03-06-2017 Council Packet - Laserfiche WebLink

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TO: Mayor Keis and Members of City Council FROM: Joel Hanson, City Administrator DATE: March 3, 2017 RE: Water & Sewer Rate Adjustments With first quarter utility bills going out by mid-April, we need to finalize our water and sewer rates for 2017. Here is a summary of each component: Water Fund #601: The 2016 Budget for the Water Fund anticipated a net loss of $41,911. The projected actual result anticipates a net loss of $32,950. This positive variance of $8,961 is largely attributable to increased interest earnings. In 2017, SPRWS is increasing our volume based rate by an average of 4.75% with the monthly fixed fee component remaining unchanged. The net impact is about a 4.25% increase in our water charges. Given the wet years we have experienced recently, sales of water have continued to trend lower than expected. We use a three year averaging system based on our water purchases over that time. Our average usage has dropped by 22 million gallons the past three years as compared to the period from 2009 through 2013. This translates to about $24,000 of unrealized revenues as compared to recent average consumption amounts. Another factor that impacted 2016 is an increase in electric expenses for the booster station of about $11,000. This was caused by Xcel’s rate structure penalty whereby if we pump water outside of the 9:00 p.m. to 9:00 a.m. time frame, we are surcharged for the next 12 months. Apparently, we pumped outside this period in the fall of 2015. This factor is not being applied in 2017. Without a rate increase, we would be looking at a projected loss of around $75,000. We have the ability to absorb some loses as long as we fund at least $300,000 of depreciation between the water and sewer funds to service debt associated with the new Public Works building. For reference purposes, we project total depreciation at $396,000 between the two funds.) Staff also believes it would be a good idea to continue to provide some cash to the Water & Sewer Capital Replacement Fund to ensure long term needs will be met. Therefore, to keep the loss manageable and avoid more dramatic increases in the future, staff is recommending just less than a 3.00% increase in our water rates for 2017. As a result, the winter rate would increase from $3.30 per 1000 gallons of water to $3.40 (3.03%). The summer period rate would increase from $3.41 per 1,000 gallons of water to $3.51 (2.93%). We are also recommended we increase our water service charge from $12.60 per unit to $13.50 (a 6.98% increase). In reviewing the attached survey of other St. Paul Regional Water customer, our proposed