2017.12.18 CC Packet - Laserfiche WebLink

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CITY OF= EST. 1906 --r 14669 Fitzgerald Avenue North, Hugo, MN55038 • (651) 762-6300 • www.ci.hugo.mn.us TO: Honorable Mayor Tom Weidt and Members of the City Council FROM: Ron Otkin, Finance Director SUBJECT: 2018 Water and Sewer Service Rates DATE: For the City Council Meeting of December 18, 2017 DESIRED COUNCIL ACTION Adoption of Resolution Approving a Pro Forma Financial Guide for Water and Sanitary Sewer Operations for the 2018 Fiscal Year and Establishing Service Rates. BRIEF HISTORY It has been my goal for many years to have water and sewer rates prepared by the Finance Department rather than by an outside consultant. The Finance Department has spent a considerable amount of hours this year collecting, organizing, and analyzing water usage information. With the help of Billing Clerk Jodie Guareschi and Accounting Clerk Anna Wobse, staff is now ready to recommend water rates (last adjusted in 2010) and sanitary sewer rates (last adjusted in 2013). PRO FORMA FINANCIAL GUIDE In order to develop service rates staff developed a pro forma financial guide (basically a budget) for the water and sewer departments. Staff feels that the spending items identified in the guide reflect the true and actual expenses for the services being provided. Funds for large repair items (such as pump repairs, water main breaks, lift station rebuilds) have been identified separately. The water budget includes funds to continue the radio read meter change out program. The wages portion of the operating budget includes an additional full-time maintenance worker. These funds could be redirected to providing a clerical position in public works to contend with the paperwork and increasing number of e-mails and phone calls. This would certainly free up the director's time to attend to more pressing matters. RESIDENTIAL WATER RATES The base charge will increase from $17 per quarter to $28. This revenue will offset annual depreciation and allows us to lower the usage rates paid by low-end water users. Mother Nature set a record rainfall of over 40 inches in 2016, with 28 inches falling in the spring and summer quarters. 2017 has mirrored 2016 in rainfall. Thus, it can be assumed that any usage over 29,000 gallons is attributable to residential irrigation and should command the highest rate. Water rates have been crafted around the quarterly residential usage levels from 2016 and 2017. These usage levels and recommended rates are as follows: Average Winter Usage: 11,648 gallons First 11,000 gallons billed at $1.00 per thousand gallons Average Spring Usage: 20,635 gallons Next 9,000 gallons billed at $2.00 per thousand gallons Average Summer Usage: 29,438 gallons Next 9,000 gallons billed at $3.00 per thousand gallons Average Fall Usage: 12,101 gallons Over 29,000 gallons billed at $4.88 per thousand gallons