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2NFRITI, 2161 Roseville PWET Commission Agenda Item Memo To: PWET Commission From: Michelle Pietrick, Finance Director Date: October 24, 2023 Re: Review of the 2024 Proposed Utility Rates and adopt a recommendation for the City Council 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. The City engaged Ehlers to perform an updated utility rate study in 2022 of the Water, Sewer and Storm Drainage Funds. The utility rate study recommendations were used for the 2024 utility rates in these funds. Operational Review Water Fund Operations The updated Utility Rate Study done by Ehlers on the Water Fund recommends an 8% increase in rates for 2023-2028 to cover fixed and variable costs, debt service and replenishment of fund reserves. St. Paul Regional Water increased their rate charged to Roseville by 9%, which is the main driver of our needed increases. To minimize the increases needed for capital projects, public works has prioritized projects for the next few years to reduce the amount of capital projects until this fund has a chance to increase reserves. 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. Public Works did an intensive analysis of the infrastructure in the Storm Drainage system and identified a significant increase in capital improvements over the next 20 years. The initial improvements have been curtailed for a few years, however, they are still significant. The updated utility rate study recommended a 33% increase for 2023 and 2024 and then a 2.5% thereafter. While the percentage seems high, the actual dollar amount change was $5 per quarter in 2023 and it will be $6.64 per quarter in 2024 for residential properties. Sanitary Sewer Operations The City maintains a sanitary sewer collection system to ensure the general public's health and general welfare. The updated utility rate study recommends a 2% increase. Public Works made some reductions in the proposed capital improvement projects so the 2% increase recommended by Ehlers is adequate for this fund. Recvcling Operations The recycling operation provides for the contracted curbside recycling pickup throughout the City and related administrative costs. The primary operating cost is the amounts paid to a contractor to pick up recycling materials. The current contract for recycling services covers 2022-2025. For 2024, the rates are again based on this contract with a small amount to build reserves for cart purchases in the future. Page 1 of 2 Page 22 of 82