End of Test Year Table 13 - Rates at End of Test Year St. Joseph, MN; Sewer Rates Scenario 2015-1 This table shows user unit charges at the end of the test year. Rates for volume ranges that are not shown are the same as the next lowest volume range rates. Bottom of Customer or Volume Range Top of Volume Usage Rate Class, or in 1,000 Range in 1,000 Allowance in Unit Charge Meter Size Gallons Gallons Minimum Charge 1,000 Gallons per 1,000 Gallons 0 999 $0.00 0.000 $2.95 Residential 1,000 1,999 $0.00 0.000 $2.95 160,000 99,999,999 $0.00 0.000 $2.95 0 999 $0.00 0.000 $2.95 Commercial 1,000 1,999 $0.00 0.000 $2.95 160,000 99,999,999 $0.00 0.000 $2.95 0 999 $0.00 0.000 $2.95 Industrial 1,000 1,999 $0.00 0.000 $2.95 160,000 99,999,999 $0.00 0.000 $2.95 CSB Student 0 999 $0.00 0.000 $2.95 Housing 1,000 1,999 $0.00 0.000 $2.95 160,000 99,999,999 $0.00 0.000 $2.95 CBGreatRates©Version 7.2 59 Table 14 - Average Cost Classification St. Joseph, MN; Sewer Rates Scenario 2015-1 This table distributes costs from a representative year(the"target'year)to fixed and variable categories(see Definitions)in order to calculate the"proportional to use"or"cost of service"rate structure based upon the cost breakdown for that year. The rate structure target year runs from 1/1/2016 through 12/31/2016 Variable Capacity Fixed Cost Variable Capacity Fixed Cost Cost Cost Operating Costs Amount % Cost% Cost% Amount Amount Amount DEPART 47100 Bond Payment(P&1) CIP Below 33.3% 66.7% 0.0% $0 $0 $0 720 Transfers to Other Funds $45,935 33.3% 66.7% 0.0% $15,296 $30,639 $0 101 Salaries $102,726 33.3% 66.7% 0.0% $34,208 $68,518 $0 111 OPEB Liability $2,496 33.3% 66.7% 0.0% $831 $1,665 $0 121 PERA Contributions $7,597 33.3% 66.7% 0.0% $2,530 $5,067 $0 122 FICA Contributions $5,413 33.3% 66.7% 0.0% $1,803 $3,611 $0 123 Deferred Comp-Employer $406 33.3% 66.7% 0.0% $135 $271 $0 125 Medicare Contributions $1,264 33.3% 66.7% 0.0% $421 $843 $0 130 H S A-Employer Contribution $3,224 33.3% 66.7% 0.0% $1,074 $2,150 $0 131 Health Insurance $19,287 33.3% 66.7% 0.0% $6,423 $12,864 $0 132 Dental Insurance $3,312 33.3% 66.7% 0.0% $1,103 $2,209 $0 133 Life Insurance $260 33.3% 66.7% 0.0% $87 $173 $0 134 Disabilty Insurance $697 33.3% 66.7% 0.0% $232 $465 $0 151 Workers Comp.Insur.Prem. $4,311 33.3% 66.7% 0.0% $1,435 $2,875 $0 171 Clothing Allowance $645 33.3% 66.7% 0.0% $215 $430 $0 210 Operating Supplies $1,560 0.0% 100.0% 0.0% $0 $1,560 $0 215 Software Support $99 33.3% 66.7% 0.0% $33 $66 $0 220 Repair and Maintenance $8,320 33.3% 66.7% 0.0% $2,771 $5,549 $0 230 Vehicle Repair&Maintenance $4,160 33.3% 66.7% 0.0% $1,385 $2,775 $0 235 Motor Fuel $8,320 33.3% 66.7% 0.0% $2,771 $5,549 $0 240 Small Tool&Minor Equipment $208 33.3% 66.7% 0.0% $69 $139 $0 300 Professional Services $10,400 33.3% 66.7% 0.0% $3,463 $6,937 $0 303 Engineering Fee $520 33.3% 66.7% 0.0% $173 $347 $0 331 Travel&Conference Expense $1,040 33.3% 66.7% 0.0% $346 $694 $0 361 General Liability Insurance $11,112 33.3% 66.7% 0.0% $3,700 $7,412 $0 433 Dues&Memberships $473 33.3% 66.7% 0.0% $158 $316 $0 446 License $208 33.3% 66.7% 0.0% $69 $139 $0 530 Improvements Other than Bldgs $0 33.3% 66.7% 0.0% $0 $0 $0 550 Motor Vehicles $2,080 33.3% 66.7% 0.0% $693 $1,387 $0 580 Other Equipment $0 33.3% 66.7% 0.0% $0 $0 $0 Lift Stations:220 Repair and Maintenance $11,232 33.3% 66.7% 0.0% $3,740 $7,492 $0 Lift Stations:300 Professional Services $1,820 33.3% 66.7% 0.0% $606 $1,214 $0 Lift Stations:321 Telephone $3,120 100.0% 0.0% 0.0% $3,120 $0 $0 Lift Stations:361 General Liability Insurance $780 33.3% 66.7% 0.0% $260 $520 $0 Lift Stations:381 Electric Utilities $8,691 0.0% 100.0% 0.0% $0 $8,691 $0 Lift Stations:530 Improvements Other than Bldgs $6,800 33.3% 66.7% 0.0% $2,264 $4,536 $0 Lift Stations:383 Gas Utilities $2,210 0.0% 100.0% 0.0% $0 $2,210 $0 Lift Stations:Operating Supplies&Small Tools $29,328 33.3% 66.7% 0.0% $9,766 $19,562 $0 Lift Stations:Engineering&Legal $520 33.3% 66.7% 0.0% $173 $347 $0 Lift Stations:312 Tests $5,720 33.3% 66.7% 0.0% $1,905 $3,815 $0 Lift Stations:322 Postage $520 100.0% 0.0% 0.0% $520 $0 $0 Lift Stations:419 Sewer Use Rental $315,050 33.3% 66.7% 0.0% $104,912 $210,138 $0 Lift Stations:580 Other Equipment $42,500 33.3% 66.7% 0.0% $14,153 $28,348 $0 CBGreatRates©Version 7.2 60 Table 14 - Average Cost Classification Variable Capacity Fixed Cost Variable Capacity Fixed Cost Cost Cost Operating Costs Amount % Cost% Cost% Amount Amount Amount DEPART 49490 Administration and General $41,080 33.3% 66.7% 0.0% $13,680 $27,400 $0 DEPART 49970 Depreciation Expense $0 33.3% 66.7% 0.0% $0 $0 $0 Temporary Adjustment of R&R Annuity $0 33.3% 66.7% 0.0% $0 $0 $0 Annual Payment to Repair and Replacement(Table 17) $169,001 33.3% 66.7% 0.0% $56,277 $112,723 $0 User Charge Analysis Services $0 33.3% 66.7% 0.0% $0 $0 $0 CIP Spending Net of Grant/Loan Proceeds and Other External Incomes(Table 4) $716,200 33.3% 41.7% 25.0% $238,495 $298,655 $179,050 Grand Total Costs,Weighted Avg Percentages $1,600,644 33.2% 55.6% 11.2% $531,2931 $890,3011 $179,050 "Proportional to Use" Rate Structure Cost Basis 100% 1 $1,600,644 Average Fixed Cost/User Every Other Month= $51.93 Inflow and Infiltration is Estimated at 0% Cost of Inflow and Infiltration is Estimated at 52% Average Variable Cost to Produce/1,000 Gallons= $6.68 Resulting Cost of Inflow and Infiltration $0 Gallons/Billing Cycle Used by Average Residential Test Year Customer Metered Usage(in Gallons) 133,352,218 Customer= 8,144 + Test Year Inflow and Infiltration 0 Total Test Year Volume 133,352,218 CBGreatRates©Version 7.2 61 Table 15 - Marginal Cost Classification St. Joseph, MN; Sewer Rates Scenario 2015-1 The utility incurs unavoidable,or marginal,costs.Thus,the utility must collect minimal fees from various customers to"break even"on a marginal cost basis.Costs vary by customer type and volume used. In the calculations below it is assumed that marginal costs are being calculated for: Snowbirds The rate structure target year runs from 1/1/2016 through 12/31/2016 Marginal Marginal Marginal Marginal Marginal Marginal Variable Capacity Fixed Cost Variable Capacity Fixed Cost Cost Cost Operating Costs Amount % Cost% Cost% Amount Amount Amount DEPART 47100 Bond Payment(P&I) $0 100% 100% 100% $0 $0 $0 720 Transfers to Other Funds $45,935 100% 100% 100% $15,296 $30,639 $0 101 Salaries $102,726 50% 50% 100% $17,104 $34,259 $0 111 OPEB Liability $2,496 50% 50% 100% $416 $832 $0 121 PERA Contributions $7,597 50% 50% 100% $1,265 $2,534 $0 122 FICA Contributions $5,413 50% 50% 100% $901 $1,805 $0 123 Deferred Comp-Employer $406 50% 50% 100% $68 $135 $0 125 Medicare Contributions $1,264 50% 50% 100% $210 $421 $0 130 H S A-Employer Contribution $3,224 50% 50% 100% $537 $1,075 $0 131 Health Insurance $19,287 50% 50% 100% $3,211 $6,432 $0 132 Dental Insurance $3,312 50% 50% 100% $552 $1,105 $0 133 Life Insurance $260 50% 50% 100% $43 $87 $0 134 Disabilty Insurance $697 50% 50% 100% $116 $232 $0 151 Workers Comp.Insur.Prem. $4,311 50% 50% 100% $718 $1,438 $0 171 Clothing Allowance $645 50% 50% 100% $107 $215 $0 210 Operating Supplies $1,560 50% 50% 100% $0 $780 $0 215 Software Support $99 100% 100% 100% $33 $66 $0 220 Repair and Maintenance $8,320 50% 50% 100% $1,385 $2,775 $0 230 Vehicle Repair&Maintenance $4,160 50% 50% 100% $693 $1,387 $0 235 Motor Fuel $8,320 50% 50% 100% $1,385 $2,775 $0 240 Small Tool&Minor Equipment $208 50% 50% 100% $35 $69 $0 300 Professional Services $10,400 100% 100% 100% $3,463 $6,937 $0 303 Engineering Fee $520 100% 100% 100% $173 $347 $0 331 Travel&Conference Expense $1,040 100% 100% 100% $346 $694 $0 361 General Liability Insurance $11,112 100% 100% 100% $3,700 $7,412 $0 433 Dues&Memberships $473 100% 100% 100% $158 $316 $0 446 License $208 100% 100% 100% $69 $139 $0 530 Improvements Other than Bldgs $0 100% 100% 100% $0 $0 $0 550 Motor Vehicles $2,080 50% 50% 100% $346 $694 $0 580 Other Equipment $0 50% 50% 100% $0 $0 $0 Lift Stations:220 Repair and Maintenance $11,232 50% 50% 100% $1,870 $3,746 $0 Lift Stations:300 Professional Services $1,820 100% 100% 100% $606 $1,214 $0 Lift Stations:321 Telephone $3,120 100% 100% 100% $3,120 $0 $0 Lift Stations:361 General Liability Insurance $780 100% 100% 100% $260 $520 $0 Lift Stations:381 Electric Utilities $8,691 0% 0% 100% $0 $0 $0 Lift Stations:530 Improvements Other than Bldgs $6,800 100% 100% 100% $2,264 $4,536 $0 Lift Stations:383 Gas Utilities $2,210 100% 100% 100% $0 $2,210 $0 Lift Stations:Operating Supplies&Small Tools $29,328 50% 50% 100% $4,883 $9,781 $0 Lift Stations:Engineering&Legal $520 100% 100% 100% $173 $347 $0 Lift Stations:312 Tests $5,720 100% 100% 100% $1,905 $3,815 $0 Lift Stations:322 Postage $520 100% 100% 100% $520 $0 $0 Lift Stations:419 Sewer Use Rental $315,050 100% 100% 100% $104,912 $210,138 $0 Lift Stations:580 Other Equipment $42,500 100% 100% 100% $14,153 $28,348 $0 CBGreatRates©Version 7.2 62 Table 15 - Marginal Cost Classification Marginal Marginal Marginal Marginal Marginal Marginal Variable Capacity Fixed Cost Variable Capacity Fixed Cost Cost Cost Operating Costs Amount % Cost% Cost% Amount Amount Amount DEPART 49490 Administration and General $41,080 100% 100% 100% $13,680 $27,400 $0 DEPART 49970 Depreciation Expense $0 100% 100% 100% $0 $0 $0 Temporary Adjustment of R&R Annuity $0 50% 50% 100% $0 $0 $0 Annual Payment to Repair and Replacement(Table 17) $169,001 50% 50% 100% $28,139 $56,362 $0 User Charge Analysis Services $0 100% 100% 100% $0 $0 $0 CIP Spending Net of Grant/Loan Proceeds and Other External Incomes(Table 4) $716,200 100% 100% 100% $238,495 $298,655 $179,050 Offset for Capacity Surcharges(Table 10) $0 100% 100% 100% $0 $0 $0 Grand Total All Costs $1,600,644 88% 85% 100% $467,309 $752,671 $179,050 Marginal Costs per Customer, Volume Unit and Capacity Share The system would suffer a net revenue loss if it set minimum and unit charges lower than the marginal costs at the right. It would make a"profit"on a marginal cost basis if it charged more. Capacity costs, however,are a bit Marginal Marginal Marginal Capacity different.They can be recovered over time,as modeled here,or all at once in Volume in Fixed Cost Variable the case of connection(tap-on)fees or by using a combination of both Cost per Number of 1,000s of per Cost per AWWA methods. Customers Gallons Customer 1,000 Capacity 1,705 133,352 $45.68 Gallons Share Bi- Marginal Fixed Cost as a Percent of Average Fixed Cost(Table 14): 88% $5.64 monthly Marginal Variable Cost as a Percent of Average Variable Cost(Table 14): 85% $14.19 Marginal Capacity Cost as a Percent of Average Capacity Cost(Table 10): 100% CBGreatRates©Version 7.2 63 a) D_-E a c O O O O O O O O O O O O O O O O O O O O O T Q E c o O v) O 63 EA v) O O O O O O O O O O O O O O O O (� a) O ' O r� r� O O O O O O O O O O O O O O i d E 3 .2 V N N N N N N N N N N N N N N Oa)a ) 0) v3 v) v3 v) v3 v) v3 v3 v3 v) v3 v) v3 63 v3 v3 N (6 -6 a 0 D d J U a a+- w t= O O O O O O O O O O O O O O O O O O O O O t= J ,O v3 O O O O O O O O O O O O O O O O O O O O L a) LQ l() In O) O) O) O O O O O O O O O O O O O O 6 d N N N CO 0 CO r- r- r- r- r- r- rl. r- r- � rl. r- r- r- v) 63 v) v3 63 v3 v) 63 v3 v3 v3 v3 v3 v3 v) v3 v) O CL o r a) U O O O O O O O O O O O O O O O O O O O O O i � v3 63 v30 v3 N v3 v) O 63 O v) v3 O v3 O v) 6c) O V d C H O O LO LO LO LO In (7 a) d N d N w D O O O O O O O O O O O O O O O O O O O O O O O J , � v) v) v3 v3 00 v) v3 v3 v) v3 v3 v3 v3 v3 v3 v3 v3 v3 v3 v3 v) j � N Cn C CD W t U 0) O O O O O O O O O O O O O O O O O O O O O d °' °' °° 'C O v3 O O O O O O O O O O O O O O O O O O O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 co o � � o o o m Lo o Lo Lo o o o Lo Lo o 0 6 6 p M N N Cl) Cl) CO M co V V V LO LO LO In LO O O O Co W a) a) a) LL 63 v3 v3 613 63 69 63 v) 613 63 63 613 613 63 v) v) v3 63 v) 63 x0Oa) 0 H v O T C O a O O O O O O O O O O O O O O O O O O O O O - � LO v3 O O O O O O O O O O O O O O O O O O O }� co N O N O O O O O O O O O O O O O O O O O O O 76 N W Y LI') L(') O O LO m O O LO m O O O m LO LO LO L2 L(') Nv3 N N N N co co Cl) co V V V V V V V A, 0 6% 6% vj vj v) vj EA vj vj vj EA vj v) 6% EA vj v) 6% 69 - Y/ �- N C a) Q cn N a) a a) x a) O O O O O O O O O O O O O O O O O O O o 0 N .0. 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O O) O N CO V LO CO I-- CO O) O N CO V (Q C N N N N N N N N N N M M M M M OJ Table 17- Equipment Replacement Annuity Calculation St. Joseph, MN; Sewer Rates Scenario 2015-1 This schedule calculates the annual annuity needed to fund all replacement and refurbishment from Table 16,the detailed schedule. 2.00% Average Inflation Rate for the Following Sewer System Equipment for the Term of This Replacement Schedule 3.00% Average Interest Rate on Balances Invested for the Term of This Replacement Schedule 3.00% Average Interest Rate on Amounts Borrowed for the Term of This Replacement Schedule Minimum This Year's Future Annual Interest Earned End of Year Desired End of Year Costs in Current Inflated Net on Prior Balance in Future Year Balance in Beginning Item Description Dollars Costs Balance Dollars Future Dollars 1/1/14 Last year's replacements $75,053 $75,053 $0 -$75,053 $127,896 1/1/15 Total of replacements from detailed replacement $161,310 $164,536 -$2,252 -$72,840 $130,454 schedule 1/1/16 Total of replacements from detailed replacement $191,468 $199,203 -$2,185 -$105,228 $133,063 schedule 1/1/17 Total of replacements from detailed replacement $224,300 $238,029 -$3,157 -$177,413 $135,725 schedule 1/1/18 Total of replacements from detailed replacement $236,200 $255,670 -$5,322 -$269,405 $138,439 schedule 1/1/19 Total of replacements from detailed replacement $63,700 $70,330 -$8,082 -$178,817 $141,208 schedule 1/1/20 Total of replacements from detailed replacement $103,950 $117,065 -$5,365 -$132,245 $144,032 schedule 1/1/21 Total of replacements from detailed replacement $125,000 $143,586 -$3,967 -$110,798 $146,913 schedule 1/1/22 Total of replacements from detailed replacement $80,000 $93,733 -$3,324 -$38,854 $149,851 schedule 1/1/23 Total of replacements from detailed replacement $100,000 $119,509 -$1,166 $9,472 $152,848 schedule 1/1/24 Total of replacements from detailed replacement $95,000 $115,804 $284 $62,953 $155,905 schedule 1/1/25 Total of replacements from detailed replacement $117,000 $145,475 $1,889 $88,367 $159,023 schedule 1/1/26 Total of replacements from detailed replacement $155,000 $196,577 $2,651 $63,441 $162,204 schedule 1/1/27 Total of replacements from detailed replacement $105,000 $135,829 $1,903 $98,516 $165,448 schedule 1/1/28 Total of replacements from detailed replacement $120,000 $158,337 $2,955 $112,135 $168,757 schedule 1/1/29 Total of replacements from detailed replacement $115,000 $154,775 $3,364 $129,725 $172,132 schedule 1/1/30 Total of replacements from detailed replacement $130,000 $178,462 $3,892 $124,155 $175,574 schedule 1/1/31 Total of replacements from detailed replacement $120,000 $168,029 $3,725 $128,852 $179,086 schedule 1/1/32 Total of replacements from detailed replacement $120,000 $171,390 $3,866 $130,328 $182,668 schedule 1/1/33 Total of replacements from detailed replacement $105,000 $152,965 $3,910 $150,274 $186,321 schedule 1/1/34 Total of replacements from detailed replacement $90,000 $133,735 $4,508 $190,047 $190,047 schedule Notes:This schedule covers items in the City's replacement Starting Account Balance $0 $127,896 schedule with several assumed repeat cycles.A Discretionary Minimum Desired Annuity amount was added so that at the end of the 20-year Balance in Today's modeling period,the balance will equal the average of the annual Minimum Annual Annuity $161,928 Dollars replacement cost amounts. Discretionary Annuity $7,073 Required Annual Deposit (Annuity)to Replacement Account $169,001 This amount is entered into Table 3 as an operating cost of the system. CBGreatRates©Version 7.2 66