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Attachment A 2009 Utility i�ate Chang�s In the January/February 2009 issue af the Roseville City News, an article was published regarding the City's change ta a canser�ation-based rate structure. This article has generated some questions froin residents who wanted to learn more about the impacts on homeowners. The infarmaiion presented beiow addresses those questions anc� provides additional information on how the new rate structure works. The change to a conservation-based rate structure was in response to requirements set forth under a new State Law, but also reflects the societal belief that water is a limited resource and as such, the City ought to encourage conservation measures. The concept of encouraging water conservation was also emphasized by citizens and sCakeholders during the Imagine Izosevi�le 2025 process. ilnder the new rate structure, a typieal home would see an increase of 5% from 2008; as measured over an entire calendar year. `T'his is comparable to increases in priar years. Hoi�ever, ihose households that typically have less-than-average water usage, say 10-15,000 gallo�ls per quarfer, will see a higher percentage increase. This paradox did not go unnoticed by City O�ficials. The r�eason is due to an implicit s�ibsidy that was present under the old rate structure. In short, �igher-volume users su6sidized lovver volume users -- and had 6een for decades. For some homeowners, th� subsic�y am�untec� tio $IO p�r quarter or more. Under a eonservation- basec� rate structure, this subsidy must be eliminated. To explain further, we must loak a� how the City accounts for its water and sewer operations. Like most municipalities, the City incurs both f xed and variable casts in providing water and sewer services to homeowners. The Czty's rate structure was designed ta recoup these costs using both a fixec� or `base' fee that is charged equally to all homeowners, as well as a variabie ar `usage' fee that fluctuates depending an how tnuch �water each household uses. Conceptually, the base fee should be set at at� amount that is cornmensurate with tf�e cost of simply ensurin� that water and sewer services is available; i.e., to inaintain existing water and sewer mains. Historically however, and for reasons that aren't entirely known, the City's base fee vvas set at a level that was insufficient in generaCing enough revenue to maintain these mains inc�uding those that lead up to individual homes. The difference had to be made up with the usage fee. 7'his rate-setting practice doesn't necessarily present a problem as long as ho�seholds continue to use the same amount of water they al�vays have. However, under a conservation-based rate structure households are encouraged ta use less water, w�ich in turn means that they wiIl pay less in usage fees. But because the usage fees helped deiray the costs to maintain and replace water and sewer infrastructure, a decline in water consumption would result in fewer monies available to replace that ii�frastructure. To avoid this, the City needed to increase the base fee ta an amount that was suffcient to meet the City's infrastructure needs. At the same time, tl�is enabled the City to lo�er the usage fee because it no longer had to help fund infrastructure and could now be used �xclusiveIy to pay for the variable casts.