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CITY COUNCIL AGENDA ITEM 5A • STAFF ORIGINATOR: Rick DeGardner, Public Services Director MEETING DATE: June 25, 2012 TOPIC: Consider Resolution 12 -51 Authorizing a Utility Rate Study VOTE REQUIRED: 3/5 • INTRODUCTION In February, 2012, the City requested and received a proposal from Springsted, Inc. to conduct a comprehensive utility rate study. The study would include reviewing current and background utility data, including historical financial information, volumes, capital improvements, debt service requirements, policies and practices, growth trends and reviewing engineering studies, including the water conservation plan. Springsted, Inc. then would evaluate the current data and consider future needs in developing a comprehensive report which would recommend and justify any future rate adjustments. The last rate analysis was completed in 2008. BACKGROUND Utility rates are set based upon a number of factors. Among these are the cost of providing the service (operations costs), the cost of extending the utility network (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. The proposed study will provide recommendations for the water and sewer user rates, water and sewer trunk area charges, sanitary sewer unit charges, and watermain unit charges. In order for Springsted, Inc. to accurately complete the study, we recommend retaining WSB & Associates to prepare /update the following: o Water Demand/Sewer Flow Population Projections o Water /Sewer Capital Improvement Plan o Replacement, Operations, and Maintenance Plan WSB & Associates proposes to perform the above mentioned engineering services for a not -to- exceed fee of $16,000 (We will be billed at the customary hourly rates). The cost for Springsted, Inc. to conduct the utility rate study is $25,800, plus expenses, which would be financed equally from the Water and Sewer funds. We anticipate Springsted, Inc. would present their formal report to the City Council this fall. RECOMMENDATION Staff is recommending Council adopt Resolution No. 12 -51 authorizing Springsted, Inc. to complete a utility rate study and WSB & Associates to provide supporting engineering services. ATTACHMENTS • Water and Wastewater Fee Study Update Proposal from Springsted, Inc., dated February, 2012. • Estimate of Professional Engineering Services from WSB & Associates, dated June 13, 2012