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<br />TO: MARK CASEY, CITY MANAGER <br />FROM: SHELLY RUECKERT, FINANCE DIRECTOR <br />SUBJECT: 2017 UTILITY RATES <br />DATE: FEBRUARY 9, 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. February <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. These functions are the production of potable water and <br />the distribution of the potable water. Beyond the carbon filtration costs previously <br />carried in the Water Filtration Fund, the Water Fund carried the treatment costs <br />associated with iron removal and ground water pumping. These costs combined with <br />carbon filtration costs and estimated advanced oxidation process costs equal the <br />production costs. The labor costs associated with the maintenance of the distribution <br />system, water billing and administrative support, along with other distribution <br />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. The balance of distribution costs are not impacted by usage. The table below <br />summarizes the amount of water operating and depreciation expenses assigned as <br />production costs or distribution costs. <br /> <br /> <br /> <br /> <br />DISTRIBUTION COSTS 432,826 47% 106,956 60% 539,781 49% <br />PRODUCTION COSTS 487,254 53% 72,672 40% 559,926 51% <br />920,079 100% 179,628 100% 1,099,707 100% <br />DEPRECIATION OPERATING OVERALL <br />23