06-09-2004 Council Agenda - Laserfiche WebLink

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1 aNada 515 Little Canada Road, Little Canada, MN 551174600 (651) 766 -4029 / FAX: (651) 766 -4048 www. ci.li ttle- canada. inn. us MEMORANDUM TO: Mayor Fahey & Members of the City Council FROM: Joel Hanson, City Administrator DATE: June 4,2004 RE: Options for Water System MAYOR fvlichael 1. Fahey COUNCIL Jim LaValle Matt Anderson Rlelt Montour 13111 Blesener ADMINISTRATOR Joel R. Hansom Staff has completed our analysis of the possible turnover of our water system to St. Paul Regional Water System (SPRWS) versus continuing on with them on a wholesale basis. Some of the advantages SPRWS offered us in their initial proposal of August of 2001 have regressed. This makes their current proposal less attractive. Examples of this include their initial offer to paint our water tower this year, conversion of our water meter system to meet their needs, and no surcharge of their rates to our customers at the outset of the contract. (Note: This surcharge is a percentage factor on top of the rates St. Paul charges to its residents. They do this to offset costs they believe would not be recovered by simply charging their standard rates to our customers. This differs from the surcharge we had contemplated to offset the costs now pay for through our water enterprise that would need to funded in another manner if we transferred our system to SPRWS.) Another key issue in this analysis is the wholesale rates we are being charged by SPRWS versus what Roseville is being offered in their contract renewal. Attached is a spreadsheet staff prepared that attempts to compare these scenarios on an "apples to apples" basis. Some of the important factors to consider when reviewing this analysis are as follows: > Water billings are the revenues we generate with our current rate structure, or in SPRWS's case, what they would be charging our residents based on their current rates. > Water tower rental reflects the antenna lease agreement we currently have in place. SPRWS's proposal would be to split that 50/50. They have indicated a willingness to work with us on that item to increase that ratio to our benefit. > Surcharge is the amount we would have to charge to recover 100% of costs that would remain if we transferred the system to SPRWS. The largest component is salary costs whereby we post 1/3 of Public Works and Office salaries to water, 1/3 to sewer, and 1/3 to the general fund. Transferring the system is unlikely to result in the reduction of any of these expenses and they will need to be paid for by another source. This item also includes about $44,000 of costs to pay SPRWS for billing our sanitary sewer accounts. (That is not the incremental cost to add sewer billing to their preparation of water bills, but it does represent what they charge their other customers. This fee in not negotiable.) Therefore, we would propose surcharging the St. Paul rates by over 30% to make up this amount. ➢ Water Cost is the amount we pay SPRWS for water under our wholesale arrangement. The reduction from the "Current Contract" colun' 1 ^_the "Wholesale Contract" column reflects a