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AGENDA ITEM 3A STAFF ORIGINATOR: John Powell, City Engineer COUNCIL MEETING DATE: March 26, 2001 TOPIC: Consideration of Resolution No. 01 -05 and 01 -19 Setting the Proposed Utility rates for 2001 -2003 VOTE REQUIRED: 3/5 Vote Required BACKGROUND: The City Charter states "The Council shall endeavor to make each municipal utility financially self- sustaining ". The City staff has prepared cost and revenue projections for the next three years and is prepared to recommend utility rates for 2001 through 2003. Sanitary Sewer The City's sewer rates are based on a quarterly charge per REU. An REU is a residential equivalent unit that represents the daily volume required by a typical residential connection. One house equals one REU. Commercial, industrial, and institutional use is converted to REU's based on the volume of flow they generate. The major expenses related to sewer charges include the cost of operating the system, Metropolitan Council charges, and depreciation. Depreciation relates to the cost of replacing the system after it has reached the end of its useful life. The rate computation has assumed a 220 unit increase in the number of connections on an annual basis. This includes connection by existing houses as well as new construction. However, if this increase does not occur our costs should also be proportionally lower. Our current sewer rate is $51.00 per quarter per REU with no usage charge. The proposed sewer rate increase is as follows: Effective March 26, 2001: $50.00 per quarter per REU + $1.00 per 1,000 gallons over 10,000 gallons (based on winter usage) Effective January 1, 2002, $51.00 per quarter per REU + $1.00 per 1,000 gallons over 10,000 gallons (based on winter usage) Effective January 1, 2003, $52.00 per quarter per REU + $1.00 per 1,000 gallons over 10,000 gallons (based on winter usage) Water The City's water rates are based on a quarterly charge per REU and a charge on water usage. The usage charge is based on 1,000 gallon units.