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REQUEST FOR COUNCIL ACTION Date:October 17, 2022 Item No.: 7.a Department Approval City Manager Approval Item Description: Ehlers Utility Rate Study for Water, Sewerand Storm Drainage Utility Funds 1 B ACKGROUND 2 Unlike many city services that are supported by property taxes, the City’s utility or enterprise operations 3 are funded primarily by user fees and are operated as separate, stand-alone functions. Over the past 4 several months, city staff has been reviewing the City’s utility operations to determine what customer 5 rate adjustments are necessary for 2022. The City engaged Ehlers to perform an updated utility rate study 6 of the Water and Storm Drainage Funds from 2021 and to update an analysis of the Sanitary Sewer Fund th 7 rates. Ehlers will be presenting their analysis at the October 17 City Council meeting. 8 9 Water Fund Operations 10 The updated Utility Rate Study done by Ehlers on the Water Fund recommends an 8% increase in rates 11 for 2023-2028 to cover fixed and variable costs, debt service and replenishment of fund reserves. The 12 previous study recommended a 5% increase in rates for 2022-2026. St. Paul Regional Water increased 13 their rate charged to Roseville by 9%, which is the main driver of our needed increases. To minimize 14 the increases needed for capital projects, public works has prioritized projects for the next few years to 15 reduce the amount of capital projects until this fund has a chance to increase reserves. 16 17 Storm Drainage Operations 18 The City provides for the management of storm water drainage to prevent flooding and pollution control, 19 as well as the street sweeping program. In 2021 the Utility Rate Study done by Ehlers recommended a 20 4% increases for 2022-2024 to cover fixed and variable costs of the Storm Drainage fund and a 1% 21 increase thereafter. Public Works did an intensive analysis of the infrastructure in the Storm Drainage 22 system and identified a significant increase in capital improvements over the next 20 years. The initial 23 improvements have been curtailed, however they are still significant. The current update of the utility 24 rate study is recommending a 33% increase for 2023 and 2024 and then a 2.5% thereafter. While the 25 percentage seems high, the actual dollar amount change is about $5 per quarter for residential properties. 26 27 Sanitary Sewer Operations 28 The City maintains a sanitarysewer collection system to ensure the general public’s health and general 29 welfare. Ehlers included a review of the rates for Sanitary Sewer in this year’s Utility Rate Study and is 30 recommending a 2% increase. For 2022, the city increased the base rates by 3.5% and the usage rates 31 by 1.92%. Public Works made some reductions in the proposed capital improvement projects so the 32 2% increase recommended by Ehlers is adequate for this fund. 33 Page 1 of 2