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