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<br />TO: MARK CASEY, CITY MANAGER <br />FROM: SHELLY RUECKERT, FINANCE DIRECTOR <br />SUBJECT: 2017 UTILITY RATES <br />DATE: JANUARY 22, 2017 <br /> <br /> <br />The utility rates recommended herein for 2017 builds on the multi-year approach <br />towards rate adjustments that began in 2012. <br /> <br />Water Rates: <br />During 2016, the Utility Infrastructure capital fund was created and the Water Filtration <br />Fund was closed. As part of this reorganizing the costs associated with carbon filtration <br />of potable water became a water fund expense. These costs had previously been <br />excluded from the calculation of water rates. Funds provided as part of the closing of <br />the Water Filtration Fund allows for a phase-in of these costs into the water rates. <br /> <br />With this added dynamic the Water Fund expenditures have been categorized by two <br />primary operating functions, as seen in Exhibit A. These functions are the production <br />of potable water and the distribution of the potable water. Beyond the carbon filtration <br />costs previously carried in the Water Filtration Fund, the Water Fund carried the <br />treatment costs associated with iron removal and ground water pumping. These costs <br />combined with carbon filtration costs and estimated advanced oxidation process costs <br />equal the production costs. The labor costs associated with the maintenance of the <br />distribution system, water billing and administrative support, along with other <br />distribution operating costs equal distribution costs. <br /> <br />Production costs are considered to be substantially driven by water usage while overall <br />distribution costs were considered to be 24% related to usage. The remaining <br />distribution costs correlate to common infrastructure maintenance needs and customer <br />service. This share of costs is considered fixed and not impacted by usage. Based on <br />the analysis at Exhibit A, the table below summarizes the amounts of water operating <br />expense and depreciation expense assigned as usage based and fixed cost. <br /> <br /> <br /> <br /> OPERATING DEPRECIATION OVERALL <br />FIXED 432,826 47% 106,956 60% 539,781 49% <br />USAGE 487,254 53% 72,672 40% 559,926 51% <br /> <br /> 920,079 100% 179,628 100% 1,099,707 100% <br /> <br /> <br />