02-12-07 Item 3D, Resolution 07-29 2007 Utility Rates

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~ ~HILLS MEMORANDUM DATE: February 6, 2007 AGENDA ITEM 3D TO: Honorable Mayor and City Council Michelle Wolfe, City Administrator FROM: Sue Iverson, Finance Directo~Y Sandy Byl, Utility Billing Clerk SUBJECT: Resolution 07-29: Water Standby Utility Rates BACKGROUND In 2004, the Council hired Abdo, Eick, and Meyers (consultant) to perform a Utility Rate Study for the City. Based upon the findings of the utility rate study, the City Council adopted a four year (2005-2009) implementation plan to increase the City's utility rates for residential and commercial customers. DISCUSSION Council previously approved the Utility Rates for 2007 on December II, 2006. Staff has found through the course of updating utility rates that the Standby rates were not included. After some research, it has been found that the standby rates have not been increased since 2004. The residential rate is an increase of $1.34 per quarter to reflect the 2007 rate schedule. Commercial accounts vary by meter size and charges, the average standby charge per account will be $49.17 for 2007 vs. $45.00 for 2004. It seems that these rates have never been included on the letter sent to residents, which in turn is the format also used for council approval in the resolution. Due to stafftumover, the previous formats were used and these rates were inadvertently forgotten. To correct this problem, these rates will be included in the resident letters in the future, FINANCIAL IMPLICATIONS Approximately $133,721.89 in standby charges were collected in 2006, which were billed at the 2004 rate. This equates to $9,831.20 in lost revenue for 2005 and $14,375.37 in lost revenue for 2006. This represents a cumulative loss of $24,206,57 over the two years. (These amounts were calculated using the increases outlined in the rate study referenced above.) If we do not increase