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61 MEMORANDUM DATE: October 16, 2009 TO: City Council FROM: Mike Morrison, City Manager Roger Larson, Finance Director ITEM: SEWER RATE INCREASE & DISCUSSION Based on 2008 financial data, the City Auditor reported the need for a sewer rate increase. Operating revenues totaled $797,360 compared to expenditures of $810,920. The deficit of ($13,560) was funded from the existing fund balance. The last sewer rate increase was in 2003 when the rate was changed from $2.77 per 1,000 gallons to $3.30 per 1,000 gallons. Since 2003, there has been no need for an increase due to the City's aggressive I & I program that significantly reduced or eliminated ground water entering the sanitary waste disposal system. This resulted in less gallons being processed by Metropolitan Waste and stabilized the rising per unit cost for disposal. Projected expenditures for 2009 total $843,350. The increase in operating costs includes: 1) Cost of living increase for City employees. 2) Rising cost of health insurance. 3) The per unit cost for sanitary waste disposal has increased since 2003. The anticipated shortfall for 2009 totals ($45,990). Funding for both shortfalls (2008 & 2009 is funded by the 2007 sewer fund balance which increased $105,314. Charles for sanitary waste disposal: The Met Council is moving ahead with restructuring how it pays for sewer capacity already built as part of their system in anticipation of future growth and development. Previously, these charges were paid for by hookup fees called SAC Credits. The current fee of $2,000 per credit is charged for new homes, new development and redevelopment. Because of a significant decline in growth of new development, resulting in loss of income from SAC Credits, the Met Council is shifting the costs to existing homes and businesses. The result for 2010 is that the Met Council has approved a sanitary waste disposal increase of 3.8%. The good news for St. Anthony is the 1 & I program has been effective tool in reducing the amount of sanitary waste enteringthe he system. The reduced owage offset the 3.8% increase and in 2010, the City will experience a $10,400 decrease in sanitary waste disposal costs.