10/01/2007 Council Packet - Laserfiche WebLink

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1 ✓ Executive Summary 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 other revenue needed to adequately fund ■ operations through 2017. The process included a historical review of the two utility funds, the evaluation of the appropriate rate structures needed to fund these operations over the planning period, an inclining block rate structure to encourage water conservation, connection fees, a comparison of rates with other similar utilities, and the establishment of charges for other utility services. ■ One major consideration in determining the water rates is the possibility the City may construct a water treatment plant and add additional wells. In order to do so, Minnesota State Statutes, Section 103G.291, requires the City to implement demand reduction (conservation) measures prior to seeking approval . to construct new wells or increase the volume of water consumed. Therefore, in determining the water rates and rate structure, Springsted reviewed historical ■ water consumption patterns and used this information to recommend a rate structure that would promote water conservation. 1 A conservation rate structure provides a financial incentive for users to reduce water consumption based upon the general economic theory that demand for a commodity decreases as its price increases. Water conservation rates generally involve increasing block rates where the marginal cost of water to the user increases in blocks of usually two or more steps as water use increases. Increasing block rates generally have the highest impact on heavy irrigation users. The responsiveness of customers to such a conservation rate structure depends on the existing price structure, the water conservation incentives of the new price structure, and the customer base and their water uses. 1 It is important to point out that conservation rate structures by themselves do not constitute an effective water conservation program. Rate structures work best when coupled with a comprehensive program. A water conservation program 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. 1 All recommendations are based on information provided to us and on the assumptions given for the financial projections. 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. ■ 1 1 1 Springsted . City of Lino Lakes, Minnesota. Water and Sewer Study