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