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Sanitary Sewer O�erations: The City maintains a sanitary sewer collection system to ensure the <br />general public's health and general welfare. The single largest operating cost to the sanitary <br />sewer operation is the treatment costs paid to the Metropolitan Council Environmental Services <br />Division (MCES). The MCES has notified us that our treatment costs are expected to increase <br />by approximately 3% in 2007. In addition, the City's internal operating costs are expected to <br />increase by approximately 4% reflecting higher planned capital replacements. <br />Unlike the Water Fund, the Sanitary Sewer Fund is in a relatively strong financial position which <br />will somewhat offset the need to increase rates. <br />Storm Water Draina_�e Operations: The City provides for the management of storm water <br />drainage to prevent flooding and pollution control, as well as street sweeping and the leaf pickup <br />program. The storm sewer costs are expected to somewhat lower than in previous years, due to a <br />reduction in the planned replacement of Stormwater systems. <br />Recyclin� Operations: The recycling operation provides for the contracted cuarbside recycling <br />pickup throughout the City. The primary operating cost is the amounts paid for a contractor to <br />pickup recycling materials. The 2007 contract coupled with the revenue sharing component will <br />allow recycling rates to remain at their 2006 levels. <br />Recommendation <br />After reviewing the needs of the various enterprise-type operations and the current rate structure, <br />Staff feels a rate adjustment is warranted. This is based on the following: <br />1) The City will realize a 3% increase from various service providers including the City of St. <br />Paul, and MCES <br />2) The City is projecting an overall 3.5% increase in City-controlled operating costs <br />3) Substantial capital replacement costs will be incurred in the next several years that will <br />require both the use of existing reserves, as well as planned rate increases <br />4) The City has fixed costs that it must recoup independent of the amount of citywide usage <br />5) The City has typically applied rate adjustments on an equal percentage basis across various <br />property types <br />Based on these reasons, Staff is recommending the following rate adjustments as shown in the <br />tables below: <br />� <br />