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In addition, the City's internal operating costs are expected to increase by approximately 12% due to higher supply and capital replacement costs. The 2010-2019 Capital Investment Plan call for an investment of nearly $1 million dollars per year in the City's sanitary sewer system. Sy comparison, the City is currently setting aside only $500,000 per year. To ensure that the City's sanitary sewer system infrastructure is replaced at the end of its useful life, sustained increases in the sewer rates will be necessary. The Sanitary Sewer Fund is in good financial condition which has allowed for lower-than-inflation rate increases over the last 5 years. However, planned capital replacements over the next 10 years will necessitate a rate increase in 2010. Storm Water Drainage Operations Overview: The City provides for the management of storm water drainage to prevent flooding and pollution control, as well as street sweeping and the leaf pickup program. The storm sewer costs are expected to be higher than in previous years, due to an increase in the planned capital replacement of stormwater systems, as well as additional costs resulting from the need to perform a citywide wetland inventory. The 2010-2019 Capital Investment Plan call for an investment of nearly $700,000 dollars per year in the City's sanitary sewer system. Sy comparison, the City is currently setting aside about $600,000 per year. To ensure that the City's stormwater system infrastructure is replaced at the end of its useful life, an increase in the stormwater rates will be necessary. Like the Sanitary Sewer Fund, the Storm Water Drainage Fund is in good financial condition which has allowed for lower-than-inflation rate increases over the last 5 years. However, planned capital replacements over the next 10 years will necessitate rate increases in 2010. Recycling O�erations Overview: The recycling operation provides for the contracted curbside recycling pickup throughout the City. The primary operating cost is the amounts paid to a contractor to pickup recycling materials. The current agreement with the recycling contractor specifies that the City is to receive a portion of the monies generated from the re-sale of recycled materials. However, over the past year the City's revenue sharing portion has dropped dramatically from a high of $135,000 in 2008, to only $42,000 in 2009. This drop in program revenue along with increases in general operating costs will necessitate an increase in recycling fees charged to residents. Discussion on the Conservation-Sased Rate Structure For 2009, the City adopted a conservation-based rate structure that included a tiered water rate whereby higher-volume users paid a higher rate than low-volume users. This was designed to encourage water conservation year round. It also included a summer usage rate to encourage residents to use less water for irrigation purposes. The current residential water rates are as follows: Page 2 of 7