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AttachmentA �*ZEHLERS N PUBLIC FINANCE ADVISORS MEMORANDUM TO: Michelle Pietrick, Finance Director FROM: Stacie Kvilvang and Jeanne Vogt, Ehlers DATE: October 19, 2020 SUBJECT: Utility Rate Study The City of Roseville contracted with Ehlers to complete a utility rate study ("the Study") of the water utility and storm drainage utility funds. The scope of work for the Study included: • Balancing who's using the system with who's paying for the system • Building and maintaining adequate cash balances • Funding future capital projects • Managing revenue volatility (review of fixed fees and user rates) • Competitiveness Overall Impact on Utility Customers Attached is the Impact Analysis for "Residential" and "Other Users" of the system. We looked at quartiles, which is defined as the number of accounts in the bottom quarter (2S% quartile), mid- point (SO%quartile) and top quarter (7S%quartile) oftotal users. Also included in "Other Accounts" is the City's largest commercial account at the 100% quartile. Bottom Line: There are two options up for consideration. Both look at shifting the burden of who is paying from residential users to high industrial users. This means most residential users can expect a decrease in their quarterly bills. This is part of balancing who's using with who's paying for the system, as discussed below. It is important to note, the projected 2021 water and storm drainage rates include inflationary increases, similar to past years. Both of our rate structure options are considered "revenue neutral". This means we design rate structures that will generate only enough revenue needed to maintain adequate fund balances. For example, because we are recommending increased usage charges, we are also recommending reduced fixed rates. Below are brief summaries of how the goals included in the scope of work were met: Balancing Who's Using vs. Who's Paying Included in our analysis is a comparison by customer class of who is using water to who is paying. Currently, residential customers use 41.47% of total water, but pay for S6.26%. Apartments, commercial, and irrigation accounts all pay for less than what they currently use. Both options look at balancing the current disparity going forward, with Option #1 being closer to the goal. Building and Maintaining Adequate Cash Balances The Water and Storm Drainage Funds currently have cash balances that are either negative or at $0. The Study looks at how the City can define appropriate cash balance reserves and provide a BUILDING COMMUNITIES. ITS WHAT WE DO. 0 Inro@enters-Inc.com 1, 1 (800) 552-1171 9 www.ehlers-Inacom