02-04-13 Council Packet - Laserfiche WebLink

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Executive Summary 1 City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update 1. Executive Summary This report was prepared to review the financial performance of the City of Lino Lakes’ current Water and Sewer Funds and determine the appropriate rate structure, availability charges, and ot her revenue needed to adequately fund operations through 2022. The process incl uded a historical review of the two utility funds, the evaluation of the appropriate rate structures needed to fund these operations over the pla nning period, alternative water rate structures to encourage water demand reduction, connection fees, and a comparison of rates with other similar utilities. One major consideration in determini ng the water rates is compliance with Minnesota State Statutes, Section 103G.291. In the 2012 the Minnesota Legislature redefined the water con servation requirements now calling them demand reduction measures. The law now states that “public water suppliers serving more than 1,000 people must encourage water conservation by employing water use demand reduction measures” as opposed to the initial law requiring “a conservation rate structure”. The law goes on further to state, “Demand reduction measures must include a conservation rate structure, or a uniform rate structure with a conservation program that achieves demand reduction.” It is important to point out that conservation rate structures by themselves do not constitute an effec tive water conservation/demand reduction program. Rate structures work best when coupled with a comprehensive program. A water demand reduction progr am should include, at a minimum, a public education program and public assistance program to achieve the reduction in per capita water use envisioned by the City. In determining the water rates and rate structure options, Springsted reviewed historical water consumption patterns a nd used this information to recommend alternative rate structures that would promote water conservation. All recommendations are based on info rmation provided to us and on the assumptions given for the financial projec tions. The City will need to monitor the performance of each fund and make any necessary adjustments based upon its actual performance and on the actual construction costs of the anticipated capital improvements. The following conclusions were determin ed as a result of this study and the financial projections prepared: 1. The Water and Sewer Fund’s histor y shows revenues and expenditures, have remained fairly stable over tim e. Operating income in the Water Fund is projected to decrease from $324,865 in 2009 to $217,713 in 2012. Operating income in the Sewer Fund is projected to decline more rapidly from $70,057 in 2009 to ($56,275) in 2012, thereby not funding depreciation. 2. The City should maintain a minimum cash balance in each Utility fund of at least three months of anticipated operating expenses and one year’s debt service at the end of each year. Current and projected cash levels support this recommendation.