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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 gallons 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 /> <br />The current recommendation is to modify the rate structure as follows: <br /> <br />• Eliminate the use of a Minimum charge. <br />• Phase-in a flat quarterly fee over time. <br />• Usage rate growth decelerates as flat fee is phased-in. <br /> <br />The recommended 2017 rates based upon these steps are below: <br /> <br /> <br /> 2016 2017 <br />Per 1000 gallons Rates Rates $ Increase <br />Water Tier I 3.10 3.10 0.00 <br />Water Tier II 3.27 3.27 0.00 <br />Water Tier III 3.59 3.59 0.00 <br />Water Tier IV 4.12 4.12 0.00 <br />Water Tier V 5.17 5.17 0.00 <br />Irrigation 4.12 4.12 0.00 <br />Qtr. Distribution <br />system charge - 3.35 3.35 <br /> <br />24