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~ ~HILLS MEMORANDUM DATE: January 14, 2008 TO: Honorable Mayor and City Council FROM: Sue Iverson, Finance Director SUBJECT: 2008 Utility Rate Study Proposal BackgroundJDiscussion: As previously discussed, the enterprise funds have excess expenditures over revenues in the 2008 budget. I met with our financial consultants from Ehlers in November to review the Financial Management Plan and to discuss conducting a Utility Rate Study. (This was to be part oflast year's Financial Management Plan, but was postponed in order to get accurate numbers and accurately assess what our major problem areas were.) At our December work session, Mark Ruff and Jon North from Ehlers were present to discuss policy direction to be used in the rate study. It was also noted that part of this study would be used for the TCAAP resource plan and could be charged back to the developer as it was part of the PDA agreement. As part of the process, the Council needs to authorize the rate study with Ehlers & Associates, Inc. The Proposal for the rate study is attached. The cost quoted in the study is a not-to-exceed amount of $14,000 for water and sewer with $5,000 for surface water management. Typically, actual costs are less than the not-to-exceed amount quoted. It is estimated that approximately 30% of the workload in the study will be attributable to the TCAAP Resource Plan. We did include some monies in the budget of each enterprise fund for this study to be completed, but did not anticipate the extent of what was involved at that time. These estimates are based on Ehlers not knowing what the City can provide and how much work need to do. Staff anticipates that the actual cost will be less. The last study was done in September 2004 by Abdo, Eick, and Myers (CPA-consultant) with information provided by City staff that was not entirely accurate. The financial impact/costs to each fund would be: Water $4,900 Sewer $4,900 Surface Water Mgmt. $3,500 TCAAP $5.700 (billable to the developer) $19,000 Staff has checked references provided in the proposal. All references reported favorably.