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ARDEN HILLS CITY COUNCIL WORK SESSION - MAY 19, 2008 4 Ms. Diaz explained that for the water and sewer extended to new areas, a percentage of the capital cost could be recovered from the developer. Mayor Harpstead questioned if the proposed bonding in the analysis was linked to any capital expenditures. Ms. Diaz stated these bonds were tied to capital expenditures. She noted this would alleviate the need for the accumulated cash flow to cover all major expenses completely but, rather, use a portion from cash flow and the rest from bonding. Councilmember Holden stated she liked the structured options, but did not like the toll it would take the first year and wondered if this increase could be spread out more evenly over several years as this would be a 20% increase the first year. Mayor Harpstead questioned the cash flow recovery chart stating the sewer rate is clearly misaligned at this time with growing expenditures. He indicated that from this chart it appears that in 2011 the cash balance in the water fund would turn around if the proposed rate structure were assumed. Mayor Harpstead reviewed the recommendations from Ehlers & Associates noting the City needed to switch the current billing to.tiers to promote conservation and begin a new fee structure in 2009. Mayor Harpstead questioned what percentage of revenue was collected from meter charges versus the rate. Ms. Diaz indicated usage fees were 690/0 with 31 % of revenues collected from meter charges. Mayor Harpstead indicated that the Council would now need to provide feedback, requesting additional information if needed to reach the City's desired goals. Councilmember McClung questioned what figures went into the assumptions. Finance Director Sue Iverson explained how these numbers were determined adding which capital outlays were projected for the near future, such as water tower painting. She stated these numbers were realistic estimates based on past expenses. Councilmember McClung asked if the projected rate structures would reach the desired goals by 2022 with a 500/0 cash flow. Interim City Administrator Willis stated the I5-year goal could be reached with the proposed _ changes but that ongoing repair would be needed even after this time. Councilmember Grant stated this would be an ongoing process and the financials would evolve with new proposed projects. He stated a policy could be set but that the actual may turn out better or worse depending on the capital outlays. Councilmember Grant suggested that a regular review of the rates be set each year to see if the Council was achieving the desired outcomes. He added that he would be most in favor of Option II, if a rate change were made.