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l�Gparirn�nt :'��rr�,��,;2: �� REQUEST FOR COUNCIL ACTION Manager Approved: � Item Description: Discussion on the 2004 Utility Rate Adjustments Date: Ul2/2004 Item No: 5. Agenda Section: Worksession Background Over the past several weeks, Staff has been analyzing the various City-enterprise operations to determine whether rate adjustments are necessary. The analysis entailed a review of the following services: a) Water b) Sanitary Sewer c) Storm Water Drainage d) Recycling For each of these operations, the following 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 In December, 2003, the City Council adopted a budget for each of the operations listed above. The remainder of this report summarizes the rate adjustment necessary to accommodate the 2004 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 continuing. Staff estimates an increase of up to 5% can be expected in 2004. 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.