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City Council Regular Meeting Minutes February 14, 2017 Page 5 I associated with carbon filtration of potable water became a water fund expense. These costs had 2 previously been excluded from the calculation of water rates. Funds provided as part of the 3 closing of the Water Filtration Fund allows for a phase -in of these costs into the water rates. The 4 Water Fund expenditures have been categorized by two primary operating functions. These 5 functions are the production of potable water and the distribution of the potable water. Beyond 6 the carbon filtration costs previously carried in the Water Filtration Fund, the Water Fund carried 7 the treatment costs associated with iron removal and ground water pumping. These costs 8 combined with carbon filtration costs and estimated advanced oxidation process costs equal the 9 production costs. The labor costs associated with the maintenance of the distribution system, 10 water billing and administrative support, along with other distribution operating costs equal 11 distribution costs. 12 13 Ms. Rueckert stated the current recommendation is to modify the water rate structure as follows: 14 eliminate the use of a Minimum charge; phase -in a quarterly fee for distribution system costs — 15 over time; and, usage rate growth decelerates as flat fee is phased -in. Rate structure 16 modifications provide: elimination of the minimum charge will extend an incentive for water 17 conservation to quarterly usage levels less than 7,500 gallons; aligning revenue sources with 18 corresponding costs; the Distribution system charge will be based on distribution costs and 19 applied by residential equivalent units; providing greater transparency as to the basis of rates and 20 rate adjustments; and, increases ability to maintain a structural balanced operation as revenue 21 generated would not be entirely subjected to volatility in water usage (dry vs. wet summers). 22 23 Ms. Rueckert stated the current recommendation is to modify the sewer rate structure as follows: 24 eliminate the use of a Minimum charge; phase -in a quarterly fee for collection system costs — 25 over time; and, usage rate growth decelerates as flat fee is phased -in. Rate structure 26 modifications provide: aligning revenue sources with corresponding costs; the collection system 27 charge will be based on collection costs and applied by residential equivalent units; and, provide 28 greater transparency as to the basis of rates and rate adjustments. Ms. Rueckert reviewed the 29 multi -year approach to storm water rates planned for the quarterly single family residential 30 charge to increase by thirty -five cents. In 2017, this represents a 2.37% increase in rates and the 31 2.37% rate increase will be applied to all levels of storm water charges. 32 The sewer rates, water rates and storm water rates were provided by tiers. 33 34 Councilmember Gray commented a goal has been for water conservation. Ms. Rueckert stated 35 over the last few years the cash flow has been breakeven. 36 37 Motion by Councilmember Gray, seconded by Councilmember Brever, to approve First Reading 38 of Ordinance 2017 -01; an Ordinance Setting Sewer, Water and Storm Water Charges for 2017. 39 40 Motion carried 5 -0. 41 42 C. Ordinance 2017 -02: an Ordinance adding Chapter 132 Predatory Offenders to the Cif 43 Code. 44 45 Mayor Faust reviewed from a report written by Phil Steger, Dorsey & Whitney, LLP, that in 46 2006, some local governments in Minnesota began to adopt ordinances restricting where