2020_10-27_PWETCpacket - Laserfiche WebLink

Home

Attachment A long-term road map to meet those goals, all while paying for future operating, capital and any recommended future debt service. Funding Future Capital Projects The Study looked at the timing and cost of capital projects over the next ten years. We recommend using cash -on -hand after a one-time external borrowing for the water fund. This, along with annual rate increases, allows fund balance to build over time while minimizing impact on rate payers. It should be noted that the storm drainage fund will have sufficient cash on hand to pay for capital projects without the need for bonding. Managing Revenue Volatility The Study looked at the fixed vs. variable costs of the funds. Fixed costs are defined as those the City will incur regardless of water used. This definition is different than what the City has used in past. However, our approach is based on industry standards provided by the American Water Works Association ("AWWA"). AWWA states fixed costs include utility billing, administrative overhead, and personnel expenses. These fixed costs should be paid for with the Fixed Rate. Current charges cover approximately 260% of budgeted 2020 fixed costs. The Study will provide two options for the Council to consider. • Option #1 (Recommended): We recommend decreasing the quarterly fixed charges to cover 100% of the fixed costs of the system, as defined by AWWA. This option also provides a fixed rate that is comparable to fixed rates charged by similar communities. • Option #2: We also understand the City has capital costs that have historically been paid for with fixed rates, so we are also including a second option which covers the fixed costs in Option #1, plus a 5-year average of capital costs of $900,000. Since the City does not charge a WAC fee due to being fully developed, this is a reasonable alternative. Pursuant to M.S. 103G.291, Minnesota utilities serving more than 1,000 people were required to have conservation rates by 2015. The City's current rate structure has seasonal rates, which meet the conservation criteria, but are difficult to administer and explain with quarterly billings. Another more common option is an increasing block rate, or tiered rate structure. After analyzing 2019 usage data by customer type, we are recommending creating increasing block rates with three tiers for Residential accounts so that usage falls into the following "buckets": • Tier 1: Essential usage (at least 80% of winter usage) • Tier 2: Summer usage (at or around 90% of summer usage) • Tier 3: Excessive usage (over 90% of summer usage) For commercial accounts, we looked at promoting conservation, while keeping rates affordable for small businesses. For apartments, we looked at tier breaks on a per -unit basis. For irrigation accounts, we do not recommend any tiering, since that usage is not considered essential. Competitiveness We compared Roseville's existing 2020 and proposed 2021 rates for residential accounts to comparable communities. Both options for 2021 show rates are in the middle for fully developed communities. Please contact either of us at 651-697-8500 with any questions. City of Roseville, MN Utility Rate Study Memo Page 2 October 2020