03-11-1998 Council Agenda - Laserfiche WebLink

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44 / ' : 99‘W4 `.CSC mCG,4g 515 Little Canada Road, Little Canada, MN 55117 -1600 (612) 484 -2177 / FAX: (612) 484 -4538 MEMORANDUM TO: Mayor Fahey & Members of the City Council FROM: Joel Hanson, City Administrator DATE: March 6, 1998 RE: Proposed Sewer Rate Increase MAYOR Michael I. Fahey COUNCIL Beverly Scalze Jim LaValle Steve Morelan Bob Pedersen ADMINISTRATOR Joel R. Hanson Attached are updated water and sewer budgets for 1998. You will note that the water fund is projecting a $52,000 loss from operations. However, given our recent earnings history and the amount of depreciation allocated to this fund, that amount appears manageable. As you know, actual revenues can be dramatically impacted by the summer's weather as well as items such as maintenance and repair expense. I do not feel a rate increase is necessary in 1998 in this area especially in light of the increase we imposed in 1997. The sewer fund is another matter. We are projecting a loss of $96,000 for 1998 which comes on the heals of a projected $81,000 loss in 1997. You may recall that we were hopeful that 1998's treatment costs to Metropolitan Council Waste Water Services Division would go down or at least not increase dramatically in 1998 given the fact that 1996 was a dry year (lower infiltration/inflow I/I impact). Even with reduced flows, we received an increase of over $24,000 in our sewer costs largely because treatment costs were raised to offset the treatment of less flows within the Metro system. You will also note that in 1996 we experienced a profit of $142,000. We felt the fund could absorb some losses to offset that large amount. With the sump pump program and other I/I work, we hope to have a dramatic impact on future sewer treatment costs. It must be kept in mind that those savings will not be realized until the year 2000 given the lag in rate adjustments due to flow history. Therefore, we are now at the point that an increase is necessary to avoid jeopardizing the stability of the fund. My recommendation is to increase sewer rates by 7 1/2% ($2.15 per 1,000 gallons x 1 .075 = $2.31 per 1,000). This rate would be effective with 1s` quarter utility bills to go out April 1st. I am anticipating this should raise approximately $50,000 subject to variances in billable gallonage and allowing for sewer users on the flat fee of $37.50 /quarter (those users are not seeing an increase as the minimum charge is high enough). In looking at the attached rate comparison from other cities, I feel a rate of $2.31 per 1,000 gallons of sewer treatment is competitive with our neighboring jurisdictions. You will also note that the last time we increased the sewer rates Page 3