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<br />~ <br />~HILLS <br /> <br />MEMORANDUM <br /> <br />. <br /> <br />DATE: <br /> <br />October 20, 2004 <br /> <br />Agenda Item 3.C <br /> <br />TO: Honorable Mayor and City Council ""'s <br /> <br />FROM: Murtuza Siddiqui, Finance DirectorlTreasurer <br /> <br />SUBJECT: Utility Rate Study <br /> <br />BACKGROUND: <br />In July 2004, the Council approved hiring Abdo, Eick, and Meyers (consultant) to perform a <br />Utility Rate Study. The City had not reviewed or adjusted its water rates since 1999, and sewer <br />and storm water rates since 2001. Currently, the enterprise funds are breaking even from a <br />routine operational perspective. This does not take into account major maintenance projects. The <br />existing rate structure does not appear to be adequate and is not able to accommodate . <br />maintenance of the sewer, storm water, and water infrastructure in the long-term. <br /> <br />DISCUSSION: <br />The consultant has completed the Utility Rates Study. The study not only reviewed the City's <br />rates and analyzed the cash flow requirements, but it has also compared rates with eleven other <br />cities from the surrounding communities. The attached report is very comprehensive with <br />summary recommendations on page nine. It should be noted that this study does not assume <br />debt issuance and has used the most recent 5 year CIP data. <br /> <br />The study took a multi pronged approach. First it reviewed the city's rate structure and <br />compared it with a number of surrounding communities of comparable size. The next approach <br />was to determine the future cash flow requirements in order to have adequate funds to support <br />the undertaking ofthe proposed projects, as well as maintaining a desirable fund balance in the <br />enterprise (utility) funds. A draft Utility Rate Study document was presented at the September <br />20, 2004 Work Session. The Council was not comfortable with the proposed rate increase and <br />expressed a comfort level with a residential rate increase of $18 per quarter for a residential <br />account that uses an average of 15,000 gallons per quarter. Based on this directive, st~fworked <br />with the consultant to modify the rates and adjust the cash flow data accordingly. A final version <br />of the Utility Rate Study was presented at the October. 18th Work Session. This version <br />incorporated the direction provided by the Council with regards to the CIP, as well as the <br />suggested rate increase. <br /> <br />. <br />