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Department Approval �� REQUEST FOR COUNCIL ACTION �f :�r�,s�,� ��s�= c��td : Item Description: Adopting the 2007 Utility Rate Adjustments Date: 1 I ; � �,�`? �� Item No: 3.d Agenda Section: Consent Background At the November 20, 2006 Council Worksession, the City Council received a report and presentation outlining Staffs recommendation for the 2007 utility rate adjustments. An excerpt of the report is included below. Excerpt ofStaffReport (originally submitted 1 �/20/06} Over the past several weeks, Staff has been analyzing the City's utility operations to determine whether rate adjustments are necessary for 2007. The analysis entailed a review of the following services: a) Water b) Sanitary Sewer c) Storm Water Drainage d) Recycling For each operation, the following service inputs were reviewed: 0 Fixed City costs including personnel, supplies and maintenance, and depreciation � Variable costs including the purchase of water from the City of St. Paul, water treatment costs paid to the Metropolitan Council, and recycling contractor costs. C� Capital replacement costs � Current customer base, rates, and rate structure On September I 1, 2006, the City Council adopted the 2007 Preliminary Budget for each of the operations listed above. The remainder of this report summarizes the rate adjustment necessary to accommodate the budget, and scheduled capital replacements over the next few years. Discussion Items Water Operations: The City's water operation provides City customers with safe potable water, as well as on-demand water pressure sufficient to meet the City's fire protection needs. The City purchases its water supply from the City of St. Paul, which remains the single largest operating cost to the water operation. It is estimated that are wholesale water purchase costs will increase approximately 3%. In addition, the City's internal operating costs are expected to increase by approximately 3% due to higher personnel costs.