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The first order of business in the multi-year rate adjustment approach which began in 2012 <br />was annually increasing rates until revenues covered operating costs and the cash balances <br />were restored to a positive balance. This was achieved by 2015 and in 2016 budgeted rates <br />were increased sufficiently to produce a small transfer to the general capital improvement <br />fund to help support utility equipment needs. The reorganization of 2017 water operations <br />has added more water production costs to be supported by rates. At this juncture, there is <br />the opportunity to align revenue sources with corresponding costs. Essentially this <br />involves establishing a flat rate fee to cover the corresponding fixed costs. This allows the <br />usage rate to be set at an amount to cover the usage driven expenses. This approach would <br />provide: <br /> Greater transparency as to the basis of rates. <br /> An increased ability to maintain a structural balanced operation as the fund revenue <br />would not be entirely subjected to swings in water usage (dry vs wet summers). <br /> Provides for the elimination of the minimum charge, which residents with low <br />water usage question in principle given tiered rates. In other words there will be a <br />continuing incentive for water conservation at usage levels less than 7,500 g allons per <br />quarter. <br /> The flat rate fee would be computed based on the total fixed costs divided by the <br />total the residential equivalent units (according to the Metropolitan Council <br />formula) for all water accounts. <br /> A single family home would represent one unit. Multi-family residential properties <br />would have multipliers based on the number units. Commercial accounts will have <br />multipliers based the residential equivalent units. <br /> <br />In a review of the 2015 survey of Metro-area city’s water rate structures it was not <br />uncommon to see the use of rate structure that couples a usage rate with a flat fee or a <br />minimum use charge. The survey details are attached as Exhibit B. The tables below <br />summarize the overall 2015 findings and estimated 2017 rates based on 4% increase in <br />annual rates. The SAV billings in the table below are based on the existing vs proposed rate <br />structure. <br /> <br /> <br /> <br /> <br /> <br />Base/Min Bill @ 7,500 Bill @ 15,000 Bill @ 22,500 Bill @ 30,000 Bill @ 37,500 <br />2015 Overall Average 17.42$ 36.70$ 56.35$ 78.05$ 100.70$ 125.73$ <br />SAV (Min +usage)22.35$ 22.35$ 45.90$ 71.78$ 101.48$ 138.75$ <br />Usage only (3 Cities)-$ 16.55$ 33.10$ 46.10$ 56.72$ 67.35$ <br />Flat fee + usage (60 Cities)16.01$ 37.16$ 56.84$ 78.03$ 100.37$ 125.21$ <br />Min + usage (11 Cities)25.11$ 29.63$ 44.67$ 65.54$ 87.06$ 110.17$ <br />Base/Min Bill @ 7,500 Bill @ 15,000 Bill @ 22,500 Bill @ 30,000 Bill @ 37,500 <br />2017 projected at 4% annual increase 18.84$ 39.69$ 60.95$ 84.42$ 108.92$ 135.98$ <br />SAV 24.17$ 24.17$ 49.65$ 77.63$ 109.76$ 150.07$ <br />Usage only (3 Cities)-$ 17.90$ 35.80$ 49.86$ 61.35$ 72.84$ <br />Flat fee + usage (60 Cities)17.32$ 40.20$ 61.48$ 84.40$ 108.55$ 135.43$ <br />Min + usage (11 Cities)27.16$ 32.05$ 48.31$ 70.89$ 94.17$ 119.16$