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Home My WebLink About11-04-13 Council Packet Updated 11-4-13 WORK SESSION AGENDA CITY OF LINO LAKES Monday,November4, 2013 CITY COUNCIL WORK SESSION Community Room (not televised) 5:30 P.M. 1.7309 Lake Drive, Michael Grochala 2.Accessory Buildings Update, Katie Larsen 3.Signage Requirements, Michael Grochala 4.2014-2016Water and Sewer Rates, Rick DeGardner 5.2014 Water, Sewer and Program Recreation Budget Proposals, Al Rolek 6.Funding for Parks, Dave Roeser 7.Financial Software Upgrade, Al Rolek 8.December Council Schedule, Julie Bartell 9.Cartegraph -Operations Management System Proposal, Rick DeGardner 10.Monthly Progress Report, Jeff Karlson Review Regular Agenda Adjourn WS –Item#2 WORK SESSION STAFF REPORT Work Session Item No.2 Date: November 4, 2013 To: City Council From: Katie Larsen, City Planner Re: Accessory Buildings Background City Council members received an email from a resident stating concerns about the allowed size and location of accessory buildings in residential neighborhoods. At the September 3, 2013 Council Work Session, staff reviewed the City’s ordinance on accessory buildings. The Council directed staff toalsoreview the ordinance with the Planning & Zoning Board at their October 9, 2013 meeting. Current City Ordinance Chapter 1007, Section 1, Subd. 2.B. of the zoning ordinance defines the following: Accessory Building. A portion of the principal building or a detached structure on the same lot which is used for an accessory use. Accessory Use. A use of land or of a building or portion thereof customarily incidental and subordinate to the principal use of the land or building and located on the same lot with such principal use. Detached Garage. A one-story accessory building used or intended for the storage of motor driven passenger vehicles. Garage. A deck building or structure, or part thereof, used or intended to be used for the parking and storage of vehicles. Tool Shed. A small one-story accessory building used or intended for the storage of hobby tools and garden equipment. Per Chapter 1007, Section 3, Subd. 4: Accessory Buildings and Structures. D. 1.General Provisions. 1 a.No accessory building or use shall be constructed or developed on a lot prior to the time of construction of the principal building to which it is accessory, except in the case of agricultural buildings on agriculture land as defined by State Statute 273.13, Section 23, as amended. b.A building or portion thereof used for an accessory use, other than home occupation, shall be considered as an accessory building. c.No detached accessory building shall be closer to the front lot line than the principal building or its attached garage exceptwithin the R, R-X, and R-BR Zoning Districts, provided the accessory building is set back at least one hundred (100) feet from the street right-of-way. d.Setbacks for accessory buildings in all districts shall be determined in accordance with appropriate district provisions. Location of said accessory buildings shall not interfere with the future subdivision of the property. e.Accessory structures may be constructed within public and private utility and drainage easements provided that: 1)No accessory structure shall be located within a drainage or utility easement without written permission of the Zoning Administrator and the filing of an encroachment agreement. 2)No footings or foundation shall be placed within the easement. 3)The entire structure, including any base material, must be designed to be easily moved if deemed necessary by the city. 4)Removal of an accessory structure or portion thereof for the purpose of utilizing the easement shall be at the property owner’s expense. f.In Rural and Residential districts, Gazebos that are attached to the dwelling by a raised deck, porch, or patio shall not be counted towards the maximum area or number of accessory structures allowed on a site, so long as the sides of the gazebo remain at least 50%, though the open areas may be covered with screens. g.In Rural and Residential districts, Fabric structures are considered an accessory structure and are therefore counted towards the maximum area and number of accessory structures allowed on a site. 2 9.Rural andResidential Zoning District Accessory Buildings. The following summarizes the maximum number, size, and height of accessory buildings allowed in an individual parcel according to lot size and residential district. For the purposes of this section, lot size for metes and bounds properties shall include roadway easements. a.Twenty (20) Acres or Greater. (R, R-X, R-BR, R-1, R-1X, R-EC, and PSP Districts) 1)No maximum combination of accessory building(s) and garage(s) size requirement. 2)Metal buildingsand pole barns acceptable. 3)Fabric or vinyl canopy structures acceptable. 4)No maximum height requirement. 5)One (1) attached garage not to exceed one thousand two hundred (1,200)square feet or equal to the size of the house foundation, whichever is greater. b.Ten (10) to Less than Twenty (20) Acres.(R, R-X, R-BR, R-1, R- 1X, R-EC, and PSP Districts) 1)The combination of accessory building(s) and garage(s) shall not exceed the greater of: a.Ten thousand (10,000) square feet, or b.1.85% of the lot area, not to exceed fift.een thousand (15,000) square feet. 2)Total allowable accessory building space shall be limited to the following: a.One (1) attached garage and b.Three (3) detached accessory structures. 3)Metal buildings and pole barns acceptable. 4)Fabric or vinyl canopy structures acceptable. 5)One (1) attached garage not to exceed one thousand two hundred (1,200)square feet or equal to the size of the house foundation, whichever is greater. 3 6)Building height shall not exceed base district requirement. c.Five (5) to Less than Ten (10) Acres.(R, R-X, R-1, R-1X, R-EC, and PSP Districts) 1)The combination of accessory buildings and garages shall not exceed the greater of: a)Five thousand (5,000) square feet, or b)2.21% of the lot area, not to exceed ten thousand (10,000) square feet. 2)Total allowable accessory building space shall be limited to the following: a)One (1) attached garage and b)Three (3) detached accessory structures. 3)Metal buildings and pole barns acceptable. 4)Fabric or vinyl canopy structures acceptable. 5)One (1) attached garage not to exceed one thousand two hundred (1,200)square feet or equal to the size of the house foundation, whichever is greater. 6)Building height shall not exceed base district requirement. d.Less than Five Acres.(R, R-X, R-1, R-1X, R-EC, R-2, R-3, R-4, R- 6, R-7, and PSP Districts) 1)The combination of accessory buildings and garages shall not exceed the greater of: a)One thousand two hundred (1,200) square feet, or b)3.75% of the lot area, not to exceed five thousand (5,000) square feet. 2)Total allowable accessory building space shall be limited to the following: a)One (1) attached garage and one (1) detached structure, or b)Two (2) detached accessory structures. 4 3)One (1) attached garage not to exceed one thousand two hundred (1,200)square feet or equal to ninety (90) percent of the size of the house foundation, whichever is greater. 4)Twenty (20) foot maximum height. 5)No metal sheet/panel siding with vertical orientation except upon tool sheds less than one hundred fift.y (150) square feet in area. Metal horizontal lap siding is acceptable. 6)Fabric or vinyl canopy structures acceptable. 7)Roof and exterior color and material compatible with home (except manufactured tool shed). 8)Lots that have shared ownership/membership in the Lino Airpark may have a three thousand two hundred (3,200) square foot accessory building as an airplane hangar provided that: a)The hangar be earth tone in color. b)The hangar conform to Building Code standards for hangar use. c)The hangar location has direct taxiway access to the Lino Airpark runway. 5 PreviousCity of Lino Lakes Ordinances The following chart summarizes previous City ordinances related to accessory structures: YearStructure Size (max.)Height (max.)Number of Structures Cannot exceed height of 1971None mentioned.None mentioned. principal building (30 ft.) Tool Shed=120 s.f.Tool Shed= 10 ft.< 2.5 acres = 1 tool shed + 1 detached garage Rural Storage= 1,000 s.f. on All Others = Cannot exceed parcel size 2.5-10 acresheight of principal building 2.5-10 acres = 1 tool 1983(30 ft.)shed + 1 detached garage Rural Storage=1,500 s.f. on + 1 rural storage parcel size > 10 acres > 10 acres = No limit Combination of accessory building + garage 1 attached garage + 1 Parcel size < 0.75 acres = 1,000 s.f. 20 ft.detached or 2 detached 1997Parcel size 0.75 -1.25 acres = 1,100 s.f.20 ft.1 attached garage + 1 detached or 2 detached Parcel size >1.25 acres (residential zoned) = 2,020 s.f.20 ft.1 attached garage + 2 detached Combination of accessory building + garage Parcel size < 5 acres = 1,200 s.f. or 20 ft.1 attached garage + 1 3.75% of lot area not to exceed 5,000 detached or 2 detached s.f. Parcel size 5-10 acres = 5,000 s.f. or Shall not exceed base district 1 attached garage + Current 2.21% of lot area not to exceed 10,000 requirement3 detached s.f. Parcel size 10-20 acres = 10,000 s.f. or Shall not exceed base district 1 attached garage + requirement3 detached 1.85% of lot area not to exceed 15,000 s.f. Parcel size > 20 acres = No maximumNo maximumNo limit 6 Other Community Ordinances (Typical R-1, Single Family Lot) CityHeightSize Shall not exceed 1,200 s.f. Blaineheight of principal (combination garage + accessory) building (30 ft.) 10 ft. sidewall;200 s.f. detached accessory + Centerville 15 ft. height1500 s.f. attached accessory Shall not exceed 1,200 s.f. Hugoheight of principal (combination garage + accessory) building (35 ft.) 1 ½ stories or 18 Edinafeet Varies by district (whichever is less) NTE 1,000 s.f. of gross floor area or more than 30% of the area of the side or rear yard in which they are Minnetonka12 feet located NTE 1,000 s.f. for attached accessory building (i.e. <120s.f. –10 feet Plymouthgarage, storage or workshop area) >120s.f. –15 feet NTE 120 s.f. for detached accessory building NTE 1,064s.f.; New (same as house –Any structure larger than 624 s.f. up to 1,064 s.f. Brighton30 feet)subject to approval of a Special Use Permit 864 s.f.; up to 1,008 s.f. by meeting performance standards in Section 1004.02A.2 15 feet; In any case, combined area ofaccessory buildings Roseville 9 feet wall heightshall not exceed 85% of the footprint of the principal structure NTE height of Depends on lot area; lots <10,400s.f. NTE 750s.f.; home>10,400s.f. NTE 1,250s.f. or 7.25% of the total lot Mahtomedi (30 feet/25 feet in area whichever is less; in no case can the accessory shoreland overlay)building exceed 80% of the principal building 1. NTE = Not Too Exceed 2. Information compiled by WSB & Associates and City Staff 7 Setbacks The setbacks for accessory buildings are established per zoning district. A typical R-1, Single Family Residential District requires a 5 foot side and 5 foot rear setback. Accessory buildings are not allowed in the front yard. Requested Council Direction Staff seeks Council direction as to whether the ordinance should be amended per the following discussions had by the Planning & Zoning Board on October 9, 2013. 1.Should the allowed square footage of accessory buildings and garages be based on the percentage of total lot area orbuildable land? P&Z BoardRecommendation: No change. Totallot areawhich is how ordinance is currently applied. 2.Should the allowed square footage of accessory buildings and garages differentiate between Rural Districts (R, R-X and R-BR) and Residential Districts? P&Z Board Recommendation: Amend the ordinance to allow for 1 attached garage + 2 detached structures not too exceed 1,200 s.f. total on parcels less than 5 acres. 3.Is 20 foot height acceptable for residential accessory buildings? a.Should maximum sidewall heights be included in ordinance? P&Z Board Recommendation: No changes to height, sidewallsor setbacks were proposed. Attachments 1.Buildable Area Example 2.Accessory Building Example #1 3.Accessory Building Example #2 8 WS Item # 3 WORK SESSION STAFF REPORT Work Session Item No. 3 Date: November 4, 2013 To: City Council From: Michael Grochala Re: Signage Requirements Background Planning and Zoning Board held a public forum, in December of 2012, to solicit comments from area businesses and institutional uses. Staff also completed a survey of sign regulations for surrounding communities. Nine (9) individuals brought forth suggestions regarding signage needs. In general the respondents requested more flexibility in the annual day allowance, location and duration of temporary sign permits. The board discussed several options in February of 2013 however staff has not made any final recommendations. In September the City Council was approached by the pastor of Gethsemane Church requesting additional signage and expressing concern over the limited flexibility for multiple temporary signs on a property. The council directed staff to bring the issue back to the Planning and Zoning board for further discussion. The following modifications were discussed at the October 9, 2013 Planning and Zoning Board meeting. The proposed changes for consideration are broken up into two sign categories Permanent Signs and Temporary Signs. It is also likely that with any proposed amendment would also include some suggested modifications to the definition section of the ordinance. Permanent Signs 1.Increase allowance for permanent signage for non-residential uses in residential areas e.g., schools & churches as follows: Allow for both a wall sign and a monument sign for these uses. The ordinance does not currently allow for both. The Planning and Zoning Board recommended no change. Increase the allowance for ground signs to 50 sq. ft. (same as neighborhood business district). The City currently allows 36 sq. ft. The Planning and Zoning Board recommended no change. Increase the allowance for wall signs to 100 sq. ft. or 10% of the wall surface area whichever is greater. This is consistent with our commercial district provisions. The City currently allows one wall sign with a maximum size of 50 sq. ft. The Planning and Zoning Board recommended no change. The board did suggest consideration of adding Churches to uses allowed within Public/Semi-Public zoning districts. The PSP district allowed signage is the same as the GB, General Business District. 2.Change the number of wall signs allowed to one per street frontage in commercial districts. The city currently limits the number of wall signs to one unless the business fronts 2 streets. In this case a second sign is allowed. The proposed change would allow signs on more than two facades if fronting more than 2 streets. The Planning and Zoning Board recommended this change. Staff is proposing additional modification to allow signage on all walls with the following limitations: 10% of wall area on street facing walls and 5% percent on all other walls. No illuminated sign may face land zoned residential or guided residential by the comprehensive plan (this does not include across a street). Temporary signs: 1.Provide for a temporary sign allowance of 90 days annually. This is roughly equivalent to one week a month. Business owners would determine dates but display would be limited to no more than 30 consecutive days. Staff will need to further review the permitting process to accommodate the 90 day allowance. The City currently allows one permit each quarter for a maximum of 17 days each totaling 68 days. With this change additional consideration should be given to the number of temporary signs allowed on multi-tenant properties at one time. Staff recommends that only one sign be allowed on the property at any single time. The property owner would be responsible for arranging signage allowances with tenants. The Planning and Zoning Board recommended this change with a requirement that a maximum of 3 signs be allowed on multi-tenant properties at any one time. 2.An additional option proposed was to allow one advertising (off-premise) sign per property. Sign size would be limited to a suggested 4 sq. ft. (typical size of yard sign). While this would open up properties to off-premise advertising which is not currently allowed, it would provide a legal avenue for the placement of special event advertising signs throughout the city. An individual, group or business would need to obtain the property owners permission to place the sign. Signs would continue to be prohibited within the public right-of-way. Please note however, that while the intent is to provide an opportunity to promote school, church, or community events it would also allow for the placement of business signage on any property within the city. The Planning and Zoning Board modified the recommendation to allow off- premise advertising as a temporary sign in commercial zoning districts. This would limit the off-premise advertising to a maximum of 90 days per property with a maximum sign area of 32 sq. ft. The Board also proposed allowing sandwich boards at all times provided they are located within 10 feet of the business and brought inside after business hours. Requested Council Direction Staff is requesting council preliminary consideration of the proposed changes. If the council is supportive staff will draft the proposed ordinance and initiate the amendment process. We would anticipate a public hearing held by the Planning & Zoning Board in December. Council consideration of the first and second ordinance readings would be held in January. WS –Item #4 WORK SESSION STAFF REPORT Work Session Item No.4 Date: November 4, 2013 To: Mayor Reinert and City CouncilMembers From: Rick DeGardner, Public Services Director Re: 2014-2016Water and Sewer Rates Background The City Council has previously discussed revising thewater and sewer ratesduring several work sessions: February 4, 2013 Work Session-Nick Dragisich and Patty Kettles from Springsted, Inc.gave a PowerPoint presentation reviewing the resultsof the Utility Rate Study(attached). March 4, 2013 Work Session -City staff provided additional information includinga follow up report from Springsted, Inc.with comparison information, a spreadsheet directly comparing the cities of Blaine and Lino Lakeswater operations, and funding analysis for our chemicals, utilities, and water/sewer operations. April 1, 2013Work Session-Staff reviewedadditional utility rate information such as comparisons of our existing and proposed water rates with other cities. June 3, 2013 WorkSession-The City Council discussed several water related topics including options to increasing water quality and reducing operational costs. Tim Hillesheim, Utilities Supervisor,reviewed ourchemical treatment operation. July 1, 2013 Work Session-WSB Engineer Ms. Nancy Ziegler distributed the Mt. Simon Aquifer Study that she prepared with the assistance of a geologist.Ms. Zieglerpresented analysis pertaining to the potential use of the Mt. Simon Aquifercompared to the currently utilizedaquifers. Ms. Ziegler reported on existing wells and treatment, availability of aquifers, water quantity, water quality and treatment requirements, construction costs for a new well, operation costs for a deeperwell, and the impact an additional well would haveon the existing system and regulatory impacts. Springsted, Inc.and staff are proposing that water rates be increased 2% per year for the next three years. /¢³®¡¤± þ 0 ¦¤ 1 Residential Rates-Water2009-2013201420152016 Rate per Rate per Rate per Rate per 1,0001,0001,0001,000 GallonsGallonsGallonsGallons Flat Fee of $10 per Residential $10$10$10$10 Equivalent Unit (REU) 0-20,000 gallons$1.80$1.84$1.87$1.91 20,001 -40,000 gallons$2.00$2.04$2.08$2.12 40,001 -80,000 gallons$2.50$2.55$2.60$2.65 80,001 -120,000 gallons$3.00$3.06$3.12$3.18 Over 120,000 gallons$3.50$3.57$3.64$3.71 Springsted, Inc. projections indicatethat the existing sewer rate structure combined with projected growth in the customer base, will providesufficient revenues to meet the minimum recommended cash reserves,but an increase of 7% in 2014 and 2% annual increases in 2015and 2016will be needed to fully fund depreciation(last increased in 2001).The current Sewer Availability Charge of $2,911 is adequate to fund projected capital costs. Volume Charges –Sewer*2001-2013201420152016 0-10,000 gallons$52.00$55.64$56.75$57.89 >10,000 (per 1,000 gallons)$1.00$1.07$1.09$1.11 Flat Sewer Only$62.00$66.34$67.67$69.02 *Based on winter quarter usage Springsted, Inc. recommends that the City establish the user rates for each utility fund for a three year period. The rates should be reviewed on an annual basis concurrent with the development of the following year’s budget. Requested CouncilDirection Discussproposed water and sewer ratesfor approval. Attachments Springsted, Inc. Water and Sewer Utility Rate Study Update (dated January 28, 2013) /¢³®¡¤± þ 0 ¦¤ 2 Final Report Cit of Lino Lakes, Minnesota y Water and Sewer Utilit Rate Stud Update yy Januar 28, 2013 y 1EXECUTIVE SUMMARY ....................................................................... 1 Table of Contents 2INTRODUCTION .................................................................................. 5 3BACKGROUND ................................................................................... 6 Water Fund Historical Information ...................................................... 6 Current Water Rate Schedule ............................................................ 7 Sewer Fund Historical Information ...................................................... 9 Current Sewer Rate Schedule ........................................................... 9 Cash Reserves ............................................................................ 11 Depreciation ................................................................................ 11 Assumptions ............................................................................... 12 4WATER UTILITY ............................................................................... 13 Water Rates ................................................................................ 13 Water Customer Growth Projections ................................................. 13 Conservation Rate Structure ........................................................... 14 Water Utility Revenue Requirements ................................................. 17 Capital Outlay .............................................................................. 19 Financial Projections ..................................................................... 22 Impact on Water Charges ............................................................... 30 5SEWER UTILITY ............................................................................... 37 Sewer Rates ............................................................................... 37 Sewer Customer Growth Projections ................................................. 37 Sewer Utility Revenue Requirements ................................................ 38 Capital Outlay .............................................................................. 40 Financial Projections ..................................................................... 41 Impact on Sewer Charges .............................................................. 43 6CONCLUSIONS AND RECOMMENDATIONS .......................................... 47 Springsted Incorporated 380 Jackson Street, Suite 300 Saint Paul, MN 55101-2887 Tel: 651-223-3000 Fax: 651-223-3002 www.springsted.com LETTER OF TRANSMITTAL January 28, 2013 Mr. Al Rolek, Finance Director Mr. Rick DeGardner, Public Services Director City of Lino Lakes 600 Town Center Parkway Lino Lakes, Minnesota 55014-1182 Summary of Water and Sewer Utility Rate Study Update Re: Dear Mr. Rolek and Mr. DeGardner: Springsted Incorporated was hired to update the utility rate study for the Water Fund and Sewer Fund of the City of Lino Lakes. Each Fund was looked at individually. performance of each fund, determines the adequacy of revenues in each of the Funds, and provides rate recommendations which reflects recent cost experience as well as anticipated capital improvement costs of each Fund. We appreciate the opportunity to conduct the Water and Wastewater Utility Rate Study for the City of Lino Lakes. Respectfully submitted, Nick Dragisich Patty Kettles Nick Dragisich, Executive Vice President Patty Kettles, Vice P Director, Management Consulting Services sml Executive Summary 1 1. Executive Summary This report was prepared to review the financial performance of LakesÓ current Water and Sewer Funds and determine the appropriate rate structure, availability charges, and other revenue needed to adequately fund operations through 2022. The process included a historical review of the two utility funds, the evaluation of the appropriate rate structures these operations over the planning period, alternative water rate structures to encourage water demand reduction, connection fees, and a compari with other similar utilities. One major consideration in determining the water rates is compliance with Minnesota State Statutes, Section 103G.291. In the 2012 the Min Legislature redefined the water conservation requirements now calling them demand reduction measures. The law now states that Ðpublic water suppliers serving more than 1,000 people must encourage water conservation employing water use demand reduction measuresÑ as opposed to the initial law requiring Ða conservation rate structureÑ. The law goes on furt ÐDemand reduction measures must include a conservation rate structure, or a uniform rate structure with a conservation program that achieves reduction.Ñ It is important to point out that conservation themselves do not constitute an effective water conservation/demand reduction program. Rate structures work best when coupled with a comprehe program. A water demand reduction 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. In determining the water rates and rate structure options, Springsted reviewed historical water consumption patterns and used this information to recommend alternative rate structures that would promote water conservatio 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 t capital improvements. The following conclusions were determined as a result of this study and the financial projections prepared: 1.The Water and Sewer FundÓs history shows revenues and expenditures, have remained fairly stable over time. Operating income in the Water Fund is projected to decrease from $324,865 in 2009 to $217,713 2012. Operating income in the Sewer Fund is projected to declin rapidly from $70,057 in 2009 to ($56,275) in 2012, thereby not f depreciation. 2.The City should maintain a minimum cash balance in each Utility fund of at least three months of anticipated operating expenses and one debt service at the end of each year. Current and projected cash levels support this recommendation. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Executive Summary 2 3.The current Water Availability/Trunk Charge of $3,854 is adequate to fund projected capital costs through our planning period of 2022 However, should growth be expedited and the need for the new wat treatment plant currently projected for 2025 be moved up, we rec the City revisit this charge to include the capital and associated borrowing costs of this large capital expenditure. 4.Water user rates should be set to encourage demand reduction as provide for simplicity in understanding. After analyzing curren historical consumption patterns, we have provided four scenarios for water rates. They are: Scenario 1 – Keep Current Block Structure and Adjust Rates 2012 2013 Residential Rates Rate per 1,000 Rate per 1,000 GallonsGallons Flat Fee of $10 per Residential Equivalent Unit (REU) Same 0 - 20,000 gallons $1.80 $1.84 20,001 40,000 gallons $2.00 $2.04 – 40,001 80,000 gallons $2.50 $2.55 – 80,001 120,000 gallons $3.00 $3.06 – Over 120,000 gallons $3.50 $3.57 2012 2013 Non-Residential Rates Rate per 1,000 Rate per 1,000 GallonsGallons Flat Fee of $10 per Residential Equivalent Unit (REU) Same 0 - 20,000 gallons $1.80 $1.84 20,001 40,000 gallons $2.00 $2.04 – Over 40,000 gallons $2.25 $2.30 2012 2013 Non-Residential Irrigation Rates Rate per 1,000 Rate per 1,000 GallonsGallons 0 - 40,000 gallons $2.50 $2.55 40,001 80,000 gallons $3.00 $3.06 – Over 80,000 gallons $3.50 $3.57 Future projections indicate rates may need to be increased by 2. annually 2014 - 2017. Scenario 2 – One Rate for Each Customer Class In Scenario 2, the rate for each residential, non-residential, and non- residential irrigation customer is assumed to be the rate which residential customers generating 77% of total revenues, non-residential accounts generating 10% of annual revenues, and non-residential irrigation accounts generating 13% of total revenues, as is currently the c City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Executive Summary 3 The proposed rates are: Non-Residential Residential Non-Residential Irrigation 2013 $2.02 $2.21 $3.40 As in the first scenario, these volumetric rates would need to be increased by 2.0% annually 2014-2017. Scenario 3 –Uniform Rate for All Use/All Users Scenario 3 assumes one rate for all use of all users. The 2013 users; residential, non-residential, and non-residential irrigat recommended to be $2.16 per 1,000 gallons to meet revenue requirements. A uniform rate structure is estimated to alter the total revenue from each customer class as follows: Non- Non- Residential Residential Residential Irrigation Current Rates 77% 10% 13% Proposed Rate 82% 10% 8% As in the first two scenarios, these volumetric rates would need to be increased by 2.0% annually 2014-2017. Scenario 4 –Revised Block Rate Structure The final option reviewed is to keep a block rate structure, whe price of water increases with volume consumed, but reduce the nu blocks from five to three for residential and from three to two residential and non-residential irrigation. The following block rate structure is proposed in order to meet revenue requirements: Proposed 2013 Residential Rates Residential 0 – 30,000 gallons $1.89 30,001 – 50,000 $2.09 > 50,000 $2.91 Proposed 2013 Non-Residential Rates Non-Residential 0 – 50,000 gallons $2.04 > 50,000 $2.30 City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Executive Summary 4 Proposed 2013 Non-Residential Irrigation Rates Non-Residential Irrigation 0 – 50,000 gallons $2.55 > 50,000 $3.57 Our proposed rates along with 2.0% increases in these rates 2014 projects depreciation could be funded while maintaining recommended reserve levels. 5.The current Sewer Availability Charge of $2,911 is adequate to fund projected capital costs. 6.Sewer user rates should be increased by 7.0% in 2013 and 2.0% annually 2014 through 2019. 7.The City should establish the user rates for each utility fund for a three- year period and review them on an annual basis. The rates shoul reviewed on an annual basis concurrent with the development of the following yearÓs budget. These recommendations are based on information provided to us by City of Lino Lakes. The City will need to monitor the performance of the Water and Sewer Funds and make any necessary adjustments based upon its actual performance and on the actual construction costs of the anticipa improvements. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Introduction 5 2. Introduction The purpose of this report is to review and analyzeCity of Lino LakesÓ Water and Sewer Funds to determine the appropriate rate structure and other revenue sources needed for its operation and financing of capital assets. The rate structure and other revenue in each fund must provide sufficient 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 sh water conservation. Since our initial study in 2007/08, the Min Legislature has revised the definition of water conservation rat Total revenue collected should reflect not only recent cost expe should recognize anticipated future costs during the period for which rates are being established. This report includes a review of the CityÓs Water Fund and Sewer Fund revenues and expenditures, historical budgets, a projection of revenues and expenditures through 2022 (incorporating the CityÓs plans for ca improvements), and a determination of the rates and charges necessary to provide sufficient revenues that will cover capital and operational costs. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Background 6 3. Background The City of Lino Lakes, which is located approximately 20 miles Paul in southeastern Anoka County, provides approximately 4,175 residential, commercial, industrial, and institutional customers with water and sewer services. The City encompasses approximately 33 square miles and had a 2010 Census population of 20,216 and an estimated 2011 population slightly higher at 20,505. Currently, the City obtains its water supply from four raw water wells. Water storage for consistent pressure and for fire protection occurs in two elevated storage towers. Wastewater treatment is provided by the Metropolitan Waste Contr Commission. Collection is accomplished through a series of trun empty into one of nine lift stations operated by the City. Water Fund A review of the CityÓs most recent financial reports shows the W Historical Information ending cash balance has increased since 2009. The 2012 budget was projected to result in an ending cash balance of $3,861,609, up from $3,432,696 in 2009. Historically the fund has recorded positive operating income, fu depreciation each year. Revenues and expenditures for the past three years and the 2012 budget, as well as the CityÓs current water rate schedule are shown on the following pages. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Background 7 Current Water Rate Schedule Water Volume Charges (Quarterly) Residential Rates Rate per 1,000 Effective January 2009 Gallons Flat Fee of $10 per Residential Equivalent Unit (REU) 0 - 20,000 gallons$1.80 20,001 40,000 gallons$2.00 – 40,001 80,000 gallons$2.50 – 80,001 120,000 gallons$3.00 – Over 120,000 gallons$3.50 Non-Residential Rates Rate per 1,000 Effective January 2009 Gallons Flat Fee of $10 per Residential Equivalent Unit (REU) 0 - 20,000 gallons$1.80 20,001 40,000 gallons$2.00 – Over 40,000 gallons$2.25 Non-Residential IrrigationRates Rate per 1,000 Effective January 2009 Gallons 0 - 40,000 gallons$2.50 40,001 80,000 gallons$3.00 – Over 80,000 gallons$3.50 Water Connection Fee Meter Size (Inches)Amount All $250 Water Availability Charge Per SAC unit Amount 2012 $3,854 City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Background 8 Water Fund Information 2009201020112012 Operating RevenuesActualActualActualBudget Charges for Services1,334,055 1,059,994 1,054,977 1,250,000 Hook-up Charges8,750 8,000 9,260 9,000 Water Meter Sales10,874 8,698 10,561 10,000 Other Revenue12,138 10,321 15,306 36,000 Total Operating Revenue1,365,817 1,087,013 1,090,104 1,305,000 Operating Expenses Personal Services187,201 172,095 175,906 181,337 Materials and Supplies269,925 208,872 154,450 237,500 Contractual Services60,814 76,755 92,345 110,000 Utilities78,532 97,060 80,906 92,000 Other21,262 28,640 19,903 31,450 Depreciation423,218 426,861 421,616 435,000 Total Operating Expenses1,040,952 1,010,283 945,126 1,087,287 Operating Income (Loss)324,865 76,730 144,978 217,713 Non Operating Revenues (Expenses) Investment Earnings74,818 37,249 43,983 25,000 Special Assessments8,107 6,216 731 10,000 Bond Interest(43,298) (29,858) (15,864) (13,566) Paying Agent Fees(5,319) (5,760) (5,653) (5,500) Total Non Operating Revenues (Expenses)34,308 7,847 23,197 15,934 Net Income (Loss) Before Transfers359,173 84,577 168,175 233,647 Operating Transfers Transfers In Transfers (Out)(35,561) (34,061) (33,061) (34,511) Total Operating Transfers(35,561) (34,061) (33,061) (34,511) Net Income (Loss)323,612 50,516 135,114 199,136 Beginning Cash & Investments 3,432,6962,964,709 3,555,128 3,649,473 Net Income323,612 50,516 135,114 199,136 Depreciation423,218 426,861 421,616 435,000 Amortization5,319 5,760 5,653 5,500 Acquisition and Construction of Assets- Proceeds from New Long-Term Debt- Payments on Long-Term Debt(360,000) (375,000) (390,000) (427,500) Adjustment to Accruals75,838 14,295 (78,038) - Ending Cash Balance3,432,696 3,555,128 3,649,473 3,861,609 City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Background 9 Sewer Fund A review of the CityÓs most recent financial reports shows the c Historical Information the Sewer Fund has also been increasing. The 2012 budget was projected to result in an ending cash balance of $6,939,631; up from $5,750,402 in 2009. Historically, the fund recorded positive operating income in 2009 and 2010. Operating income was ($143,875) in 2011 and is projected to be ( 2012, indicating the City is not fully funding depreciation as p been a goal. Revenue and expenditures for the past four years in the Sewer Fu the CityÓs current sewer rate schedule are shown below. Current Sewer Rate Schedule Sewer Volume Charges (Quarterly) Rate per 1,000 Rate Gallons Up to 10,000 gallons$52.00 Over 10,000 gallons $1.00 SewerCustomer Only$62.00 *Sewer based on winter quarter usage. Sewer Connection Fee Water Meter Size (Inches) Amount All $200 Sewer Availability Charges Per SAC Unit Amount 2012 $2,911 City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Background 10 Sewer Fund Information 2009201020112012 Operating RevenuesActualActualActualBudget Charges for Services1,477,007 1,491,728 1,486,616 1,480,000 Hook-up Charges7,490 6,490 7,220 8,000 Other Revenue17,667 352 500 Total Operating Revenue1,502,164 1,498,218 1,494,188 1,488,500 Operating Expenses Personal Services172,744 173,937 177,758 184,942 Materials and Supplies43,147 43,252 73,029 42,500 Contractual Services91,973 70,464 163,233 105,000 MCES Sewer Charges625,353 681,591 720,986 704,933 Utilities37,121 34,047 42,251 44,000 Other14,981 17,600 14,229 13,400 Depreciation446,788 445,956 446,577 450,000 Total Operating Expenses1,432,107 1,466,847 1,638,063 1,544,775 Operating Income (Loss)70,057 31,371 (143,875) (56,275) Non Operating Revenues (Expenses) Investment Earnings153,929 67,521 82,232 50,000 Special Assessments662 2,493 731 Total Non Operating Revenues (Expenses)154,591 70,014 82,963 50,000 Net Income (Loss) Before Transfers224,648 101,385 (60,912) (6,275) Operating Transfers Transfers In Transfers (Out)(10,561) (34,061) (33,061) (34,511) Total Operating Transfers(10,561) (34,061) (33,061) (34,511) Net Income (Loss)214,087 67,324 (93,973) (40,786) Beginning Cash & Investments 5,750,4025,609,938 6,237,600 6,575,417 Net Income214,087 67,324 (93,973) (40,786) Depreciation446,788 445,956 446,577 450,000 Amortization- - - - Acquisition and Construction of Assets(27,748) (17,524) (45,000) Proceeds from New Long-Term Debt- Payments on Long-Term Debt Adjustment to Accruals(492,663) (26,082) 2,737 - Ending Cash Balance5,750,402 6,237,600 6,575,417 6,939,631 City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Background 11 Cash Reserves SpringstedÓs clients often ask about the amount of cash that sho in their Utility funds. Utility funds need sufficient cash to pay current expenses, together with principal and interest on outstanding bonds. This would typically require each Utility fund to have a minimum of three months of anticipated operating expenses and one yearÓs total debt service in cash at year. However, this does not provide any level of cash reserves for unforeseen expenses, emergencies, or to cover any shortfalls in the budget. The amount of cash reserves that the Water and Sewer Funds should have is dependent on a number of factors, including: Reserves that are legally required Variability of the annual revenue stream Variability in annual expenditures Variability in rainfall Age and condition of fixed assets Anticipated future capital needs Capital improvement plan Regulatory compliance Tolerance for risk Number of relatively large customers Unfortunately, there are no prescribed formulas, and the amount varies considerably between utilities. We encourage the City to maintain a minimum cash balance in the Water and Sewer Fund of at least thr months/ninety days of anticipated operating expenses and one yearÓs debt service at the end of the year. Depreciation Costs incurred in the operation of each Utility are either recorded as operating expenses or capitalized as assets. Whether the cost is expensed immediately or capitalized, the City actually pays for the asset at the time it Generally, anything that is used up in the period in which the c is incurred is treated as an operating expense. Personnel, supplies, and repairs and maintenance are typical examples of costs that are treated a expenses. These costs are shown on the income statement each year in the total amount of the expenditure for each category. The cost incurred acquisition or construction of assets such as buildings and major pieces of equipment are capitalized. That means their cost does not show expense on the income statement in the year in which the expenditure occurs, rather the cost of these assets are depreciated. Depreciation is the process of allocating the cost of an asset over its useful life in a system manner. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Background 12 The City currently includes depreciation in its annual budget and until recently, user rates in each utility fully funded annual depreci since 2011, sewer rates are not fully funding annual depreciatio recommendations will show the necessary rate increases in order again fully fund deprecation in the Sewer Fund. Assumptions The City provided Springsted with a variety of material includin 2009-2011 Financial Reports 2012 and 2013 Operating Budgets for each Fund 2013-2025 Capital Improvement Plan Î listing cost and year of expenditure in 2012 dollars Capital costs were inflated to year of construction cost, using the 10- year average of the Municipal Cost Index, or a 3.59% inflation f Projected new connections to the water and sewer system over the planning period Detailed number of water connections by quarter by user class fo 2010 and 2011 Detailed water consumption data by quarter by user class for 201 and 2011 Previous utility rates We have used the information provided by the City as the basis o projections, as well as discussions with City personnel. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Water Utility 13 4. Water Utility Water Rates The Water Availability Charge is a fee incurred to recover the c associated with providing the necessary infrastructure to make water services available to the customer. These should include the cost of wat providing treatment capacity, and the cost of the distribution s insures that growth pays for the costs of growth. Springsted an determined the water meter charge, connection fee, and the availability charge to be sufficient at this time. Due to limited growth recently experienced by the City, the new plant is now projected to occur in 2025 (it was projected to be previous rate study), which is beyond the planning period of this analysis. Should growth be expedited, we recommend the City revisit these include the capital and associated borrowing costs of this large capital expenditure. It is important for the City to understand that while availability charges provide a valuable source of revenue for the utilities, they can be much more volatile than user fee revenue related to actual sales. Water availabili dependent on local economic conditions and will rise and fall accordingly. However, the fixed costs associated with debt issued to finance the necessary capital improvements will need to be paid regardless of how much revenue is collected. To minimize this risk, we have recommended the City maintain an adequate level of cash reserves that include one year of debt se Water Customer The projection of new residential water connections is based on those provided Growth Projections by the CityÓs engineering consultant WSB (which used the Metro Council projections) for capital planning purposes, revised to take into account the slower growth pattern the City has recently experienced. The projected number of added connections is shown below. Residential Commercial (3/4Ñ meter) (1Ñ meter) 2013 50 3 2014 75 3 2015 75 3 2016 75 3 2017 100 3 2018 100 3 2019 125 3 2020 125 3 2021 150 3 2022 150 3 City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Water Utility 14 Conservation Rate Water utilities have traditionally relied on increased capacity to meet their Structure growing needs for additional water resulting from population growth and economic development. However, utilities are increasingly looking to conservation as an alternative strategy. This change in philosophy is the result of several factors including: Growing competition for limited water supplies; Increasing cost and difficulties in developing new water supplie Increasing cost of capacity expansion; Increasing cost of water treatment and testing; Statutory requirements for increased water supply permits; and Growing public support for the conservation of our natural resources. The City is required to complete a water emergency and conservation plan every 10 years. Included in this plan, the City must explain current and how they will address conservation in the future. The average use per resident in the City in 2007 was 86 gallons per day (gpd). The resident in 2011 was 90 gallons per day. And the average use pe 2012 was 107 gallons per day. The average use in 2012 is reflec relatively dry watering months (July, August, and September). Precipitation in the summer watering months of 2012 were 50% lower than the 29 year average of those same months, most likely prompting residents to water The DNR goal is to achieve an average consumption per user of 75 conservation rate structure was developed to help the City achieve this goal. A conservation rate structure provides a financial incentive for users to reduce demands based upon the general economic theory that demand for a commodity decreases as its price increases. Water conservation rates gene of the types listed below: 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; Flat rate where the cost of water is the same regardless of consumption; and Seasonal pricing where the cost of water consumed during the sea of peak demand is charged at a higher rate than water consumed in the off-peak season. The City currently tracks consumption patterns for the following eight types of users: residential, commercial, industrial, institutional, prison, church, school, and non-residential irrigation. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Water Utility 15 The total annual consumption by residential, non-residential and non-residential irrigation for 2010 and 2011 is shown in the chart below. 2010 2011 Residential 396,630,500 402,204,500 Non-Residential 48,644,000 48,995,500 Non-Residential Irrigation 38,534,000 40,999,000 Totals 483,808,500 492,199,000 The average use per quarter by residential, non-residential and non-residential irrigation is: 2011 – Q12011 – Q2 2011 – Q32011 – Q4 Residential 16,32818,404 32,62433,077 Non-Residential 104,63994,178 125,257143,080 Non-Residential Irrigation 66,70098,083 243,061343,500 Below are some additional highlights on past water use in the Ci Winter water use (Quarter 1, 2010 & 2011 data) ResidentialAccountsbyTier winteraverage(20102011) z;© u V z;© uV z;© u V z;© u V z;© uV 98.5% of residential users used 40,000 gallons or less, falling into the first two tiers of use. Only 61 customers (1.5% of users), used more than 40,000 gallons falling into the top three tiers. Therefore, our assumption was that water consumption over 40,000 the summer quarters is due primarily to non-residential irrigation. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Water Utility 16 Summer consumption statistics include: Summer water use (Quarter 3, 2010 & 2011 data) ResidentialAccountsbyTier summeraverage(20102011) z;© z;© uV uV z;© z;© uV u V z;© u V 68.2% of residential users use 40,000 gallons or less, falling into the first two tiers of use. 1,290 or 31.8% of residential customers use 40,000 gallons or mo in the summer months, which is over 21 times what customers use winter. 47 or 1.2% of residential customers use 120,000 gallons or more the summer months. In the 2012 the Minnesota Legislature redefined the water conser requirements now calling them demand reduction measures. The la that Ðpublic water suppliers serving more than 1,000 people must encourage water conservation by employing water use demand reduction measu opposed to the initial law requiring Ða conservation rate struct goes on further to state, ÐDemand reduction measures must includ conservation rate structure, or a uniform rate structure with a program that achieves demand reduction.Ñ Therefore, the City ca current five-tiered system so long as it reduces water demand, w water demands, and nonessential water uses. We have provided four options for future water rates; 1) leave the current five-tiered system the same but adjust the volume charge if necessary, 2) provide one rate for each user class (residential, non-residential, and non-residential irrigation) that will generate revenues from each user class that the current block rates do, 3) go to one rate for all water use, or 4) reduce the five-tiered system to something less. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Water Utility 17 Water Utility Revenue Revenue requirements indicate the amount of revenue needed for t Requirements continue efficient operations, as well as maintain anadequate cash balance in the utility. Revenue requirements include operating and maintenance expenses, debt service payments, capital outlay, and any operating or work reserves. The debt service payments to be made from the Water U portion of the 2010A General Obligation Improvement and Utility Revenue Refunding Bonds. In 2010 and 2011, revenues from volume charges were approximatel $1,055,000. In 2012, due to an extremely dry year, year-to-date revenues to come in closer to $1,250,000. In order to not overstate revenues in 2013 and beyond, we have assumed 2011 revenues to be a more ÐnormalÑ revenue base assuming average rainfall. Therefore we assume 201 would increase somewhat to account for minimal new growth in 201 to approximately $1,115,000. 2010 and 2011 consumption data also indicated 77% of volume-base were derived from residential users, 10% from non-residential users, and 13% from non-residential irrigation accounts. We assume this pattern will continue when generating possible rate structures. The following pages show the projected operating statement and a balance in the Water Utility, assuming the current rate structur charges are kept in place over the planning period with increases only attributable to new customers as discussed on page 13, not from The 2013 proposed budget was used for operating expenditures. The fund is projected to maintain positive operating income until 2015. At that time, the City will no longer be fully funding depreciation. Ho ending cash balance is sufficient to fund the recommended reserve levels in all years of the planning period. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Water Utility 19 Capital Outlay To determine the appropriate fees and rates needed for the opera Water Utility over the planning period, we have incorporated the future capital outlay needs provided by the Finance Director and These capital costs and their projected source of funding are sh below. The capital items are projected to be paid the Area and Unit Charge Fund. All water and sewer trunk charges are deposited into the Charge Fund, in addition to the $10 quarterly fee imposed on all Special rea and Unit rea and Unit Assessments - AA Water UtilityCharge FundCharge BondsArea and UnitTotals 2012 -- - - 45,000 2013 289,307 - - 317,307 656,614 2014 2,992,150 2,603,170- - 337,185 2015 1,285,555- - 1,285,555 2,624,764 2016 398,343- - - 535,425 2017 -- 902,818 - 960,394 2018 -- 4,751,653 - 4,811,296 2019 -- 2,040,138 - 2,101,922 2020 612,433- 3,970,743 980,312 5,728,200 2021 1,556,656 -- 745,178 745,178 2022 -- 4,940,354 - 5,009,034 Total- 5,188,808 17,350,884 3,665,537 27,021,455 The only capital improvements planned for the Water Utility are primarily to projected growth and include new watermains, wells, and a new ground storage unit. The water capital outlay is projected to be funded with a mixture of special assessments and G.O. Water Revenue Bonds, whi projected to be repaid from trunk charge revenue. A detailed listing of the anticipated capital improvements to be paid from the Water Utility Fund through 2022 as well as the Area and Unit Cha projections is shown on the following pages. Capital Outlay shown in the Area and Unit Charge Fund also includes Sewer Utility projects. of the Sewer Utility appears later in the report. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Water Utility 22 Financial Projections The financial projections assumed the City would maintain a mini balance in the Water Fund equal to three months of anticipated operating expenses and one-yearÓs debt service within the planning period. In addition, the City would fully fund depreciation and maintain positive operating income. These assumptions were made to ensure that the Water Fund would have sufficient cash to fund operations going forward as well as meet requirements. To determine the appropriate user rates needed for the repayment service and operation of the Water Fund, we have projected future revenue and expenditures and have incorporated the anticipated future capital outlay needs for the time period covered by this study. The financial projections began with the Water Fund expenditures; subsequently, revenues were adjusted to provide the recommended income, cash flow, and level of ending cash balances. Our expenditure projections are generally based on an analysis of past trends, anticipated changes in operations, and our significant experience in preparing Water rate studies. Scenario 1 – Keep Current Block Rate Structure Our projections show that the existing block rate structure comb projected growth in the customer-base, will provide sufficient revenues for the operation of the Water Utility through 2014. In order to obtain above, we determined that a 2.0% increase in user rates in each of the five blocks is needed annually 2013-2017. The projected rate increases are primarily needed to fund depreciation while maintaining recommended reserve levels. The financial projections are shown on the following page. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Water Utility 24 Scenario 2 – One Rate for Each Customer Class In Scenario 2, we assume the City will generally need to generate the same amount of revenues each year as shown in Scenario 1. The rate f residential, non-residential, and non-residential irrigation customer is assumed to be the rate that provides for residential customers generating 77% of total revenues, non-residential accounts generating 10% of annual revenues, and non- residential irrigation accounts generating 13% of total revenues, as is currently the case with 2012 rates. Based on these assumptions the uniform rates for each customer c need to be: Non- Non- ResidentialResidential Residential Irrigation 2013$2.02 $2.21 $3.40 As in the first scenario, these volumetric rates would need to be increased by 2.0% annually 2014-2017. The financial projections are shown on the following page. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Water Utility 26 Scenario 3 –Uniform Rate for All Use/Users Scenario 3 also assumes the same revenue requirements will need to be met as in Scenarios 1 and 2. However, Scenario 3 assumes one rate for all use of all users. The 2013 rate for all users; residential, non-residentia residential irrigation customers is recommended to be $2.16 per 1,000 gallons. A uniform rate structure is estimated to alter the total revenue each customer class as follows: Non- Non- Residential Residential Residential Irrigation Current 77% 10% 13% Rates Proposed 82% 10% 8% Rate As in the first two scenarios, these volumetric rates would need to be increased by 2.0% annually 2014-2017. The financial projections are shown on the following page. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Water Utility 28 Scenario 4 – Revised Block Rate Structure One final option we reviewed is to keep a block rate structure, whereby the price of water increases with volume consumed, but reduce the nu blocks from five to three for residential and from three to two residential and non-residential irrigation. The following block rate structure is proposed in order to meet revenue requirements: Proposed 2013 Residential Rates Residential 0 Î 30,000 gallons $1.89 30,001 Î 50,000 $2.09 > 50,000 $2.91 Based on this rate structure, 95% of residential accounts would fall into the first tier and 99.3% in the first two tiers (based on 2010 and 2011 wi consumption records). ResidentialAccountsbyTier winteraverage(20102011) z;© z;© uV u V z;© u V Proposed 2013 Non-Residential Rates Non-Residential 0 Î 50,000 gallons $2.04 > 50,000 $2.30 Proposed 2013 Non-Residential Irrigation Rates Non-Residential Irrigation 0 Î 50,000 gallons $2.55 > 50,000 $3.57 Our proposed rates along with 2.0% increases in these rates 2014 depreciation could be funded while maintaining recommended reserve levels. The financial projections are shown on the following page. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Water Utility 30 Impact on Water Charges The proposed quarterly water bill for an average residential water user of 17,500 gallons per quarter, 24,000 gallons per quarter, and 30,000 gallons per quarter in 2013 compared to current rates for each rate scenario are shown in the tables below: 17,500 Total Average Residential User of Fixed Volume Total Increase gallonsQuarterly per quarter (64.6% of users) Fee/REU Charges Quarterly 2014-2017 Bill 2013 Bill 2012 $42.20 Scenario 1 $10.00 $32.20 $41.50 2.0% (Current Blocks) $45.35 Scenario 2 $10.00 $35.35 $41.50 2.0% (One Rate for Each Customer Class) $47.80 Scenario 3 $10.00 $37.80 $41.50 2.0% (One Rate for All Users/All Use) $43.08 Scenario 4 $10.00 $33.08 $41.50 2.0% (Revised Block Rate Structure) 24,000 Total Average Residential User of Fixed Volume Total Increase gallonsQuarterly per quarter (86.4% of users) Fee/REU Charges Quarterly 2014-2017 Bill Bill 2012 $54.96 Scenario 1 $10.00 $44.96 $54.00 2.0% (Current Blocks) $54.00 $58.48 Scenario 2 $10.00 $48.48 2.0% (One Rate for Each Customer Class) $54.00 $61.84 Scenario 3 $10.00 $51.84 2.0% (One Rate for All Users/All Use) $54.00 $55.36 Scenario 4 $10.00 $45.36 2.0% (Revised Block Rate Structure) 30,000 Total Average Residential User of Fixed Volume Total Increase gallonsQuarterly per quarter (95.0% of users) Fee/REU Charges Quarterly 2014-2017 Bill Bill 2012 $67.20 Scenario 1 $10.00 $57.20 $66.00 2.0% (Current Blocks) $66.00 $70.60 Scenario 2 $10.00 $60.60 2.0% (One Rate for Each Customer Class) $66.00 $74.80 Scenario 3 $10.00 $64.80 2.0% (One Rate for All Users/All Use) $66.00 $66.70 Scenario 4 $10.00 $56.70 2.0% (Revised Block Rate Structure) The bill for an average residential user in scenarios 2 and 3 is higher due to the need to generate lost revenues that higher end water users currently pay for using more water at higher rates. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Water Utility 31 We recommend the City establish Water rates on a three-year basi should be reviewed on an annual basis concurrent with the development of following yearÓs budget. A comparison of an average residential quarterly bill for the City of Lino Lakes to the average quarterly bill of other communities selected by the City is shown below. The average water bill of the seven communities for a resident using 17,500 gallons per quarter surveyed is $45.75, putting three of the fou 2013 options slightly below average. Some comparable communities have already adopted 2013 rates. It is noted where that is the case. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Water Utility 32 WATER RATES - RESIDENTIAL USER - AVERAGE USE 17,500 GALLONS/QUARTER Water Rates per Total Avg JurisdictionBlock UsageVolume ChargeBase Charge 1,000 GallonsQuarterly Charge Lino Lakes0 - 20,000$1.84 SCENARIO 1 - 201320,001 - 40,000$2.04 $32.20$10.00 $42.20 40,001 - 79,000$2.55 79,001 - 120,000$3.06 > 120,000$3.57 Lino Lakes SCENARIO 2 - 2013All Use$2.02$35.35$10.00 $45.35 Lino Lakes SCENARIO 3 - 2013All Use$2.16$37.80$10.00 $47.80 Lino Lakes0 - 30,000$1.89 $33.08$10.00 $43.08 SCENARIO 4 - 201330,001 - 50,000$2.09 >50,000$2.91 Blaine0 - 24,000$1.06 $18.55$5.50 $24.05 24,001 - 150,000$1.43 >150,000$2.10 Hugo - 20120 - 15,000$1.50 $26.63$17.00 $43.63 15,001 - 30,000$1.65 (2013 rates determined in March) > 30,000$2.50 Circle Pines0 - 8,000$1.70 8,001 - 16,000$1.90 $32.33$7.50 $39.83 16,000 - 35,000$2.35 >35,000$3.25 Centerville0 - 90,000$2.00 $35.00$21.00 $56.00 90,001 - 150,000$2.20 2013 rates >150,001$2.50 Lexington0 - 10,000$1.40 10,001 - 20,000$1.68 $26.60$10.00 $36.60 20,001 - 30,000$2.10 30,001 - 40,000$2.73 >40,000$3.69 Arden Hills0- 10,000$0.00 $24.60$38.47 $63.07 10,001 - 35,000$3.28 >35,000$5.75 Shoreview0 - 5,000$1.08 5,001 - 10,000$1.74 2013 rates $32.18$13.40 $45.58 10,001 - 30,000$2.41 30,001 or >$3.96 Forest Lake (a)0 - 5,000$0.00 5,001 - 15,000$2.87$37.55$19.70 $57.25 2013 rates >15,001$3.54 (a) City has fall/winter rates that vary from spring/summer. Our calculation is an average of the two. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Water Utility 33 The average water bill of the seven communities for a resident using 24,000 gallons per quarter surveyed is $60.56, again putting three of the four proposed 2013 options below average. QuarterlyResidentialWaterBill (24,000gallons) Å u Å u Å u Å u Å u Å u Å u Å u Å u Å u City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Water Utility 34 WATER RATES - RESIDENTIAL USER - AVERAGE USE 24,000 GALLONS/QUARTER Water Rates per Total Avg JurisdictionBlock UsageVolume ChargeBase Charge 1,000 GallonsQuarterly Charge Lino Lakes0 - 20,000$1.84 SCENARIO 1 - 201320,001 - 40,000$2.04 $44.96$10.00$54.96 40,001 - 79,000$2.55 79,001 - 120,000$3.06 > 120,000$3.57 Lino Lakes SCENARIO 2 - 2013All Use$2.02$48.48$10.00$58.48 Lino Lakes SCENARIO 3 - 2013All Use$2.16$51.84$10.00$61.84 Lino Lakes0 - 30,000$1.89 $45.36$10.00$55.36 SCENARIO 4 - 201330,001 - 50,000$2.09 >50,000$2.91 Blaine0 - 24,000$1.06 $25.44$5.50$30.94 24,001 - 150,000$1.43 >150,000$2.10 Hugo - 20120 - 15,000$1.50 $37.35$17.00$54.35 15,001 - 30,000$1.65 (2013 rates determined in March) > 30,000$2.50 Circle Pines0 - 8,000$1.70 8,001 - 16,000$1.90 $47.60$7.50$55.10 16,000 - 35,000$2.35 >35,000$3.25 Centerville0 - 90,000$2.00 $48.00$21.00$69.00 90,001 - 150,000$2.20 2013 rates >150,001$2.50 Lexington0 - 10,000$1.40 10,001 - 20,000$1.68 $39.20$10.00$49.20 20,001 - 30,000$2.10 30,001 - 40,000$2.73 >40,000$3.69 Arden Hills0- 10,000$0.00 $45.92$38.47$84.39 10,001 - 35,000$3.28 >35,000$5.75 Shoreview0 - 5,000$1.08 5,001 - 10,000$1.74 2013 rates $47.84$13.40$61.24 10,001 - 30,000$2.41 30,001 or >$3.96 Forest Lake (a)0 - 5,000$0.00 5,001 - 15,000$2.87$60.56$19.70$80.26 2013 rates >15,001$3.54 (a) City has fall/winter rates that vary from spring/summer. Our calculation is an average of the two. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Water Utility 35 The average water bill of the seven communities for a resident using 30,000 gallons per quarter surveyed is $74.63, putting three of the fou 2013 options below average. QuarterlyResidentialWaterBill (30,000gallons) Å u Å u Å u Å u Å u Å u Å u City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Water Utility 36 WATER RATES - RESIDENTIAL USER - AVERAGE USE 30,000 GALLONS/QUARTER Water Rates per Total Avg JurisdictionBlock UsageVolume ChargeBase Charge 1,000 GallonsQuarterly Charge Lino Lakes0 - 20,000$1.84 SCENARIO 1 - 201320,001 - 40,000$2.04 $57.20$10.00 $67.20 40,001 - 79,000$2.55 79,001 - 120,000$3.06 > 120,000$3.57 Lino Lakes SCENARIO 2 - 2013All Use$2.02$60.60$10.00 $70.60 Lino Lakes SCENARIO 3 - 2013All Use$2.16$64.80$10.00 $74.80 Lino Lakes0 - 30,000$1.89 $56.70$10.00 $66.70 SCENARIO 4 - 201330,001 - 50,000$2.09 >50,000$2.91 Blaine0 - 24,000$1.06 $34.02$5.50 $39.52 24,001 - 150,000$1.43 >150,000$2.10 Hugo - 20120 - 15,000$1.50 $47.25$17.00 $64.25 15,001 - 30,000$1.65 (2013 rates determined in March) > 30,000$2.50 Circle Pines0 - 8,000$1.70 8,001 - 16,000$1.90 $61.70$7.50 $69.20 16,000 - 35,000$2.35 >35,000$3.25 Centerville0 - 90,000$2.00 $60.00$21.00 $81.00 90,001 - 150,000$2.20 2013 rates >150,001$2.50 Lexington0 - 10,000$1.40 10,001 - 20,000$1.68 $51.80$10.00 $61.80 20,001 - 30,000$2.10 30,001 - 40,000$2.73 >40,000$3.69 Arden Hills0- 10,000$0.00 $65.60$38.47$104.07 10,001 - 35,000$3.28 >35,000$5.75 Shoreview0 - 5,000$1.08 5,001 - 10,000$1.74 2013 rates $62.30$13.40$75.70 10,001 - 30,000$2.41 30,001 or >$3.96 Forest Lake (a)0 - 5,000$0.00 5,001 - 15,000$2.87$81.80$19.70 $101.50 2013 rates >15,001$3.54 (a) City has fall/winter rates that vary from spring/summer. Our calculation is an average of the two. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Sewer Utility 37 5. Sewer Utility Sewer Rates In addition to quarterly billing charges, the City currently has Trunk/Availability Charge and a Sewer Connection Fee. These fees are as follows: Quarterly Charges Volume Charges Amount 0 – 10,000 gal $52.00 >10,000 (per 1,000 gallons) $1.00 Availability Charge Per SAC Unit Amount $2,911 Connection Fee Meter Size (Inches)Amount All $200 The Sewer Availability Charge is a fee incurred to recover the c associated with extending and over-sizing of trunk lines to new within the City. This cost should be established to recover the associated with providing the necessary infrastructure to make these services available to the customer. City staff has determined the connection fee and availability charge to be sufficient at this time. Sewer Customer The projection of residential sewer connections is the same as p Growth Projections new water connections. The projected number of added sewer connections over the planning period is as follows: ResidentialCommercial (3/4” meter) (1” meter) 2013 50 3 2014 75 3 2015 75 3 2016 75 3 2017 100 3 2018 100 3 2019 125 3 2020 125 3 2021 150 3 2022 150 3 City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Sewer Utility 38 Sewer Utility Revenue Revenue requirements indicate the amount of revenue needed for t Requirements continue efficient operations as well as maintain an adequate cash balance in the utility. The following page shows the projected operating s annual cash balance in the Sewer Utility, assuming no rate increases, over the planning period 2013-2022. Operating income is projected to become negative at the end of 2012 and remain negative through the end of the planning period, indicating that depreciation is not being fully funded. The projected ending cash balance in 2022 is $8,759,808. Sewer utility projections through 2022 without any rate increases are shown on the following page. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Sewer Utility 40 Capital Outlay To determine the appropriate fees and rates needed for the opera Sewer Fund over the planning period, we have projected future revenue and expenditures and we have incorporated the anticipated future capital outlay needs provided by the City. The capital items are projected to be paid from both the Sewer Utility Fund and the Area and Unit Charge Fund.The capital costs and their projected source of funding are shown in the table bel Special Sanitary Sewer Area and Unit Area and Unit Assessments - UtilityCharge FundCharge BondsArea and UnitTotals 2012 45,000 -45,000 - - 2013 586,614 268,30750,000 - 268,307 2014 726,165 337,18551,795 - 337,185 2015 2,624,764 1,285,55553,654 - 1,285,555 2016 137,082 -137,082 - - 2017 57,576 -57,576 - - 2018 59,643 -59,643 - - 2019 61,784 -61,784 - - 2020 3,044,544 612,433164,712 1,287,087 980,312 2021 1,556,656 -66,300 745,178 745,178 2022 5,009,034 -68,680 4,940,354 - Total816,226 2,503,480 6,972,619 3,616,537 13,908,862 These capital projects to be paid for from the Sanitary Sewer Utility are primarily related to repair and maintenance of existing infrastructure. New items, such as new lift stations and trunk lines will be repaid from trunk charges collected from new users and deposited into the Area and Unit Charge Fund. A detailed listing of the anticipated capital improvements shows estimated sewer capital expenditures through 2022 of approximately $13,909 anticipated capital improvements are shown on the following page City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Sewer Utility 41 Special rea and Unit rea and Unit Assessments - Sanitary Sewer AA YearProjectUtilityCharge FundCharge BondsArea and UnitTotals 2012Capital Outlay from 2012 Sewer Budget45,000 45,000 2013Gravity Sewer Extension, 21st Avenue Phase 1 (1,320')50,000 50,000 100,000 2013Gravity Sewer, Cedar Street/Centerville Rd218,307 218,307 436,614 2013Sanitary Sewer Rehab50,000 50,000 2014Gravity Sewers, North of Century Farms, Stage 1337,185 337,185 674,370 2014Sanitary Sewer Rehab51,795 51,795 2015Gravity Sewer Extension, 21st Avenue Phase 2 (3,960')275,000 275,000 550,000 2015Gravity Sewer, Lift Station & Forcemain Area 1G603,050 603,050 1,206,100 2015NE Area Trunk Sewer, Stage 1407,505 407,505 815,010 2015Sanitary Sewer Rehab53,654 53,654 2016Sanitary Sewer Rehab55,581 55,581 2016Upgrade Lift Station No. 881,501 81,501 2017Sanitary Sewer Rehab57,576 57,576 2018Sanitary Sewer Rehab59,643 59,643 2019Sanitary Sewer Rehab61,784 61,784 2020Gravity Sewer, 77th Street/Country Lane84,427 337,708 422,135 2020Gravity Sewer, Lake Drive North of Main Street1,287,087 321,772 1,608,859 2020Lift Station & Forcemain, Area 3D276,232 69,058 345,290 2020NE Area Trunk Sewer, Stage 2251,774 251,774 503,548 2020Sanitary Sewer Rehab64,002 64,002 2020Upgrade Lift Station No. 10100,710 100,710 2021Gravity Sewers, North of Century Farms, Stage 2745,178 745,178 1,490,356 2021Sanitary Sewer Rehab66,300 66,300 2022Sanitary Sewer Rehab68,680 68,680 2022West Side Relief Sewer 4,940,3544,940,354 TOTALS816,2262,503,4806,972,6193,616,53713,908,862 Financial Projections The financial projections assumed the City would maintain a mini balance in the Sewer Fund equal to three months of anticipated operating expenses and one-yearÓs debt service within the planning period fund deprecation. This assumption was made to ensure that the S would have sufficient cash to fund operations going forward and meet future debt service requirements. To determine the appropriate user rates needed for the repayment service and operation of the Sewer Fund, we have projected future revenue and expenditures and have incorporated the anticipated future capital outlay needs for the time period covered by this study. The financial projections began with the Sewer Fund expenditures; subsequently, revenues were adjusted to provide the recommended income, cash flow, and level of ending cash balances. Our expenditure projections are generally based on an analysis of past trends, anticipated changes in operations, and our significant experience in preparing sewer rate studies. Our projections show that the existing rate structure combined w growth in the customer-base, will provided sufficient revenues to meet the minimum cash reserves recommended, but an increase of 7.0% in 20 2.0% annual increases 2014-2019 will be needed to fully fund depreciation. Our projections fund depreciation as well as the recommended res in the Sewer Fund throughout the planning period. The financial projections are shown on the following pages. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Sewer Utility 43 Impact on Sewer Charges The proposed sewer rates are shown below. The proposed user rat determined by increasing existing rates by 7.0% in 2013, and 2.0% annually 2014-2019. 20122013201420152016201720182019 0 - 10,000 gallons $ 55.6452.00$ 56.75$ 57.89$ 59.05$ 60.23$ 61.43$ 62.66$ > 10,000 gals (per 1,000 gal)$ 1.071.00$ 1.09$ 1.11$ 1.14$ 1.16$ 1.18$ 1.20$ We recommend the City establish Sewer rates on a three year basi should be reviewed on an annual basis concurrent with the development of following yearÓs budget. A comparison of an average residential 2013 quarterly bill for t Lino Lakes to the average quarterly bill of other communities selected by the City is also shown below. The average sewer bill of the seven communities for a resident using 17,500 gallons per quarter surveyed is $71.38, putting the proposed sewer rates at 89.2% of the average. QuarterlyResidentialSewerBill (17,500gallons) Å u Å u Å u Å u Å u Å u Å u City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Sewer Utility 44 SEWER RATES - RESIDENTIAL USER - AVERAGE USE 17,500 GALLONS/QUARTER Sewer Rates per Total Avg JurisdictionBlock UsageVolume ChargeBase Charge 1,000 GallonsQuarterly Charge Lino Lakes - 20130 -10,000$0.00 $8.03$55.64$63.67 10,001 >$1.07 BlaineFlat rate$44.70$44.70$44.70 Hugo0 - 9,000$0.00 $15.73$50.00$65.73 9,000 and up $1.85 (2013 rates determined in March) Circle Pines0 - 8,000$3.55 $65.47$10.00 $75.47 8,000 - 16,000$3.84 >16,000$4.23 CentervilleAll Use$1.90$33.25$37.00$70.25 2013 rates LexingtonAll Use$2.50$43.75$9.00 $52.75 Arden Hills0 - 15,000$0.00 $12.08$83.87$95.95 >15,000$4.83 Shoreview0 - 5,000$16.02 5,001 - 10,000$27.58 2013 rates $37.91$80.20 10,000 - 20,000$42.29 20,001 - 30,000$57.52 >30,000$74.73 Forest Lake10,000$0.00 $39.00$86.00 10,001 or >$5.20 $47.00 2013 rates City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Sewer Utility 45 The average sewer bill of the seven communities for a resident using 24,000 gallons per quarter surveyed is $89.95, putting the proposed sewer rates at 78.5% of the average. QuarterlyResidentialSewerBill (24,000gallons) Å u Å u Å u Å u Å u Å u Å u Å u SEWER RATES - RESIDENTIAL USER - AVERAGE USE 24,000 GALLONS/QUARTER Sewer Rates per Total Avg JurisdictionBlock UsageVolume ChargeBase Charge 1,000 GallonsQuarterly Charge Lino Lakes - 20130 -10,000$0.00 $14.98$55.64$70.62 10,001 >$1.07 BlaineFlat rate$44.70$44.70$44.70 Hugo0 - 9,000$0.00 $27.75$50.00$77.75 9,000 and up $1.85 (2013 rates determined in March) Circle Pines0 - 8,000$3.55 $92.96$10.00$102.96 8,000 - 16,000$3.84 >16,000$4.23 CentervilleAll Use$1.90$45.60$37.00$82.60 2013 rates LexingtonAll Use$2.50$60.00$9.00$69.00 Arden Hills0 - 15,000$0.00 $43.47$83.87$127.34 >15,000$4.83 Shoreview0 - 5,000$16.02 5,001 - 10,000$27.58 2013 rates $37.91$95.43 10,000 - 20,000$42.29 20,001 - 30,000$57.52 >30,000$74.73 Forest Lake10,000$0.00 $72.80$119.80 10,001 or >$5.20 $47.00 2013 rates City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Sewer Utility 46 The average sewer bill of the seven communities for a resident using 30,000 gallons per quarter surveyed is $105.33, putting the proposed se 73.1% of the average. QuarterlyResidentialSewerBill (30,000gallons) Å u Å u Å u Å u Å u Å u Å u Å u Å u Å u SEWER RATES - RESIDENTIAL USER - AVERAGE USE 30,000 GALLONS/QUARTER Sewer Rates per Total Avg JurisdictionBlock UsageVolume ChargeBase Charge 1,000 GallonsQuarterly Charge Lino Lakes - 20130 -10,000$0.00 $21.40$55.64$77.04 10,001 >$1.07 BlaineFlat rate$44.70$44.70$44.70 Hugo0 - 9,000$0.00 $38.85$50.00$88.85 9,000 and up $1.85 (2013 rates determined in March) Circle Pines0 - 8,000$3.55 $118.34$10.00$128.34 8,000 - 16,000$3.84 >16,000$4.23 CentervilleAll Use$1.90$57.00$37.00$94.00 2013 rates LexingtonAll Use$2.50$75.00$9.00$84.00 Arden Hills0 - 15,000$0.00 $72.45$83.87$156.32 >15,000$4.83 Shoreview0 - 5,000$16.02 5,001 - 10,000$27.58 2013 rates $37.91$95.43 10,000 - 20,000$42.29 20,001 - 30,000$57.52 >30,000$74.73 Forest Lake10,000$0.00 $104.00$151.00 10,001 or >$5.20 $47.00 2013 rates City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Conclusions and Recommendations 47 6. Conclusions and Recommendations This study was undertaken to review and analyze the CityÓs Water and Sewer Funds to determine the appropriate rate structure needed to pay for anticipated operating expenditures, to provide for anticipated c improvements, to provide operating cash flow, and to ensure an adequate level of cash reserves. In addition, water rates recommended were set to achieve water demand management as required by Minnesota Statutes. The following conclusions were determined as a result of this study and the financial projections prepared for the years 2012 through 2022. 1.The Water and Sewer FundÓs history shows revenues and expenditures, have remained fairly stable over time. Operating income in the Water Fund is projected to decrease from $324,865 in 2009 to $217,713 2012. Operating income in the Sewer Fund is projected to declin rapidly from $70,057 in 2009 to ($56,275) in 2012, thereby not f depreciation. 2.The City should maintain a minimum cash balance in each Utility fund of at least three months of anticipated operating expenses and one debt service at the end of each year. Current and projected cash levels support this recommendation 3.The current Water Availability/Trunk Charge of $3,854 is adequate to fund projected capital costs through our planning period of 2022 However, should growth be expedited and the need for the new wat treatment plant currently projected for 2025 be moved up, we rec the City revisit this charge to include the capital and associated borrowing costs of this large capital expenditure. 4.Water user rates should be set to encourage demand reduction as provide for simplicity in understanding. After analyzing curren historical consumption patterns, we have provided four scenarios for water rates. They are: Scenario 1 – Keep Current Block Structure and Adjust Rates 2012 2013 Residential Rates Rate per 1,000 Rate per 1,000 GallonsGallons Flat Fee of $10 per Residential Equivalent Unit (REU) Same 0 - 20,000 gallons $1.80 $1.84 20,001 40,000 gallons $2.00 $2.04 – 40,001 80,000 gallons $2.50 $2.55 – 80,001 120,000 gallons $3.00 $3.06 – Over 120,000 gallons $3.50 $3.57 2012 2013 Non-Residential Rates Rate per 1,000 Rate per 1,000 GallonsGallons Flat Fee of $10 per Residential Equivalent Unit (REU) Same 0 - 20,000 gallons $1.80 $1.84 20,001 40,000 gallons $2.00 $2.04 – Over 40,000 gallons $2.25 $2.30 City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Conclusions and Recommendations 48 2012 2013 Non-Residential Irrigation Rates Rate per 1,000 Rate per 1,000 GallonsGallons 0 - 40,000 gallons $2.50 $2.55 40,001 80,000 gallons $3.00 $3.06 – Over 80,000 gallons $3.50 $3.57 Future projections indicate rates may need to be increased by 2. annually 2014 - 2017. Scenario 2 – One Rate for Each Customer Class In Scenario 2, the rate for each residential, non-residential, and non- residential irrigation customer is assumed to be the rate which residential customers generating 77% of total revenues, non-residential accounts generating 10% of annual revenues, and non-residential irrigation accounts generating 13% of total revenues, as is currently the c proposed rates are: Non-Residential Residential Non-Residential Irrigation 2013 $2.02 $2.21 $3.40 As in the first scenario, these volumetric rates would need to be increased by 2.0% annually 2014-2017. Scenario 3 –Uniform Rate for All Use/All Users Scenario 3 assumes one rate for all use of all users. The 2013 users; residential, non-residential, and non-residential irrigat recommended to be $2.16 per 1,000 gallons to meet revenue requirements. A uniform rate structure is estimated to alter the total revenue from each customer class as follows: Non- Non- Residential Residential Residential Irrigation Current Rates 77% 10% 13% Proposed Rate 82% 10% 8% As in the first two scenarios, these volumetric rates would need to be increased by 2.0% annually 2014-2017. Scenario 4 –Revised Block Rate Structure The final option reviewed is to keep a block rate structure, whe price of water increases with volume consumed, but reduce the nu blocks from five to three for residential and from three to two residential and non-residential irrigation. The following block rate structure is proposed in order to meet revenue requirements: City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Conclusions and Recommendations 49 Proposed 2013 Residential Rates Residential 0 – 30,000 gallons $1.89 30,001 – 50,000 $2.09 > 50,000 $2.91 Proposed 2013 Non-Residential Rates Non-Residential 0 – 50,000 gallons $2.04 > 50,000 $2.30 Proposed 2013 Non-Residential Irrigation Rates Non-Residential Irrigation 0 – 50,000 gallons $2.55 > 50,000 $3.57 Our proposed rates along with 2.0% increases in these rates 2014 project depreciation could be funded while maintaining recommended reserve levels. 5.The current Sewer Availability Charge of $2,911 is adequate to fund projected capital costs. 6.Sewer user rates should be increased by 7.0% in 2013 and 2.0% annually 2014 through 2019. 7.The City should establish the user rates for each utility fund for a three- year period and review them on an annual basis. The rates shoul reviewed on an annual basis concurrent with the development of the following yearÓs budget. These recommendations are based on information provided to us by City of Lino Lakes. The City will need to monitor the performance of the Water and Sewer Funds and make any necessary adjustments based upon its actual performance and on the actual construction costs of the anticipa improvements. City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update WS Item 5 WORK SESSION STAFF REPORT Work Session Item 5 Date: November 4, 2013 To: City Council From: Al Rolek Re: 2014 Proposed Enterprise and Recreation Program Budgets Background Staff has prepared the attached 2014 proposals for the Water, Sewer and Recreation Program funds. The proposed water fund budget, which funds the operations of the water utility, is $1,214,173. This is $39,816 higher than the 2013 budget and includes $50,000 for capital outlay projects. The proposed Sewer Fund budget, which funds operations of the sanitary sewer utility, is $1,805,834. This is $75,437 more than the 2013 budget primarily due to an increase in the MCES sewage treatment charges and an increase in capital outlay needs. These budgets are entirely funded through utility fees and are balanced, when needed, with utility fund reserve balances. Revenues for the water and sewer funds have been projected according to the results of the utility rate study prepared by Springsted, Inc. at 2% and 7%, respectively. A comparison using the current rates vs. the rates recommended in the study is attached, as are the proposed 2014 budget requests. If rates are not adjusted for 2014, it is projected that the water fund will need to use $36,673 in reserves and the sewer fund would use $263,334, the third year in which sewer fund reserves would be needed to fund operations and depreciation. A discussion regarding utility rates will take place in tandem with the budget discussion. The Recreation Program Special Revenue fund is established and budgeted to finance recreation programs provided through the City. The activities of this fund are financed entirely through recreation program fees. As directed by the City Council, the fees for 2014 will again generate an additional $10,000 to offset support staff expenses now financed through the General fund. The Recreation Program fund budget projects a $2,170 surplus after the General fund offset. Requested Council Direction Staff is looking for further City Council direction on the proposed 2014 budgets in preparation for presenting a final budget at the December 9 Truth in Taxation hearing. Attachments Enterprise Fund Budget Comparison 2014 Proposed Water Fund budget 2014 Proposed Sewer Fund budget 2014 Proposed Recreation Program Special Revenue Fund budget WS Item 7 WORK SESSION STAFF REPORT Work Session Item Date: November 4, 2013 To: City Council From: Al Rolek Re: Upgrading Financial Software - Update Background At the September 3 work session staff presented a proposal to upgrade the financial software system that has been in use since 1999. Staff outlined the process followed in the selection process and presented the proposal for Tyler Technologies Incode Version X as the best solution for upgrading our financial software systems in a Cloud hosted environment. After further discussion, the City Council directed staff to meet with the representatives from Tyler to try to negotiate pricing for the system. nd City Administrator Karlson and I met with Mr. Ron Pieracci from Tyler on October 2 to discuss the proposal. After reviewing the number of users being proposed, implementation costs and other considerations, Mr. Pieracci presented a revised proposal for a cloud subscription for Incode Version X. A spreadsheet comparing the proposals is attached. The revised proposal reduces the annual subscription cost by $2,501 per year, a 7% price reduction, and reduces the implementation costs by $900. The total cost reduction over a 5 year subscription term is in excess of $13,400. Mr. Pieracci noted that the implementation costs are quoted at the maximum anticipated cost of installing and training staff to use the system. These costs are quoted on a time and materials basis. Therefore, if implementation goes smoothly it is possible that these costs will be considerably less than proposed. If the Council approves the software upgrade, full implementation of the system is expected by June/July of 2014. Requested Council Direction Staff is seeking Council authorization to negotiate and execute a contract with Tyler Technologies for the purchase and implementation of its Incode Version X financial software suite in a Cloud- Attachments Tyler Cost Comparison Spreadsheets WS –Item8 WORK SESSION STAFF REPORT Work Session Item No. 8 Date: November 4, 2013 To: City Council From: Julie Bartell Re: December CouncilSchedule Background The council has sometimes chosen to change the city council meeting schedule in December.The December council meetings are currently scheduled for December 9 and December 23. Requested Council Direction If the council wishes to change any meetings in December, staff requests that the date be determined so that proper noticeand staff preparations can occur. Attachment(s) 2013City Council Meeting Calendar 1 Item #10 November 4, 2013 ItemLast Action TakenStaffStatus Elmcrest Road Improvements5/6/13 –Staff met with Hugo to discuss Michael Hugo is interested,but is road improvements at Elmcrest & Cedar& Rickwaiting for development Utility Rate Study4/1/13 –Council discussed feasibility of a RickIncluded on the Nov. 4 work water treatment plant or using a deeper sessionagenda aquifer to reduce chemical treatment costs Digital Scanning Project10/14/13 –Council approved hiring twoJeffThe new hires are currently PT scanner operatorsscanning financial records 7309 Lake Dr. Code 9/3/13 –Council requested additional MichaelIncluded on the Nov. 4 work Violationinformation on the property, including sessionagenda historical use Labor Negotiations9/6/13 Sergeants rejected the Council’s An arbitrator has been latest settlement offer after another Jeffselected; we are expecting a mediation sessionDecember hearing date ECFE Building 10/18/13 Staff received update from KW JeffA startup pre-school/day care Commercial center toured the facility and may submit a proposal Centennial Fire District10/24/13 Steering Committee voted in JeffSteering Committee is favor of reviewing voting proceduresmeeting again on Nov. 19 to discuss options Secretarial Services for Council approved expenditures for Cost of secretarial services for Charter CommissionTimeSaver to record minutes for two JeffCharter meetings is included charter meetingsin 2014 budget