ITEM 3.8 Establishing Utility Rates0 t�c e F o
MINNESOTA
DEPARTMENT INFORMATION
Request for
City Council Action
ORIGINATING DEPARTMENT
REQUESTOR:
MEETING DATE:
Administration
City Administrator/ Finance Director
Flaherty
February 12, 2018
PRESENTER(s)
REVIEWED BY:
ITEM #:
Consent Agenda
receive monthly utility bills for usage of the water and sanitary sewer utility system. The monthly charges
3.8
AGENDA ITEM DETAILS
RECOMMENDATION:
City staff is recommending that the City Council approve a resolution establishing water & sanitary sewer
utility rates for 2018.
ARE YOU SEEKING APPROVAL OF A CONTRACT?
IS A PUBLIC HEARING REQUIRED?
No
No
BACKGROUND/JUSTIFICATION:
The City has a public utility system with Water and Sanitary Sewer operations. The current system is
comprised of 3,351 customers who include both residential and commercial accounts. Those customers
receive monthly utility bills for usage of the water and sanitary sewer utility system. The monthly charges
include both a base fee, and a consumption fee which is calculated on their actual usage of the system.
The utility rates for the water and sanitary sewer systems are analyzed by the Finance Director on an
annual basis. This analysis includes; reviews of budget -to -actuals, preparation of the operating budget,
preparation of the capital improvement plan, and future projections.
The Water Utility fund cash balance is forecasted to be approximately $4.1 million for year-end 2017. The
cash flow includes 2018 budgeted operating expenses with 2% annual inflation for 2019-2028. The cash
flow also includes capital expenses for the next 10 years. The revenue projections in the cash flow chart
include 2% rate increases throughout, but do not account for customer growth. As indicated on the chart &
graph, the cash balance of the fund should be adequate through most of the projection period. The capital
budgets include $8 million for water treatment facilities between 2021 and 2024. The need for those
facilities is currently unknown; however, due to their significant nature, they have been included within the
future budgets. Given that uncertainty, the declining cash balance towards the end of the projection period
should not provide for too much concern at this point.
The Sanitary Sewer Utility fund cash balance is forecasted to be approximately $1.1 million for year-end
2017. This cash balance would be considered to be below best practice levels due to the construction of
the digester expansion at the West Wastewater Facility and the aerator improvements at the East
Wastewater Facility. Both of those projects were significant expenses, and were paid from cash reserves.
The cash flow includes 2018 budgeted operating expenses with 2% annual inflation for 2019-2028. The
cash flow also includes capital expenses for the next 10 years. The revenue projections in the cash flow
chart include 4% rate increases throughout, but do not account for customer growth. When looking at the
chart & graph, the cash balance of the fund should be adequate through the projection period.
Of course things are subject to change, and that is why it is important we look at these projections on an
annual basis and determine if rate changes are necessary. Based on the information provided, the Finance
Director would propose the following:
- Increase of 2% to Water Utility rates for 2018.
- Increase of 4% to Sanitary Sewer Utility rates for 2018.
These rate recommendations are the same as were discussed during the 2018 budget process.
SUPPORTING DOCUMENTS ATTACHED:
• Cash Flow Summaries
• Current & Historical Rates
• Monthly Bill Estimations
• Resolution 2018-14
POSSIBLE MOTION
PLEASE WORD MOTION AS YOU WOULD LIKE IT TO APPEAR IN THE MINUTES:
Motion to approve Resolution 2018-14, Establishing Water and Sanitary Sewer Utility Rates for 2018.
BUDGET INFORMATION
FUNDING BUDGETED:
N/A
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CITY OF OTSEGO
COUNTY OF WRIGHT
STATE OF MINNESOTA
RESOLUTION NO: 2018-14
ESTABLISHING WATER & SANITARY SEWER
UTILITY RATES FOR 2018
WHEREAS, Otsego City Code Chapter 7; Section 2 outlines that in order to pay for the costs associated
with Water and Sanitary Sewer utility systems, that a just and equitable charge will be imposed upon users of
those systems; and
WHEREAS, the Otsego City Council has identified and reviewed the operating and capital requirements of
the Water and Sanitary Sewer utility systems.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF OTSEGO,
MINNESOTA:
1. That the following rates, fees and charged be imposed on users of the Water utility system:
a. Base Charge (All Users)
Meter Size
2018 Base
j Charge
5/8"
$
9.06
3/4"
$
9.06
1.00"
$
27.60
1.50"
$
55.18
2.00"
$
82.78
3.00"
$
165.56
4.00"
$
413.92
b. Usage Rates (Per 1,000 Gallons of Consumption)
Customer Type
Consumption
2018___
Rate
Residential & City Owned
0 - 10,000 Gallons
$
1.70
Residential & City Owned
10,000+ Gallons
$
1.81
Commercial, Industrial & Institutional
0 - 50,000 Gallons
$
1.70
Commercial, Industrial & Institutional
50,000+ Gallons
i
h-rigation & Bulk Water
All
$
1.81
c. Bulk Water
In order to access bulk water from the system, a meter rental from the City is required.
There is a $200.00 deposit required for that meter. The rental fee for that meter is a
minimum of $50.00, which includes the first month, with each additional month being
charged at $50.00.
The consumption tracked by the meter will be billed at the rates identified in paragraph
1(b) of this resolution. The local sales tax rate of 7.375% will also apply to the entire
bulk water rental and consumption charge incurred.
2. That the following rates, fees and charged be imposed on users of the Sanitary Sewer utility system:
a. Base Charge (All Users)
Meter Size
2018 Base
i Charge
5/8"
$
9.48
3/4"
$
9.48
1.00"
$
18.97
1.50"
$
47.43
2.00"
$
94.87
3.00"
$
189.72
4.00"
$
474.31
b. Usage Rates (Per 1,000 Gallons of Average December -February Water Usage)
2018
Customer Type Consumption Rate
AllUsers All $ 5.88
c. Minimum Charges
These charges come into effect for new accounts where there is less than three months
of usage history to base the average off of. This minimum monthly charge is $3 8.88.
3. That the rates, fees and charges outlined in this resolution shall be effective for all billings issued on
or after March 1, 2018.
ADOPTED by the Otsego City Council this 12th day of February, 2018.
N
ATTEST:
CITY OF OTSEGO
Jessica Stockamp, Mayor
Tami Loff, City Clerk
MOTION made by Council Member and SECONDED by Council Member
IN FAVOR:
OPPOSED:
3