06/04/2007 Council Packet (2) - Laserfiche WebLink

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WS -5c WORK SESSION MEMORANDUM To: City Council From: Al Rolek Date: June 4, 2007 Re: Review of Utility Rates /Utility Rate Study cc: The city staff periodically reviews and suggests adjustments to the utility rates charged to customers for the water and sewer utilities. The last time rates were adjusted was in 2003. Utility rates are set based upon a number of factors. Among these are the cost of providing the service, or operations costs; the cost of extending the utility network, or infrastructure costs; financing and servicing of debt; and the cost of replacing worn facilities and systems, referred to as depreciation or replacement costs. Other considerations in setting rates are regulatory guidelines, conservation measures and rate comparisons with other area communities. A key element to be considered in establishing water rates is conservation of the resource. The city is currently in the process of completing a Water Emergency and Conservation Plan. This plan, required by the MN DNR, establishes methods for the city to conserve its water usage to the greatest degree possible and, importantly, plans future infrastructure needs, including sizing of trunk water mains, new wells, storage capacity and water treatment facilities. In addition, the plan establishes guidelines for residential consumption of water. A recommendation will be included in the plan to structure water rates in tiers to encourage water conservation. TKDA is also in the process of completing a feasibility study for water treatment facilities in the city. The measures included in the conservation plan are important to the sizing of the treatment facilities and, therefore, influence the cost of construction.