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261 that the unions, in their contract negotiations, had settled at a 2% increase for 262 2015. 263 264 Mr. Schwartz noted that the percentage increase for costs for employee insurance 265 benefits had exceeded pay increases over the last 5-10 years. 266 267 Member Cihacek sought staff s assumptions for supply costs, based on prime 268 inflation rates or how they determined those assumptions. 269 270 Mr. Miller responded that, while the City uses the Consumer Price Index (CPI) 271 for inflation projections and assumptions, it was different when determining 272 supply/maintenance for the water/sewer structure from that typically used for 273 individuals determining increases for groceries, gas and household supplies, with 274 Mr. Schwartz also factoring in inflationary costs based on cost trends provided by 275 suppliers. Historically, Mr. Miller advised that they remained close to 276 inflationary costs; however, noted that they could range fro\for 277 depending on the type of supplies and materials needed. 278 279 Member Cihacek asked s f for specifics for containing pr 280 commodities. 281 282 Mr. Schwartz responded that t e majority of the department's expenses were 283 personnel or equipment related in the water/sewer utility funds, with staff 284 purchasing supplies, materials and equipment off state contracts for the most part 285 when av ble. Mr. Schwartz advised that the major driver for water/sewer rates 286 were for is attributed to the wholesale cost of water and treatment of sewage, 287 representing proximatel 80% of the rates. Mr. Schwartz advised that the City 288 had been experiencing hi r than general inflationary costs from the 289 Metropolitan Council and Saint Paul Regional Water Services, which was driving 290 the rates more than local osts. 291 292 t the request of Member eigler, Mr. Miller responded that the storm water 293 drainage rates were being driven mostly by the age of existing infrastructure, with 294 most of the lines providing 50-65 years for a typical life span, and the cost to 295 build a sewer main is depreciated over 50 years. Mr. Miller advised that the 296 preferred process would be to set aside a little money over that 50 year cycle to be 297 available when replacement was needed. 298 299 At the request of Member Seigler, Mr. Miller advised that the replacement cycle 300 was now occurring with the twenty-year projected CIP; however, he clarified that 301 it had not been done diligently in the past, which created the rate hikes for 2015 as 302 shown, with depreciation averaged out, and dollars actually averaged out, but 303 capital spending fluctuating from year to year. 304 Page 7 of 17