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<br />. CITY OF ARDEN XILLS <br /> lmICllANOOM <br />. '1'0: Dorothy Person, City "",";ni"trator <br /> FIlm: Terry Post, City 1lcco1mtant <br /> DATE: """"""'...... 7, 1993 <br /> SUBJECT: Reo .,.,_nne<l 1994 utility Rate Increases <br /> Bl\CKGROOND <br /> lhe City of Arden Hills lltpJsed significant rate in=eases in 1992 and 1993 to <br /> its water and sanitary sewer utility customers. Prior to this pricing action, <br /> rates for these utility services had remained the same since July 1, 1987. <br /> At the time this two-tiered price increase was adopted, Council expressed a <br /> desire, as a matter of policy, to consider the need for such increases on an <br /> annual basis and avoid the need for more radical periodic increases. <br /> The previous pricing actions taken have essentially aa::ounted for utility <br /> service delivery =sts through 1993. lhe focus of this memorandum is to offer <br /> recommendations for 1994 pricing. <br /> 1iM'ER <br />. Although a full-scale utility rate study has not been performed by city staff, <br /> the Finance Cormnittee, or an outside consultant; enough is known about major <br /> =st drivers of this utility to offer recommendations for 1994 pricing. <br /> 1- Based upon infonnation received by the city of st. Paul Board of Water <br /> Cormnissioners and the City of Roseville Utility Depart:merrt, ''winter'' <br /> water (Le. purchases from November through April) can be expected to <br /> increase 3.65% and "SUllIller" water (Le. purchases from May through <br /> October) can be expected to increase 3.36%. Purchased water represents <br /> approximately 65% of the total operating expenses of this utility. <br /> 2. Personnel services are expected to increase by approxintately 2.0% in <br /> 1994. SUch expenses represent aOOut 17% of the total operating expenses <br /> of this utility. <br /> 3. lhe combined expenses of purchased water and personnel services <br /> represent approximately 82% of the total operating costs of the water <br /> utility . A weighted percentage cost increase for these combine:i <br /> expenses could be calculated as follows: <br /> .0365 * .42 (winter) * .65 = 1.0% <br /> .0336 * .58 (SUllIller) * .65 = 1.3% <br /> 2.3% <br /> .020 (personnel) * .17 = ~ <br /> ~ <br />. 4. It may be reasonable to assume that the remaining 18% of utility <br /> operating costs will also increase along 3.0% inflationary lines. lhis <br /> would result in a price increase for this factor as follows: <br /> .03 (other operating expenses) * .18 = .5% <br /> = <br />