HomeMy WebLinkAbout12-17-07 Item 1C Utility Rates
~
~~HILLS
MEMORANDUM
DATE:
December 11,2007
Agenda Item: 1.c.
TO: Honorable Mayor and City Council
FROM: Sue Iverson, Finance Director ~
SUBJECT: 2008 Utility Rate Study Policy Considerations
BackgroundlDiscussion:
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 of last year's Financial Management
Plan, but was postponed in order to get accurate numbers and accurately assess what our major problem
areas were.)
I have attached a memo that you previously received for the November 19, 2007 work session, but due to
time constraints, was not discussed. This memo lists policy issues that need to be discussed. Council
feedback/direction is needed regarding these policy issues. A good rate study takes approximately three
to four months to complete, so Ehlers recommended that we implement the current proposed rates and
then do a "mid-year" rate adjustment once the study is completed. Council adopted those rates on
December 10,2007.
Much of the information that will be used in the rate study will also be used for the Resource Plan for
TCAAP, sO the Financial Model and the Rate Study will be based on the current budget adopted on
December 10, 2007, and worked into the Resource Plan. I am confident that these are accurate numbers
from which to complete these models/studies and have discussions with the Council. We will also use the
five-year CIP plan once it is adopted by the Council for 2008 - 2012.
For purposes of discussion on Monday night, staff proposes a review of the Policy considerations that are
listed in the attached memo. I will bring supporting documentation and analysis with to the meeting to
answer questions on the senior discount and what other cities are doing with connections fees. Mark Ruff
from Ehlers will be in attendance to answer any questions about the rate study or rate structures that other
cities use. Once we have direction from the Council on these issues; staff can proceed with the
preparation of the Model and the Study.
DIRECTION REQUESTED:
Council feedback/direction on policy considerations for the City's water and sewer enterprise funds.
EHLERS
LEADERS IN PUBLIC FINANCE
0 To: Sue Iverson
:E From: Mark Ruff, Liz Diaz, Jon North
W Date: 11/15/07
:E Subject: Policy considerations for utilities
It is our understanding that the Council will be discussing the City's water and sewer enterprise
funds. In advance of those discussions, Ehlers has highlighted several policy options for the
Council's consideration.
Policy Considerations
. Institute tiered water and sewer rates to keep low users' rates low and require higher per
gallon payments from higher volume users
.
Eliminate senior discount with rate tiering
.
Institute a "payment in lieu oftaxes" (PILOT) payment from the enterprise funds, which
would be directed to the general fund. A PILOT is utilized by some cities to offset property
tax payments that would have been received ifthe enterprise were operated by a private
entity.
.
Eliminate proj ected deficit balances in the storm water funds with higher user fees
.
Review commercial and non-profit rates to determine stresses upon system and equity of
payments vis-a-vis home owners
.
Review rates for townhome associations, specifically related to water sprinkling meters
.
Review flat fee charges and institute more volume based for sewer as well as water
.
Institute connection fees for new development
.
Given age of current meters, review meter replacement policy to maximize efficiency and
minimize inaccurate reporting
We are available to discuss these policy options in greater detail at the Council's discretion.
Ehlers & Associates
3060 Centre Pointe Drive
Roseville, MN 55113-1105
Phone: 651-697-8545 Fax: 651-697-8555
jnorth@ehlers-inc.com