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� The single largest operating cost to the sanitary sewer operation is the wastewater treatment costs paid to �� the Metropolitan Council Environmental Services Division (MCES). Based on projected flows and � increased costs from the MCES, the budget for this category has been increased by 5°/o. The City also � expects to have moderate increases in personnel and supply-related costs bringing the total increase to � 5.7%. The impact on the sewer rates will also be affected by these and other factors. , The 20-Year CIP calls for an average capital replacement need of $1 million annually. In contrast, current �� sewer rates only provide $670,000 annually. Based on a recommendation of the CIP Task Force, the City � Council agreed in 2011 to adopt a base rate increase of approximately 60% to alleviate the funding gap. �� The increase was to be phased in over two years beginning in 2012. For 2013, the increase is expected to � generate an additional $330,000 annually. The base rate would still need to be indexed for future � inflationary impacts. � � It is further recommended that the usage rate be increased by approximately 3.5% to offset the increase in � wastewater treatment and other operating costs. ;; � Storm Drainage Operations 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 following table provides a summary of the 2012 � � and 2013 (Proposed) Budget: $ Incr. % Incr. 2012 2013 (Decrease) (Decrease) Personncl $ 316,837 $ 324,615 Su lies & Materials 55,301 57,300 Other Services & Char es 277,800 281,000 Depreciation / Capital 1,260,000 1,369,000 Total $ 1,909,938 $ 2,301,915 $ 121,977 6.4 % �: The City expects to have moderate increases in personnel, supply and capital-related costs, which will �� require an increase in the storm water rates. 1�� _ Previously, the 20-Year CIP called for an average capital replacement need of $972,000 annually. The ��_ 20ll storm water rates only provided $310,000 annually. , �� To alleviate this shortfall, the CIP Task Force recommended a one-time base rate increase of approximately � 65% in 2012. This was expected to generate an additional $660,000 annually and allow the Storm Water ��,� � Fund to provide for capital improvements over the next 20 years as well as increased operating costs. It 1� was noted at the time that the base rate would still need to be indexed for future inflationary impacts, � although no adjustment is needed far 2013. � � Recycling Operations , The recycling operation provides for the contracted curbside recycling picicup throughout the City and �� related administrative costs. The primary operating cost is the amounts paid to a contractor to pickup � � recycling materials. 1; Page 5 of 12