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Attachment A Memo To: Public Works, Environment & Transportation Commission From: Michelle Pietrick, Finance Director Date: October 26, 2021 Re: Review the 2022 Proposed Utility Rates Background Unlike many city services that are supported by property taxes, the City's utility or enterprise operations are funded primarily by user fees and are operated as separate, stand-alone functions. Over the past several months, city staff has been reviewing the City's utility operations to determine what customer rate adjustments are necessary for 2022. The City engaged Ehlers to perform a comprehensive utility rate study of the Water and Storm Drainage Funds based on the cash situations in these two funds in 2021. Operational Review Water Fund Operations In 2021 the City had a Utility Rate Study done by Ehlers on the Water Fund due to the deficit fund balance and prior formula errors. The Utility Rate Study recommended 5% increases for 2022-2026 to cover fixed and variable costs, debt service and replenishment of fund reserves. Fiscal year 2022 will be the second year of utilizing the new utility rate structure and the rates have been established based on the Utility Rate Study recommendation of 5% increases. Storm Drainage Operations The City provides for the management of storm water drainage to prevent flooding and pollution control, as well as the street sweeping program. In 2021 the City had a Utility Rate Study done by Ehlers on the Storm Drainage fund. The Utility Rate Study recommended 4% increases for 2022-2024 to cover fixed and variable costs of the Storm Drainage fund. Fiscal year 2022 rates have been established based on the Utility Rate Study recommendation of a 4% increase. Sanitary Sewer Operations The City maintains a sanitary sewer collection system to ensure the general public's health and general welfare. For 2021, the operational costs are expected to decrease by 2.7% mainly as a result of a decrease in the costs charged by the Metropolitan Council Environmental Services Division (MCES). While they have increased costs of treatment, the City's share of flow has decreased the overall cost to the City of Roseville. The capital outlay that is factored into the rates is based on a 5 year average and that number has increased from $1,349,000 to $1,407,000. The Base rates require a 3.5% increase to cover the fixed costs which are operational and capital only. The usage rates require a modest 1.96% increase to cover the MCES total costs. See Attachment A for the rate analysis. Recycling Operations Page 1 of 4