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. . . Arden Hills Council 9 May 10,1993 ~ISCUSSION REGA~gJNG WATER UTILITY RATE l~~R~ASES DUE TO INCREASED SUPPLY _COSTS Councilmember Malone gave a history since the mid 1980s regarding water utility activity, water utility fund balance, and rate increases. He stated that the City, during the late 1980s charged constant water rates, which resulted in a substantial declining balance in the water fund; therefore, over the last two years the City increased water rates in an effort to correct that trend and anticipate the needs of the water fund; however, now the City is faced with the additional burden of a significant increase in the cost of water from its supplier. MaIone referred to a memo (dated May 10) he forwarded to Council which outlined the models the City used in setting the water and sewer rates in 1992. MaIone explained that Arden Hills purchases its water supply from the City of Roseville, who in turn purchases the water supply from the City of St. Paul. He reported that the City of st. Paul is planning to raise what they charge for water supply by increasing summer rates 24% and increasing winter rates 14%. He noted that increased water supply costs must be passed on to the Arden Hil1s user and would result in an increase to the Arden Hi.lls user of about 12% (summer' rate) and 8% (winter rate). City Accountant Post showed graphs illustrating water purchase costs from 1987 to 1993. He noted that costs increases have been trending upward since 1991, but it would have been difficult to predict the estimated 1993 cost increase. He also showed a graph illustrating the water utility net income results since 1988 which indicated the loss dropped significant during the early 1990s and recovered slightly in 1992. Councilmember Hicks commented that even though the City is experiencing major increases from the supplier, the City needs to set a goal to at least balance the water fund. Post noted that the City's Finance Committee has opined that the City should consider establishing a differential rate for summer and winter water use to correlate with the differential rate being charged by the supplier. Mayor Sat.her noted that there was no recommendation before Council this evening as to a specific rate structure. Administrator Person stated that she understood that Council would provide direction as t.o what components should be incorporated into the rate structure.