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REQUEST FOR COUNCIL ACTION Date: 411912004 Item No: 10. Department Approval: Manager Approved: Agenda Section: Item Description: Update on the St. Paul Water Contract Background Nearly three years ago, City Staff began discussions with representatives from the St. Paul Regional Water System (SPRWS) to renew the Agreement to purchase wholesale water from St. Paul. The current agreement allows the City to purchase bulk water at 68.5% of the 'retail' rate — the rate which St. Paul charges its own customers. The current agreement is set to expire at the end of May of this year. This matter has been before the Council on several occasions in the past two years. The Council has consistently maintained its preference to renew the agreement on a wholesale purchase basis. Approximately one year ago the City offered to renew the Agreement at a rate of 70%. Recently, St. Paul has countered with an offer of 73.5%; an increase that would amount to 73% or an additional cost to the City of $220,000 annually. Staff Recommendation In consideration of the negotiations that have taken place over the past three years, Staff recommends that the City formally counter-offer with a rate of 71 %, accompanied with some assurances that the SPRWS will continue to meet our minimum pumping requirements and that they maintain their reservoirs at their current capacities. Moving from the current 68.5% to 71% would give the SPRWS an increase of about 4%, a respectable amount by most measures. A rate of 71% should allow the SPRWS to recoup its direct and indirect costs, especially in consideration that their on-going consolidation efforts are likely to produce efficiencies that will lower their overall production and operating costs in the near future. Requested Council Action A motion authorizing Staff to submit a 71% counter-offer to the SPRWS offer of 73.5% for the purchase of wholesalewater.