03-13-2013 Council Agenda - Laserfiche WebLink

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rate increase.) It is also important to note that there was no mention of rebating prior year's payments given the impact of the debt issue. So even with this apparent good news, we must remember that the SPRWS Board has not yet acted on this study nor have we reviewed it with them. Staff did contact Steve Schneider, the General Manager, and he indicated it is likely they would apply that reduction to all of the 2013 billed water usage. But there are a few complicating factors such as how SPRWS new "fixed fee" rate component impacts the study results (the study was based on fees charged prior to the new rate system). Another concerns based on a cursory review of the study is the handling of debt, i.e. did we really get the appropriate credit for the debt service payments not attributable to providing service to Little Canada. Finally, are they willing to address the past couple of years where we have been paying for the unrelated debt? Therefore, staff feels we can find a position that allows us to work through these issues without passing on a 6.5% increase or assuming we will actually benefit from a reduction from 71% to 65% in this calendar year. As a result, we are recommending a 3% rate increase at this time to ensure we don't take too large a hit if we hit some unexpected issues. This rate also doesn't hit our customers too hard, even if we do achieve the maximum benefit implied by the study. We have attached a projected budget with the three percent (3 %) rate increase while still leaving SPRWS costs at the 6.5% increase. This reduces the projected loss to $56,330. If you factor in the 2012 projected profit, staff believes we are more than able to handle this type of situation on a one year basis. Sewer The 2012 Sewer Utility Fund budgeted deficit was 550,270. The actual 2012 operating results are a loss of S56,868. Projected revenues were off by $41,000, but personnel costs were down by about $28,000. Coupled with higher investment earnings and some other expense reductions, we absorbed most of the unrealized revenue. With no rate increase, the 2013 budgeted operations are currently projected to result in a loss of 534,234. The primary reason for the reduced loss with no rate increase is attributed to lower treatment costs for 2013 (about $51,500). This reduction is a certainty given how Metropolitan Council Environmental Services (MCES) establishes their rates. Another positive factor we hope will help us going forward is the infiltration/inflow corrective work started in 2012 and being completed this year. Hopefully, this will have result in reduced flows. When coupled with the fact that depreciation accounts for $130,000 of our expenditures, staff believes we can avoid a rate increase for 2013. I I:VoeIH \Correspondence\Joel 2013 \Water & Sewer Rate Memo - 3.02.13.docx