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Attachment 1 Memo To: Roseville Finance Commission From: Michelle Pietrick, Finance Director Date: October 14, 2025 Subject: Review of the 2026 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 2024 of the Water, Sewer and Storm Drainage Funds. The utility rate study recommendations were used for the 2026 utility rates in these funds. Operational Review Water Fund Operations The updated Utility Rate Study done by Ehlers on the Water Fund recommends a 5.5% increase in rates for 2025-2028 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. In addition, this fund is still working on building fund reserves to cover the minimum for operations and capital. 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. The updated utility rate study recommended a 0% increase for 2026 and this is adequate to cover operating and capital needs at this time. Sanitary Sewer Operations The City maintains a sanitary sewer collection system to ensure the general public's health and general welfare. Met Council increased their rates by 1.06% for fiscal year 2026. The updated utility rate study recommends a 2% increase; the increase for the past 2 years has been held to 0%. Public Works previously deferred capital projects to accommodate the 0% increase. Based on the 2026-2045 CIP, a 2% increase is necessary at this time. See the chart below: Page 1 of 3 Page 15 of 27