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Storm Water Drainage Oyerating Bud : The City provides for the management of storm water drainage to prevent flooding and pollution control, as well as street sweeping and the leaf pickup program. The storm sewer operating costs are expected to increase substantially in 2003. The majority of the increase is for capital improvements to the system which will include replacement of storm water mains along County Road C, and Stormwater Phase II improvements. Given the size and cost of these projects, it is suggested that an increase in rates and existing reserves be used to finance the projects. Nearly $1 million in existing cash reserves will be used to fund these projects. This will leave the fund with a reserve of approximately $1.5 million. It's worth noting that the Stormwater Management Plan currently underway is expected to identify additional capital improvement projects that will necessitate the use of reserves as well. Recycling Budget: The recycling operation provides for the contracted curbside recycling pickup throughout the City. The primary operating cost is the amounts paid for a contractor to pickup recycling materials. Earlier this year, a Recycling Task Force recommended that the City provide curbside recycling service to multi-family housing. This will necessitate an increase in the rates. Recommendation After reviewing the needs of the various enterprise-type operations and the current rate structure, Staff feels a rate adjustment is warranted. This is based on the following: ❑ The City will realize a 2-5% increase from various service providers including the City of St. Paul, MCES, and Waste Management. ❑ The City is projecting a 3% increase in City-controlled operating costs. ❑ Substantial capital replacement costs will be incurred in the next several years that will require both the use of existing reserves, as well as planned rate increases. ❑ The City has fixed costs that it must recoup independent of the amount of citywide usage. ❑ The City has typically applied rate adjustments on an equal percentage basis across various property types. Based on these reasons, Staff is recommending the following rate adjustments as shown in the tables below: