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POLICY Hl 11/23/05 . ITEM: 2006 Utility Fee Structure SUBMITTED BY: Heather Worthington, City Administrator Roland Olson, Finance Director EXPLANATION: Summary: The City has two enterprise funds, the Storm Drainage Fund, and the Sanitary Sewer Fund. These are business-type activities that need to be self-supporting through the collection of fee revenue according to our auditors. Each year in our CAFR (Comprehensive Annual Financial Report) there is a "Statement of Revenues, Expenses, and Changes in Fund Net Assets" that presents the revenues and expenses of each of these funds. This statement summarizes the Operating Income or Loss of each of these two enterprise funds. Storm Drainage Fund: Large storm water infrastructure improvements are scheduled for Hamline and Roselawn Avenues in 2006. As of December 31, 2004, this fund had a cash balance of $296,347. The storm water drainage portions of these projects are estimated to cost $466,000. Given the history of revenues and expenditures for 2004 and 2005, and forecasts of revenues and expenditures for . 2006 and 2007 it is clear that the Storm Drainage Fund will be depleted during the year of 2007. There are increasing unfunded federal and state mandates for storm sewer maintenance and control (including NPDES) passed on to the cities that add substantial costs to the storm drainage costs today, and those costs will only become more onerous in the future as those mandates are adjusted through regulatory and court action. Fees are collected to cover ongoing maintenance of the storm water system, including repair of catch basins, installation of new catch basins and other water conveyances, and improving water quality in the two watersheds that serve Falcon Heights. The last increase was 49 cents per quarter in 2002. The fee increased from $3.25 a quarter up to $3.74 a quarter ($14.96/year). Recommendation: We recommend that the Council consider raising the Storm Drainage fee from $3.47 per quarter to $6.00 per quarter beginning on January 1, 2006, and commercial apartment and commercial/industrial properties from $32.50 per acre to $56.00 per acre per quarter (corresponding to the percentage increase for residential customers). Additionally, there were a few commercial properties that had a standard charge of $65 per quarter based on size of lot and drainage area, however, staff now recommends making our commercial rates consistent across all commercial properties. Falcon Heights will still remain in the lowest third of the Metropolitan area in terms of storm water fees, while beginning to cover operational costs within the Storm Drainage Fund without showing a loss. ~CHG02:40069922.v1 ~9/28/OS 11:33 AM