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HomeMy WebLinkAbout[09a] Water/Sewer Rates 11 Council Agenda Item 9a urry 01 S-ri �c�ss'�Ei MEETING DATE: October 3, 2016 AGENDA ITEM: Water/Sewer Rates SUBMITTED BY: Finance BOARD/COMMISSION/COMMITTEE RECOMMENDATION: None PREVIOUS COUNCIL ACTION: Council set the 2016 water/sewer rates on Feb. 1St, 2016 with the understanding the rates would be reviewed in September 2016 to analyze the funds financial stability. BACKGROUND INFORMATION: Carl Brown from GettingGreatRates.com was hired to prepare a comprehensive rate analysis for water and sewer funds. Each fund has significant debt payments and proposed upcoming projects to fund with no reserves available. Council set the water rates just under what was suggested by Mr. Brown; and opted to increase sewer rates at a lower rate and review after a few months of collections. The City has had significant development activity in 2016. The development brought in water and sewer connection revenues to compensate the utility funds and assist in covering current revenue debts. Water Fund: With the rate increase and development fees collected for the water fund, the water fund looks like it should end the year with a positive cash balance without borrowing from the debt reserve fund. Also, the 2017 budget was set without a debt levy for the water filtration plant bonds. The water fund has stabilized and staff recommends continuing to follow Mr. Brown's rate structure to continue the healthy trend. Sewer Fund: The sewer fund has done a little better than would otherwise without the rate increase. The new developments have also helped the fund cover some of the debt payments. Projections to the end of the year show a cash deficit in the sewer fund of approximately$200,000. GASB and the State Auditors do not allow a fund to end the year with a cash deficit balance. There is one utility bill to go out yet in 2016 for the September and October usage, billed in November. There is an opportunity for the Council to increase the sewer usage rate to address the sewer fund cash needs. Staff recommends increasing the sewer rate to the rate recommended by Mr. Brown ($5.80/1,000 gallons water used); an increase from $3.65/1,000 gallons water used. With just one bill period left for cash collections in 2016, a transfer from another fund may also be necessary at the end of the year to cover a much smaller cash deficit. The table below shows the estimated impact increasing the sewer rate has on an average single family household and medium commercial user. Current 2016 Bill Proposed 2016 Bill Avg. Single Family $192.62 $218.42 Medium Commercial $594.84 $723.84 BUDGET/FISCAL IMPACT: Estimated $46,000 ATTACHMENTS: Request for Council Action—Water/Sewer Rates Extract Council Minutes—February 1, 2016 REQUESTED COUNCIL ACTION: Consider adoption the proposed revised 2016 sewer rates beginning September 1, 2016 usage. February 1, 2016 Extract Meeting Minutes Utility Rates: Weyrens stated that following the special session Council meeting on Thursday, she had met with the Public Works Director Thene and City Engineer Sabart regarding the water tower and filtration plant questions that were raised by the council. Sabart stated the existing water tower has a capacity of 500,000 gallons. The MN Department of Health states cities should have in storage what is typically used on an average day. Based on the current pumping records the City is not in a situation where the planning for the second tower needs to be initiated. Sabart recommended that the plan be revised to re-evaluate the need in five years or when the pumping records start increasing to elevate the need With regard to the need to maintain the original treatment facility, Sabart stated the original plant was rebuilt in 1996. Based on industry standard useful life, the plant is in the middle of the cycle and worth maintaining. The plant has a capacity of 1,000,000 gallons while the new plant can process 2.5 M gallons. The City is fortunate to have two plants in the event of an emergency. Loso questioned how many other cities have two water systems. Sabart stated Sartell does and would need to do additional research on other cities. Sabart stated that in the summer, during the peak times, the flow has been 1.8 million gallons. The second water filtration plant has the capacity of 2.5 million gallons. Bartlett stated she had reached out to Carl Brown Consulting after the last Council meeting to revise the rates based on changes to the capital improvement plan. As of this time he has yet to respond; however, removing the costs for the second water tower will reduce the increase that is needed. Bartlett stated that due to the St. Cloud fixed costs, the sewer rates will still need to be increased 25% over the next three year period. Weyrens stated new developments will have an impact on the water and sewer revenue as any structure that is connected to the water and sewer system are required to pay water and sewer access fees. She stated that she has been working with various developers and there is a potential to capture significant revenue in the next two years, reducing the rate increase. The City could look at a reduced rate increase at this time and review the funds in September when it will be known what impact development will have on the funds. Loso made a motion to approve the 2016 Utility Rates as indicated Scenario 4, effective January 1, 2016. The motion was seconded by Wick and passed unanimously. Discussion: Wick stated the Council had discussed increasing the sewer access charge in addition to reviewing the capital expenses. In reviewing the material, he did not see an increase in the sewer access fee. Bartlett stated the SAC charge will increase in 2019. Bartlett added that the rates will continue to be monitored throughout the year and will be reviewed again in September.