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ittle anada 51.5 Little Canada Road, Little Canada, MN 55117-1600 (651) 766 -4029 / FAX: (651) 766 -4048 www.ci.little- canada.mn.us MEMORANDUM TO: Mayor Blesener and Members of the City Council FROM: Joel Hanson, City Administrator Sharon Provos, Finance Director DATE: March 7, 2014 RE: 2014 Water and Sewer Rates MAYOR Bill Blesener COUNCIL Rick Montour John Keis Michael McGraw Shelly Boss ADMINISTRATOR Joel R. Hinson With first quarter utility bills going out by mid - April, we need to finalize our water and sewer rates for 2014. Here is a summary of each component: Water The 2013 Budget for the Water Fund anticipated a net loss of 315,261. The projected actual results anticipate a net loss of S35,305. This negative variance of 520,04.4 is largely attributable to an increase of $32,000 in depreciation anticipated due to the improvements to the water system (largely the full impact of the water meter replacement program). Without that factor, we would have only had a small loss of 53,305. The 2014, we are anticipating a reduction in St. Paul Regional Water Services (SPRWS) charges associated with their rate study conducted last year. This is subject to the execution of a new contract with them. This reduction applied to our three year consumption average yields a reduction in water purchases of just over $58,000 over 2013 projections. When applying city cost increases, we would project a loss of approximately $35,000 with no rate increase. To achieve a breakeven position, rates would need to increase by about 3.25 %. Please keep in mind this would also be funding a higher depreciation amount as discussed above. Projecting a small loss in the water fund has been an acceptable practice as long as we cover our operating costs and the projected transfer of depreciation to the Water & Sewer Capital Replacement Fund. To keep the loss at a manageable amount staff is recommending Less than a two percent (2 %) increase in our water rates for 2014. As a result, the winter rate would increase from $3.04 per 1000 gallons of water to $3.10. The summer period rate would increase from $3.15 per 1000 gallons of water to $3.21. This projects a loss of 514,746 in the Water Fund for 2014. When you compare this to the other SPRWS customers on the attached water rate survey, we remain H:VoeIH \CorrespondenceVoel 2014 \Water & Sewer Rate Menio - 3.07.14.docx