2011-07-26_PWETC_AgendaPacket - Laserfiche WebLink

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However, the impact on the water rates will be substantially different. Although capital replacement costs for budgeting purposes are expected to decline, the City's long-term capital financing program has been significantly underfunded for many years. The Water Fund has been reliant on cash reserves as well as internal borrowings from the Sanitary Sewer Fund to provide for capital needs during the past several years. The 20-Year CIP calls for an average capital replacement need of $1.1 million annually. In contrast, current water rates only provide $300,000 annually. To alleviate this shortfall, the CIP Task Force recommended a one-time base rate increase of 62% in 2012. This would generate an additional $800,000 annually and allow the Water Fund to provide for capital improvements over the next 20 years. The base rate, which all customers pay independent of their water consumption, would still need to be increased for future inflationary impacts. It is further recommended that the usage rate be increased by approximately 2.5% to offset the increased in water purchase and other operating costs. Sanitary Sewer Operations The City maintains a sanitary sewer collection system to ensure the general public's health and general welfare. The following table provides a summary of the 2011 and 2012 (Proposed) Budget: 2011 2012 D• D• Personnel $331,739 $351,448 Supplies&Materials 37,999 45,050 Other Services&Charges 38900 419,200 Sewer Treatment Costs 2,75000 2,85000 Depreciation/Capital 90400 1,16500 Total $4,413,598 $4,83008 $417,100 9.5% The single largest operating cost to the sanitary sewer operation is the treatment costs paid to the Metropolitan Council Environmental Services Division (MCES). The MCES has notified us that our treatment costs are expected to increase by approximately 11% in 2012. This is due to the continued presence of significant storm water infiltration into the sanitary sewer system. 2012 treatment costs are based on measured wastewater flows from July 2010 through June 2011. Given the significant snowfall this past winter and rainfall this spring, a substantial increase in infiltration made its way into the sanitary sewer system and eventually to the wastewater treatment plan. The City also expects to have moderate increases in personnel and supply-related costs. The 20-Year CIP calls for an average capital replacement need of $1 million annually. In contrast, current sewer rates only provide $240,000 annually. To alleviate this shortfall, the CIP Task Force recommended a one-time base rate increase of 60% in 2012. This would generate an additional $700,000 annually and allow the Sewer Fund to provide for capital improvements over the next 20 years. The base rate would still need to be increased for future inflationary impacts. Like the Water Base Fee, the Sewer Base Fee is charged to all customers independent of how much wastewater they generate. It is also recommended that the sewer usage rate be increased by approximately 7.1% to offset the increase in sewer treatment and other operating costs. 2