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Dave Perrault September 25, 2017 Interim Finance Director City of Arden Hills 1245 Highway 96 W Arden Hills, MN 55113 Re: Proposal for Utility Rate Study and Development Fee Analysis Dear Mr. Perrault: On behalf of Ehlers, I am pleased to present this proposal to provide financial planning services to the City of Arden Hills. Our experience in public finance, utility rate consulting, and redevelopment brings the necessary skills and perspectives to deliver the highest quality services. Ehlers proposes to complete a Development Fee Analysis for TCAAP and a City-wide Utility Rate Study for each utility fund. Project Understanding The purpose of the proposed Development Fee Analysis and Utility Rate Study will be to (i) develop comprehensive fee structures for Council consideration that will assure development in TCAAP will cover 100% of the costs of a new water tower, lift station and water booster station , (ii) review existing utility rates and charges to assure there is adequate revenue to address long -term repair, replacement and operational costs of the existing sy stem, along with appropriate reserves, if TCAAP is never developed and (iii) show what affect development within TCAAP will have on long -term user rates if/when developed . The proposed Analysis is a long -term financial planning tool to design and project future utility rates that meet the needs of the City. This includes encompassing the need for capital improvements, changes in operating expenses, and impacts of existing debt and proposed debt. For the new water tower, lift station and booster station, it is anticipated that the City will impose area charges that will be paid when the land is platted for the various developments. Proposed Scope of Work The Development Fee Analysis and Utility Rate Study will be conducted in the following steps. Step 1: Complete a Review of the TCAAP Master Plan The Development Fee Analysis will be based on the amount, type, and timing of development specified in the Master Plan. Step 2: Complete a Review of the TCAAP Capital Improvement Plan We will work with the City staff and engineers to refine the total cost s based upon the approved Master Plan. Furthermore, we will obtain a breakdown of the total costs into different components of the system. For example, for the sanitary sewer utility, we will work with the eng ineers to break out the costs and timing of lift stations, trunk lines, and laterals.