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tot If on the other hand we move to a revenue neutral rate structure, the premium charged for usage at Tiers 2 102 and 3 will allow the lowest tier rate to decline. As aresult, 60 -70% of single - family homes would pay less 103 than they currently do. In effect, homes with lower usage will be subsidized by those with higher usage. 104 This is in sharp contrast to the current philosophy where all homes pay the same pass - through cost of water 105 purchased from St. Paul. 106 107 It should be noted that many of these same low usage homes that would benefit from this new approach 108 already receive a subsidy through the senior discount program. 109 11 o Another consideration on whether to move to a 3- tiered rate structure is whether such an approach actually 111 promotes water conservation. We have observed that water usage has declined in the past couple of years 112 despite most households never reaching the threshold for the higher tier. One could argue that education 113 and awareness has been the leading factor in discouraging homeowners from excessive water use, rather 114 than the financial incentive (penalty) that accompanies higher tiers. 115 116 One can assume that each household has a threshold for which a financial incentive would cause them to 117 modify their water use behavior. Arguably however, it would take more than just a few dollars per month 118 which is the case under both the current and proposed water rate tier structure. 119 12o A final point for discussion involves the fairness that tiered water rates can have on larger families. For 121 example, let's assume that the per - person water usage for someone that follows moderate water 122 conservation measures is 5,000 gallons per quarter. A 3- person household would use 15,000 gallons per 123 quarter and would not hit the higher tier. However, a 4- person household would use 20,000 gallons per 124 quarter and hit the higher tier simply because there are more people living in the house. On an individual 125 basis the 4- person household is just as conservative in their water use, but they pay a higher rate 126 nonetheless. 127 128 Taking this example further, let's assume that the 4- person household is even more conservative and uses 129 only 4,500 gallons per quarter, per person. This amounts to 18,000 gallons per quarter which once again 13o triggers the higher tier rate. In this example, the 4- person household pays a higher rate despite having 131 superior conservation behaviors compared to the smaller household. 132 133 Sanitary Sewer Operations 134 The City maintains a sanitary sewer collection system to ensure the general public's health and general 135 welfare. The following table provides a summary of the 2012 and 2013 (Proposed) Budget: 136 137 138 Page 4 of 12 2012 2013 S Incr. (Decrease) % Incr. (Decrease) Personnel $ 358,448 $ 367,235 Supplies & Materials 45,050 46,395 Other Services & Charges 419,200 420,545 Wastewater Treatment 2,850,000 3,000,000 Depreciation / Ca ital 1,165,000 1,280,000 Total $ 4,837,698 $ 5,114,175 $ 276,477 5.7 137 138 Page 4 of 12