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CITY COUNCIL AGENDA ITEM 5A STAFF ORIGINATOR: Rick DeGardner, Public Services Director MEETING DATE: December 9, 2013 TOPIC: Second Reading of Ordinance No. 11-13 Setting the Water and Sewer Utility Rate Schedule. VOTE REQUIRED: 3/5 INTRODUCTION The First Reading and Public Hearing were conducted on November 25, 2013 on the proposed adjustment in water and sewer utility rates. The last water rate increase was in 2009 and the last sewer rate increase was 2001. BACKGROUND In June, 2012, the City Council authorized Springsted, Inc., to perform a utility rate study for the City. This study was prepared and coordinated with the Water Management and Conservation Plan. The Water and Sewer Rate Study (dated January 28, 2013) was originally presented to the City Council at the February, 2013 work session. Since then, the City Council has analyzed and discussed various reports/information during the March, April, June, July, and November work sessions. The rate structure and other revenue in each fund must provide sufficient revenue to cover anticipated operating and maintenance expenses, debt service including principal and interest, capital improvements, replacements, and to provide adequate cash reserves. At the same time, the rate structure should promote water conservation. Total revenue collected should reflect not only recent cost experience, but should recognize anticipated future costs during the period for which rates are being established. The attached proposed rate adjustments are expected to provide sufficient revenues that will cover capital and operational costs. A 2% water rate increase for 2014 and a 2% increase in 2015 is recommended. The proposed sewer rates reflect a 4% rate increase for 2014 and 3% increase for 2015. The primary reason sewer rates need to be increased is to more fully fund depreciation (last increased in 2001). It should be noted that the current Water Availability Charges (WAC) and Sewer Availability Charges (SAC) are adequate to fund projected capital costs. RECOMMENDATION Staff is recommending that the City Council approve the second reading of Ordinance 11-13. The adopted rates will be implemented in January, 2014. ATTACHMENTS Ordinance 11-13.