CC PACKET 11142017 - Laserfiche WebLink

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TO: MAYOR AND CITY COUNCIL MARK CASEY, CITY MANAGER FROM: SHELLY RUECKERT, FINANCE DIRECTOR SUBJECT: 2018 UTILITY RATES DATE: NOVEMEBER 7, 2017 The utility rates recommended herein for 2018 builds on the multi-year approach towards rate adjustments that began in 2012. Water Rates: As part of the 2017 rate review the water expenditures were categorized by two primary functions. These functions are the production of potable water and the distribution of the potable water. Production costs are considered to be substantially driven by water usage while distribution costs are relatively fixed in nature. Therefore a flat fee was initiated in 2017 to begin funding the costs fixed in nature. This allows for the usage rate to be re-set to cover the usage driven expenses. The transition from a singular rate to a dual rate model was planned to be phased in over time. The table below summarizes the 2018 budgeted water expenses assigned as either production costs (usage driven) or distribution costs (fixed). OPERATING DEPRECIATION OVERALL FIXED 440,602 47% 163,984 60% 604,585 50% USAGE 498,272 53% 111,421 40% 609,693 50% 938,874 100% 275,404 100% 1,214,278 100% The 2017 estimated actual ratio of fixed costs to usage costs is 49% to 51%. As part of the transition process the usage rate growth was expected to decelerate as flat fee was phased-in. The 2017 rate review projected this phasing in of flat fees and its impact to usage fees for 2018 and 2019. The projections assumed similar levels of water consumption and the additional costs of operating the AOP process. Based on estimated actual results for 2017 and updated 2018 budgeted costs the rates being proposed are consistent with the rates previously modeled for 2018. 15