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Attachment B SO NEHLERS W PUBLIC FINANCE ADVISORS MEMORANDUM TO: Michelle Pietrick, Finance Director FROM: Stacie Kvilvang and Jeanne Vogt, Ehlers DATE: October 5, 2022 SUBJECT: Utility Rate Study Update The City of Roseville contracted with Ehlers to complete a utility rate study update ("the Study") of the water utility, sewer utility, and storm drainage utility funds. The scope of work for the Study included: • Building and maintaining adequate cash balances • Funding future capital projects • Managing revenue volatility (review of fixed fees and user rates for the sewer fund) • Lookback of the water fund 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 (25% quartile), mid- point (50% quartile) and top quarter (75% quartile) of total users. Also included in "Other Accounts" is the City's largest commercial account at the 100% quartile. Bottom Line: We are not recommending any changes to existing rate structures for any funds as part of this update. Users can expect to see moderate increases across the board in their quarterly utility bills due to increasing capital projects and the City's continued efforts to build appropriate cash balances. Below are brief summaries of how the goals included in the scope of work were met: Building and Maintaining Adequate Cash Balances The Water, Sewer and Storm Drainage Funds currently have cash balances that are below recommended reserve amounts. The Study looks at how the City can continue to build adequate reserves and provide 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. Staff has looked at using a phased -in approach for capital projects to allow the funds to build adequate cash while limiting borrowing. This phased -in approach is different than what was previously approved by the Council. We recommend using cash -on -hand wherever possible over the next ten years. This, along with annual rate increases, allows fund balances to build over time while minimizing impact on rate payers. It should be noted we recommend a combination of rate increases and borrowing for the storm drainage fund in 2022 as a "shot in the arm" to rebuild cash after paying for significant capital projects in 2021. This will allow the fund to have sufficient cash on hand to pay for capital projects BUILDING COMMUNITIES. IT'S WHAT WE DO. 21 info@ehlers-inc.com % 1 (800)552-1171 ® www.ehiers-inc.com