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ltm-- <br /> ,---ARZEN HILLS <br /> MEMORANDUM <br /> DATE: December 10, 2012 <br /> TO: Honorable Mayor and City Council members <br /> Patrick Klaers, City Administrator <br /> FROM: Jim Ostlund, Financial Planning and Analysis Committee Chair <br /> Kyle Howard, Finance Analyst <br /> SUBJECT: Utility Rate Study <br /> Background <br /> Over the past few months the Financial Planning and Analysis Committee along with staff have been <br /> reviewing and analyzing the City's utility rates and structure. Our goal as a committee was to have equity <br /> in billing, promote water conservation, and maintain a positive cash flow while remaining revenue <br /> neutral. We feel that at this time the overall the system is working, but have a few recommended <br /> modifications. <br /> Water Rates <br /> The first fund and the one that we focused the most on was water. Water as it currently operates is <br /> meeting the cash flow requirement. With the current systems structure the cash flow projections show that <br /> we will cover any future expenditure that are planned and forecasted. The current system also promotes <br /> water conservation, due to the tier structure that was set up at the end of 2008. However as a committee <br /> we decided that having the current base fee which includes 10,000 gallons of water does not encourage all <br /> users to conserve water. It also does not promote fairness at all levels of the system. This is why we <br /> recommend that the 10,000 gallons be removed and that water be billed from gallon 1 on. This we feel <br /> will encourage everyone to conserve water. Resident will be bill more equitably by only pay for the water <br /> which they actually use. This will give the residents that use less than 10,000 gallons relief from paying <br /> for water that they don't use. <br /> The committee is also recommending that the Council increase the percentage of coverage provided by <br /> the meter charge. Currently fixed costs are covered at approximately 48% from the meter fee charge. This <br /> means that from the meter fee we collect only enough revenue to cover 48% of fixed expenses,the rest of <br /> the expenses are covered from usage fees. The current meter charge is set at $38.47 for 2012, this charge <br /> also include 10,000 gallons of water. For next year we recommend that base charge be lowered to $22.50 <br /> with no water included. The new base fee will cover the fixed cost at approximately 60%. At this rate the <br />