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� r•.� � � _ ', ' �� I � ' 1� To: city council From: Chris Miller, Finance Directoi- Date: January 24,2005 Re: Discussion on the 2005 Utility Rates Dat2: �� Item: 5. H�afin� abc►ut 2005 Utility F�� Introduction Over the past several weeks, Staff has been analyzing the City's utility operations to determine whether rate adjustments are necessary for 2005. The analysis entailed a review of the following services: 1) Water 2) Sanitary Sewer 3) Storm Water Drainage 4) Recycling For each operation, the following service inputs were reviewed: ❑ Fixed City costs including personnel, supplies and maintenance, and depreciation 4 Variable costs including the purchase of water from the City of St. Paul, water treatment costs from the Metropolitan Council, and recycling contractor costs. O Capital replacement costs � Current customer base, rates, and rate structure On December 27, 2004, the City Council adopted the 2005 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. Negotiations with The St. Paul Water Board for a new contract are nearing completion. Based upon these negotiations and in recognizing water consumption that had not previously been charged to Roseville, Staff estimates an increase of 5% in total water purchase costs can be expected in 2005. This will necessitate a similar increase to Roseville customers. In addition, the City's own operating costs are expected to increase by approximately 5% due to higher personnel and capital replacement costs.