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... ....... ..... -, ru March 10, 2003 Mr. Bernie B ul lert, General Manager St. Paul Regional water Services s 4"' St. E St. Paul, MN 55101-1007 Dear Bernie: Re; water Service Contract for Roseville We value our long history of working with St. Paul regional water Services as supplier of wholesale treated potable water to the City of Roseville. we have reviewed each item in your letter to us dated December 30* 2002 asking for clarification or consideration of your interpretation of the water Source Study completed by the City of Roseville in 20002, we are offering the following comments on each of your eight paints of clarification. This response is being shared with our City Council as a part of our on going negotiations for a Council directed new wholesale purchase agreement with St. Paul Regional water Services. The following is our response. I , No reply 2. Our counteroffer was based on AwwA suggested return on investment as previously discussed by our staffs. we feel this is a fair offer to both parties. I See attached letter from the City's consultant HR Green Co. As the letter explains, there are other factors that potentially could impact bath wholesale and retail rates in the SPRWS options. Normal inflationary factors were applied to all options although not at the same rate. Inflationary factors of 1.8% were applied in the SPRWS options and inflationary factors of 3% annually were applied to options 3 through 6. One would assume that this gives the St. Paul options a better standing in the long -terra picture, even though in reality inflationary factors should impact the master rates similarly in all of the options. Economy of scale can be a factor in energy and chemical casts, but we feel a Roseville system is of significant size to achieve economical production costs to minimize the overall impact on water rates. 2660 Civic Centex Drive *.+ Roseville oe Mi*nnesota *,6e 55113 651- 490 -2200 TDD 651-490-2207 www.ci.roscvillo.ammus