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kIrA IF1 <br /> VAOWSI i H <br /> %N= V <br /> );, <br /> Memo <br /> To: Public Works,Environment, and Transportation Commission <br /> From: Chris Miller,Finance Director <br /> Date: July 18,2011 <br /> Re: Discussion on Preliminary 2012 Utility Rates <br /> Background <br /> Over the past several months, City Staff has been reviewing the City's utility operations to determine <br /> whether customer rate adjustments are necessary for 2012. The analysis included a review of the <br /> City's water, sanitary sewer, storm drainage, and solid waste recycling operations. In addition, Staff <br /> has also incorporated the recommendations provided by the Council-appointed Capital Improvement <br /> Plan (CIP) Task Force. This Task Force was asked to make recommendations on creating a financially <br /> sustainable funding model for the City's infrastructure and capital assets. Copies of the Task Force <br /> Reports are attached. <br /> Staff s analysis included a review of the following: <br /> •'• Fixed costs including personnel, supplies and maintenance, and depreciation <br /> •'• Variable costs including the purchase of water from the City of St. Paul, water treatment costs <br /> paid to the Metropolitan Council, and recycling contractor costs <br /> ❖ Capital replacement costs <br /> ❖ Current customer base, rates, and rate structure <br /> A summary of each operating division is included below. <br /> Water Operations <br /> The City's water operation provides City customers with safe potable water, as well as on-demand <br /> water pressure sufficient to meet the City's fire protection needs. The following table provides a <br /> summary of the 2011 and 2012 (Proposed) Budget: <br /> 2011 2012 D• D• <br /> Personnel $568,015 $ 56900 <br /> Supplies&Materials 68,850 74,100 <br /> Other Services&Charges 592,450 582,050 <br /> Water Purchases 4,400,000 40000 <br /> Depreciation/Capital 1,441,500 1,16500 <br /> Total $7,070,815 $6,990,750 $(80,065) (1.1 Rio) <br /> The single largest operating cost for the water operation is the purchase of wholesale water from the <br /> City of St. Paul. This cost is projected to increase by 4.5%. The City also expects to have moderate <br /> increases in personnel and supply-related costs. These budgetary increases will be offset by a decline <br /> in budgeted capital replacement costs, resulting in an overall decrease of 1.1%. <br /> 1 <br />