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1 <br />z <br />:� <br />� <br />� <br />6 <br />� <br />s <br />s <br />� c� <br />�� <br />�z <br />�� <br />T� <br />1� <br />�s <br />17 <br />18 <br />�e <br />zo <br />21 <br />zz <br />23 <br />z� <br />25 <br />z� <br />z7 <br />ZB <br />2() <br />30 <br />s� <br />az <br />Council Member Ihlan <br />Attachment B. <br />�1�'�'.�� . ��_��.�� <br />REQUEST FOR COUNCIL ACTION <br />Date: 11/17/08 <br />Item No.: 12.a <br />Department Approval City Manager Approval <br />�� r�` �� -►�+.J. <br />Item Description: Adopting the 2009 Utility Rate Adjustments <br />BACKGROUND <br />Over the past several months, City Staff has been reviewing the City's utility operations to determine <br />whether rate adjustments are necessary for 2009. In addition, Staff has also assessed the changes necessary <br />to implement a conservation-based rate structure. The analysis included the City's water, sanitary sewer; <br />storm water drainage, and solid waste recycling operations. <br />The analysis entailed a review of: <br />❑ Fixed costs including personnel, supplies and maintenance, and depreciation <br />❑ Variable costs including the purchase of water from the City of St. Paul, water treatment costs paid to <br />the Metropolitan Council, and recycling contractor costs. <br />❑ Capital replacement costs - <br />❑ Current customer base, rates, and rate structure <br />On September 15, 2008, the City Council adopted the 2009 Preliminary Budget for each of the operations <br />noted above. The remainder of this report summarizes the rate adjustment necessary to accommodate the <br />budget, and scheduled capital replacements over the next 10 years. <br />Water O�erations: The City's water operation provides City customers with safe potable water, as well as <br />on-demand water pressure sufficient to meet the City's fire protection needs. The City purchases its water <br />supply from the City of St. Paul, which remains the single largest operating cost to the water operation. It <br />is estimated that our wholesale water purchase costs will increase approximately 3-4%. In addition, the <br />City's internal operating costs are expected to increase by approximately 5% due to higher motor fuel, <br />insurance, and other operating costs. <br />To facilitate a change to a conservation-based rate structure, significant changes in the water rates need to <br />occur. In essence, the portion of the rates designed to offset the City's fixed water costs need to increase <br />substantially. However, the variable rate portion can be lowered. Greater detail is provided below. <br />The Water Fund is in a relatively weak financial position compared to other ufility funds and even the <br />City's General Fund. Sustained increases in water rates will be needed for the foreseeable future to <br />improve this condition. <br />Page 1 of 8 <br />_ _ _ <br />