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Attachment 2 1� :oEHLERS PUBLIC FINANCE ADVISORS MEMORANDUM TO: Michelle Pietrick, Finance Director FROM: Jeanne Vogt and Stacie Kvilvang, Ehlers DATE: October 2, 2024 SUBJECT: Utility Rate Study Update The City of Roseville contracted with Ehlers to complete a utility rate study update ("the Study") of the water, sewer, 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 • 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 forany funds as part of this update. We are recommending consumption rate increases for the Water Fund over the next ten years to continue rebuilding appropriate cash reserves and inflationary increases in the Sewer Fund starting in 2031 to pay for future capital projects. All users, with the exception of the Very High Commercial and High Irrigation, can expect to see minimal increases across the board in their quarterly utility bills due to building reserves for the Water Funds. Below are brief summaries of how the goals included in the scope of work were met as well as additional information regarding the need for rate increases in the Water Fund and demand vs. revenue across user classes: Building and Maintaining Adequate Cash Balances The Study reviewed how the City can continue to build adequate reserves for the three (3) utility funds and provide a long-term road map to achieve and maintain those goals for all funds, all while paying for future operating, capital and any recommended future debt service. Based upon the recommendations from the studies completed in 2020 and 2022, the City has been diligent in rebuilding reserves for the utility funds and this effort is now paying off. The Sewer and Storm Drainage Funds have both met the required goals for the respective systems. The chart on the following page shows the Water Fund has a targeted cash balance below recommended reserve requirements. We are projecting the Water Fund will meet the goal by 2030 if the recommendations for annual increases are followed and there are no significant changes in capital needs. BUILDING COMMUNITIES. IT'S WHAT WE DO. E_ info@ehlers-inc.com '�, 1 (800) 552-1171 § www.ehiers-inc.com Page 49 of 78