07-18-05 - Laserfiche WebLink

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. . . Memo Replacement of Lift Stations - Impact on Fund Balance approximately $365,000 to $460,000, depending upon thc option, The estimated fund balance would be around $365,000 if the Engineer's Option A is acceptcd, and the fund balance would be around $460,000 if the Engincer's Option D is accepted, It should be kept in mind that the fund balance is cumulative at the end of the five year period, The project would still be within the affordability range, The City would have adequate funds to finance this project assuming that all future projects (other than Lift Stations) come within the 5 Year CIP Budget, the Met Council's sewer rates stay stable, and that there is not a substantial incrcase in the number of senior discount accounts. Staff is presently comfortable maintaining the $460,000 fund balance, provided all other costs and projected revenue are within the budget. 2. If a decision is made not to re-examine sewer rates, maintain the desired fund balance, and proceed with the rcplacement of the Lift Stations, the Council may want to consider deferring the SCADA project to a period past the current five year CIP plan. The budgctcd amount for SCADA is $175,000. If this option is exercised, the City can still replace all Lift Stations and still maintain the existing fund balancc without altering the sewer rates. 3, If the decision is to move forward and replace all Lift Stations as planned and move forward with SCADA, and still maintain the desired fund balance, the City would have to increase the sewcr rates greater than the rate increase reconuncnded in the Utility Rates Study, According to the study, the sewer rate should be increased by 15% in 2005, 5% in years 2006 through 2008, each year, and 3% in 2009. In order to movc forward will all projects, that is, Lift Stations and SCADA, we may want to consider re- evaluating the scwer rates in 2006 and 2007, Ifthe 2006 ratcs are increased by 7.5%, instead of 5% and the 2007 rates by 6% instead of 3%, the City would still be able to maintain a fund balance of around $500,000, if the Engineer's Option D is accepted. From a number of perspectives such as: Liability/financial exposure due to the failure of the Stations; amount spent on over-time to fix the existing Stations; difficulty in obtaining parts due to obsolescence, operational efficiencies, i.e. lower electrical costs, I would recommend that the City should strongly consider rcplacing all Lift Stations as soon as possible. RECOMMENDED ACTION: Staff reconunends that thc Council consider accepting Option D as outlined by the Engineer, with the understanding that Utility Rates may havc to be re-visited in the future as wcll as the nced to re-evaluate the need for thc SCADA project.