ITEM 7.3 Establishing Utility Rates1P
otsly.r o
MINNESOTA g
DEPARTMENT INFORMATION
Request for
City Council Action
ORIGINATING DEPARTMENT:
REQUESTOR:
MEETING DATE:
Administration
Adam Flaherty, Finance Director
February 8, 2016
PRESENTER(s):
REVIEWED BY:
ITEM #:
Adam Flaherty
City Administrator Johnson
7.3
AGENDA ITEM DETAILS
RECOMMENDATION:
It is recommended by staff that the City Council approve the corresponding resolution which will
establish the Water and Sanitary Sewer utility rates for 2016.
ARE YOU SEEKING APPROVAL OF A CONTRACT? IS A PUBLIC HEARING REQUIRED?
No No
BAC K G RO UN D/J U ST I F I CATION :
The City has a public utility system with Water and Sanitary Sewer operations. The current system is
comprised of roughly 3,051 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 Finance Director then
compiles all of this information into a visual Cash Flow chart & graph, which are attached.
It should be noted that these projections are on the operating funds, and don't include the WAC, SAC
and related debt service. There are separate projections and rate analysis for those funds, of which 2%
increases were approved in December 2015 for both WAC & SAC in the 2016 fee schedule.
The Water Utility fund currently has a healthy cash balance of $4,076,504, which is up more than $2.2
million from year-end 2012. The cash flow includes 2016 budgeted operating expenses with 2% annual
inflation for 2017-2020. The cash flow also includes the most up -to date capital expenses, which are
estimated to total $2.7 million over the next five years. The revenue projections in the cash flow chart
are flat, both for operating and non -operating sources. As indicated on the chart & graph, the cash
balance of the fund is not only sufficient to meet both operational and capital expenses over the next
five years, but actually provides for a slight increase in reserves with no change in revenues.
The Sanitary Sewer Utility fund currently has a healthy cash balance of $2,605,855, which is up more
than $1.4 million from year-end 2012. The cash flow includes 2016 budgeted operating expenses with
2% annual inflation for 2017-2020. The cash flow also includes the most up -to date capital expenses,
which are estimated to total $2.6 million over the next five years. The revenue projections in the cash
flow chart include a 2% rate increase for 2016, with flat projections for 2017-2020. As indicated on the
chart & graph, the cash balance of the fund will decrease in 2016 with the internal funding of the west
treatment plant improvements. However, after 2016, the cash balance is sufficient to meet both
operational and capital expenses through 2020, and actually provides for a replenishment of cash
reserves nearly to 2015 levels.
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:
- No change to Water Utility rates for 2016.
- Increase of 2% to Sanitary Sewer Utility rates for 2016.
SUPPORTING DOCUMENTS: x ATTACHED NONE
• Cash Flow Summaries — Water & Sanitary Sewer Utilities
• Proposed Rate Schedules — Water & Sanitary Sewer Utilities
• Monthly Utility Bill Estimate Calculations
• Resolution 2016-15: Establishing Water & Sanitary Sewer utility rates for 2016.
POSSIBLE MOTION
Please word motion as you would like it to appear in the minutes.
-Motion to approve Resolution 2016-15, Establishing Water & Sanitary Sewer utility rates for 2016.
BUDGET INFORMATION
FUNDING: BUDGETED:
N/A N/A
ACTION TAKEN
❑ APPROVED AS REQUESTED ❑ DENIED ❑ TABLED ❑ OTHER (List changes)
COMMENTS:
City of Otsego
Water Utility Fund
Cash Flow Summary
Y
Revised: February 2, 2016
Ratelncrease
Operating Revenues
Water Sales
Water Sales - Irrigation
Penalties and Interest
Other
Subtotal
Nonoperating Revenues
Antenna Leases
Water Meter Sales
Special Assessments
Investment Interest (Net)
Other
Total
Expenses
Personal Servcies
Supplies
Services & Other Charges
Depreciation
Capital Outlay
Capital Outlay (CIP)
Transfers Out
Transfers Out- Jet Vac
Total
2.50% 2.50% 2.50%® 0.00% 0.00% 0.00% 0 00%
Actual Actual Actual Projected Budgeted Projected Projected Projected Projected
2012 2013 2014 2015 2016 2017 2018 2019 2020 Comments
$ 838,013 $ 862,413 $ 883,966 $ 931,886 $ 925,000 $ 925,000 $ 925,000 $ 925,000 $ 925,000 2015 Budget was $1,052,000
- 139,419 106.747 129,647 90,000 90.000 90,000 90,000 90,000 Conservative Budget Amount
30,047 35,281 36,230 30,000 30,000 30,000 30,000 30,000 Conservative Budget Amount
(85) 43 (565)
837,928 1,031,922 1,025,429 1,097,763 1,045,000 1,045,000 1,045,000 1,045 000 1,045,000
55,168 64,050 52,538 63,196 66,000 66,000 66,000 66,000 66,000 2016 Projection - Then Flat
57,219 70,313 70,056 75,460 88,400 88,400 88,400 88,400 88,400 200 Meters @ $442.
91,316 76,319 1,617 80,855 - - - - -
17,226 (8,393) 42,919 - - - - - -
7,766 34,335 88,366 30,917 19,080 19,080 19,080 19,080 19,080 Budget = DNR State Testing Fee
1,066,623 1,268,546 1,280,925 1,348,191 1,218,480 1,218.480 1,218,480 1,218,480 1,218,480
59,334 98,936 38,046 67,983 83,618 85,290 86,996 88,736 90,511 2016 Budget - Then 2% Inflation
60,744 130,951 138,484 157.886 172,658 176,111 179,633 183,226 186,891 2016 Budget -Then 2% Inflation
283,621 201,754 204,265 205,678 204,320 208,406 212,575 216,626 221,163 2016 Budget - Then 2%Inflation
473,379 475,224 472,761 502,200 610,000 510,000 510,000 510,000 510,000 2016 Projection - Then Flat
8,550 24,519 18,055 12,542 - - - - -
- - 28,350 1,990,000 - 250.000 510,000 Based on Revised 2016 CIP (1-11-2016)
52,889 56,638 33,439 40,000 40,000 40,000 40,000 Transfer to General Fund for staff reimbursement.
9,800 - - 30,800 10,000 9,800 9,600 8,200 Transfer to Debt Fund 399 for Jet Vac
895,428 931,384 924,500 1,033,727 1,042,385 3,019,608 1,038,804 1,296,988 1,558,564
Cash Balance - Beginning
1,166,092
1,823,474
2,539,591
3,327,541
4,076,504
4,762,599
3,471,471
4,161,147
4,592,639
Balance Sheet Effects
12,808
(96,269)
(41,236)
(67,701)
Revenues
1.066,623
1.268,646
1,280,925
1,348,191
1,218,480
1,218,480
1,218,480
1,218,480
1,218,480
Expenditures
(895,428)
(931,384)
(924.500)
(1,033,727)
(1,042,385)
(3,019,608)
(1,038.804)
(1,296,988)
(1,558,564)
Noncash - Depreciation
473.,379
475,224
472,761
502,200
510,000
510,000
510,000
510,000
510,000
Cash Balance - Ending
$ 1,823,474 $
2,539,591 $
3,327,541 $
4,076,504 $
4,762,599 $
3,471,471 $
4,161,147 $
4,592,639 $
4,762,555 Current Cash = $4,076,504
6,000,000
Water Utility
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
2012
2013 2014 2015 2016 2017 2018 2019 2020
Expenses l Operating Revenues -*--Cash Balance - Ending
City of Otsego
Sewer Utility Fund
Cash Flow Summary
Y
Revised: February 2, 2016
Rate Increase
Operating Revenues
Sewer Sales
Charges for Services
Penalties and Interest
Subtotal
Nonoperating Revenues
Investment Interest (Net)
Other
Total
Expenses
Personal Servcies
Supplies
Services & Other Charges
Depreciation
Capital Outlay
Capital Outlay (CIP)
Transfers Out
Transfers Out - Jet Vac
Total
5.00% 5.00%- 0.000/u 0.00% 0.00% 0.00%
Actual Actual Actual Projected Budgeted Projected Projected Projected Projected
2012 2013 2014 2015 2016 2017 2018 2019 2020
Comments
$ 1,019,258 $ 1,136,423 $ 1,263,420 $ 1,402.610 $ 1,424,940 $ 1,424,940 $ 1,424,940 $ 1,424,940 $ 1,424,940 2015 Budget was $1,240,995
9,553 7,873 9,525 7,226 - - - - - Mobile Home Disposal - 2015 Was Final Year
14,520 42,227 52,236 54,794 54,794 54,794 54,794 54,794 54,794 Kept flat to be conservative
1,043,331 1,186,523 1,325,181 1.464,630 1,479,734 1,479,734 1,479,734 1,479,734 1,479,734
11,639 (5,049) 28,749 - - - - - -
11,987 38,725 2,100
1,066.,957 1,181,474 1,392,655 1,466,730 1,479,734 1,479,734 1,479,734 1,479,734 1,479,734
52,603
96,798
214,699
205,129
250,854
255,871
260,989
266,208
271,532
2016 Budget -Then 2% Inflation
46,010
70,580
105,574
107,201
119,366
121,753
124,188
126,672
129,206
2016Budget - Then 2%Inflation
646,297
537,129
315,315
484,567
562,648
430,081
438,683
447,456
456,405
2016Budget - Reduced Eng/Solids-Then 2%Inflation
826,242
824,492
823,122
860,117
880,000
880,000
880,000
880,000
880,000
2016 Projection -Then Flat
8,550
-
26,593
49,677
-
-
-
-
-
-
-
-
-
2,424,550
135,000
20,000
15,000
52,000
Based on Adopted 2016 C I P
-
-
57,517
56,638
100,316
110,000
110,000
110,000
110,000
Transfer to General Fund for staff reimbursement.
19,600
-
123,200
40,000
39,200
38.400
32,800
Transfer to Debt Fund 399 for Jet Vac
1,599,302
1,528,999
1,542,821
1,886,529
4,377,734
1,971,905
1.872,259
1,878,137
1.,899,143
Cash Balance- Beginning
803,364
1,127,628
1,558,600
2,203,977
2,605,855
587,855
975,684
1.,463,159
1.944,756
Balance Sheet Effects
30,367
(45,995)
(27,579)
(38,440)
Revenues
1,066,957
1,181,474
1,392,655
1,466,730
1,479,734
1,479,734
1,479,734
1,479,734
1,479,734
Expenditures
(1,599,302)
(1,528,999)
(1,542,821)
(1,886,529)
(4,377,734)
(1,971,905)
(1,872,259)
(1,878,137)
(1,899,143)
Noncash - Depreciation
826.,242
824,492
823,122
860,117
880,000
880,000
880,000
880,000
880,000
Cash Balance- Ending
$ 1,127,628 $
1,558,600 $
2,203,977 $
2,605,855 $
587,865 $
975,684 $
1,463,159 $
1,944,756 $
2,406,347 Current Cash = $2,605,855
5,000,000
Sewer Utility
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
2012
2013 2014 2015 2016 2017 2018 2019 2020
Expenses i Operating Revenues tCash Balance -Ending
City of Otsego
Public Utility Charges
Water Rate Comparison
2016
Actual Increases
n/a
2.50%
2.50%
2.50%
Proposed
2012
2013
2014
2015
2016
Change
Base Rate
5/8" Meter
$
8.00
$
8.20
$
8.41
$
8.62
$
8.62
0.00%
3/4" Meter
$
8.00
$
8.20
$
8.41
$
8.62
$
8.62
0.00%
1.00" Meter
$
8.00
$
25.00
$
25.63
$
26.27
$
26.27
0.00%
1.50" Meter
$
8.00
$
50.00
$
51.25
$
52.53
$
52.53
0.00%
2.00" Meter
$
8.00
$
75.00
$
76.88
$
78.80
$
78.80
0.00%
3.00" Meter
$
8.00
$
150.00
$
153.75
$
157.59
$
157.59
0.00%
4.00" Meter
$
8.00
$
375.00
$
384.38
$
393.98
$
393.98
0.00%
Residential & City Owned Consumption (per 1k)
0 - 10,000 Gallons
$
1.50
$
1.54
$
1.58
$
1.62
$
1.62
0.00%
10,000 + Gallons
$
1.60
$
1.64
$
1.68
$
1.72
$
1.72
0.00%
Commercial, Industrial & Institutional Consumption (per 1k)
0 - 50,000 Gallons
$
1.50
$
1.54
$
1.58
$
1.62
$
1.62
0.00%
50,000 + Gallons
$
1.60
$
1.64
$
1.68
$
1.72
$
1.72
0.00%
Irrigation & Bulk WaterConsumption (per 1k)
All Usage
$
1.60
$
1.64
$
1.68
$
1.72
$
1.72
0.00%
City of Otsego
Public Utility Charges
Sanitary Sewer Rate Comparison
2016
�J
Actual Increases
Base Rate
5/8" Meter
3/4" Meter
1.00" Meter
1.50" Meter
2.00" Meter
3.00" Meter
4.00" Meter
Consumption
Per 1,000 Gallons of Water Usage
n/a
5.00%
5.00%
5.00%
Proposed
2012
2013
2014
2015
2016
Change
$ 5.00
$
7.88
$ 8.27
$ 8.68
$ 8.85
1.96%
$ 5.00
$
7.88
$ 8.27
$ 8.68
$ 8.85
1.96%
$ 5.00
$
15.75
$ 16.54
$ 17.36
$ 17.71
2.02%
$ 5.00
$
39.38
$ 41.34
$ 43.41
$ 44.28
2.00%
$ 5.00
$
78.75
$ 82.69
$ 86.82
$ 88.56
2.00%
$ 5.00
$
157.50
$ 165.38
$ 173.64
$ 177.11
2.00%
$ 5.00
$
393.75
$ 413.44
$ 434.11
$ 442.79
2.00%
$ 5.00
$
4.88
$ 5.13
$ 5.38
$ 5.49
2.04%
City of Otsego
Public Utility Charges
Monthly Bill Estimations
2016
I
Residential (Winter = 5,000 Gallons)
Base Fee
Consumption: 0-10K Gallons
Subtotal - Water Charges
Base Fee
Consumption (5K Gallons)
Subtotal - Sanitary Sewer Charges
Total Monthly Estimated Bill
Residential (Summer = 16,000 Gallons)
Base Fee
Consumption: 0-10K Gallons
Consumption: 10K+ Gallons
Consumption: Irrigation
Subtotal - Water Charges
Base Fee
Consumption (51K Gallons)
Subtotal -Sanitary Sewer Charges
Total Monthly Estimated Bill
Proposed
2012
2013
2014
2015
2016
Change
$
8.00
$
8.20
$
8.41
$
8.62
$
8.62
$
7.50
$
7.70
$
7.90
$
8.10
$
8.10
$
15.50
$
15.90
$
16.31
$
16.72
$
16.72
0.00%
$
5.00
$
7.88
$
8.27
$
8.68
$
8.85
$
25.00
$
24.40
$
25.65
$
26.90
$
27.45
$
30.00
$
32.28
$
33.92
$
35.58
$
36.30
2.02%
$
45.50
$
48.18
$
50.23
$
52.30
$
53.02
1.38%
$
8.00
$
8.20
$
8.41
$
8.62
$
8.62
$
15.00
$
15.40
$
15.80
$
16.20
$
16.20
$
9.60
$
9.84
$
10.08
$
10.32
$
10.32
$
6.40
$
6.56
$
6.72
$
6.88
$
6.88
$
39.00
$
40.00
$
41.01
$
42.02
$
42.02
0.00%
$
5.00
$
7.88
$
8.27
$
8.68
$
8.85
$
25.00
$
24.40
$
25.65
$
26.90
$
27.45
$
30.00
$
32.28
$
33.92
$
35.58
$
36.30
2.02%
$
69.00
$
72.28
$
74.93
$
77.60
$
78.32
0.93%
CITY OF OTSEGO
COUNTY OF WRIGHT
STATE OF NIINNESOTA
RESOLUTION NO: 2016-15
ESTABLISHING WATER & SANITARY SEWER
UTILITY RATES FOR 2016
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,
NIINNESOTA:
That the following rates, fees and charged be imposed on users of the Water utility system:
a. Base Charge (All Users)
2016 Base
Meter Size Charge
5/8"
$
8.62
3/4"
$
8.62
1.00"
$
26.27
1.50"
$
52.53
2.00"
$
78.80
3.00"
$
157.59
4.00"
$
393.98
b. Usage Rates (Per 1,000 Gallons of Consumption)
2016
Customer Type Consumption Rate
Residential & City Owned
0 - 10,000 Gallons
$ 1.62
Residential & City Owned
10,000+ Gallons
$ 1.72
Commercial, Industrial & Institutional
0 - 50,000 Gallons
$ 1.62
Commercial, Industrial & Institutional
50,000+ Gallons
$ 1.72
Irrigation & Bulk Water I All
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 6.875% 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)
2016 Base
Meter Size Charge
5/8"
$
8.85
3/4"
$
8.85
1.00"
$
17.71
1.50"
$
44.28
2.00"
$
88.56
3.00"
$
177.11
4.00"
$
442.79
b. Usage Rates (Per 1,000 Gallons of Average December -February Water Usage)
2016
Customer Type Consumption Rate
All Users All $ 5.49
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 $35.99.
3. That the rates, fees and charges outlined in this resolution shall be effective for all billings issued on
or after March 1, 2016.
ADOPTED by the Otsego City Council this 11th day of January, 2016.
2
ATTEST:
CITY OF OTSEGO
Jessica Stockamp, Mayor
Tami Loff, City Clerk
MOTION made by Council Member and SECONDED by Council Member
IN FAVOR:
OPPOSED: