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MEMORANDUM <br />DATE: May 26, 2009 <br />TO: City Council <br />FROM: Mike Morrison, City Manager <br />Roger Larson, Finance Director <br />ITEM; REVIEW OF TIERED WATER RATES <br />For Council review and consideration, Staff is presenting an update on the status of the <br />tiered water rate analysis. <br />Defined in Minnesota Statutes, Section 103G.291, in 2010, Cities are required to <br />implement a "Tiered Water Rate Structure" that promotes conservation and charges a <br />higher rate for excessive use. <br />With the implementation of a tiered rate structure, the cost per unit increases as the water <br />use increases. To encourage conservation, the DNR has indicated the cost should be <br />significant between each tier. <br />Part of their process included forming a committee of professionals to establish <br />recommended guidelines for structuring of the tiers. The DNR's recommendation <br />included a tier structure with a 25% increase between tiers and 50% increase between the <br />last two tiers. <br />An example would be as follows: <br />1) Tier I <br />$2.60 per 1000 Gallons (St. Anthony's current rate) <br />2) Tier II <br />$3.25 per 1000 Gallons — 25% Increase <br />3) Tier III <br />$4.06 per 1000 Gallons — 25% Increase <br />4) Tier IV <br />$6.09 per 1000 Gallons — 50% Increase <br />Using our current rate of $2.60 per 1000 gallons, Staff has prepared an analysis which <br />compares a current water bill to one that is tiered using the DNR guidelines. The analysis <br />includes a tiered structure and a water bill comparison for residential, multi - family and <br />commercial. <br />As part of this process, Staff is asking direction from the City Council to determine the <br />goals associated with implementation of the tiered rates. If the goal is to establish CIP <br />Funding as part of the new rate structure, the City could maintain the current base charge <br />of $2.60 per 1000 gallons and implement the recommended DNR tier structure. The <br />result could be an increase in revenues by 20% or $150,000 annually (further analysis is <br />in progress). <br />If the goal is to conserve without implementing CIP Funding, the starting base rate could <br />be reduced and implement the DNR tier structure. This would allow the City to increase <br />revenues a certain percentage over last year's revenue. <br />Staff will analyze the feedback from this work session to develop and finalize a tiered <br />water rate structure for St. Anthony. Presentation will be at the August 3rd work session. <br />1 <br />