HomeMy WebLinkAbout08 21 2017 Preliminary 2018 Utility Rates Report
4646 Dakota Street SE
Prior Lake, MN 55372
CITY COUNCIL WORKSHOP AGENDA REPORT
MEETING
DATE:
AGENDA #:
AUGUST 21, 2017
A2
PREPARED
BY:
CATHY ERICKSON, FINANCE DIRECTOR
JASON ETTER, ACCOUNTING MANAGER
PRESENTER: FRANK BOYLES, CITY MANAGER
CATHY ERICKSON, FINANCE DIRECTOR
WORK
SESSION
TOPIC:
PRELIMINARY 2018 UTILITY RATES DISCUSSION
DISCUSSION: Introduction
Annually, staff reviews the fee schedule as part of the budget process and
makes recommendations to the City Council for changes or additions as
needed. Information regarding any proposed changes to the utility rates
should be included in our budget discussion so any changes may be
incorporated into the preliminary budget proposed for adoption on
September 18. The final fee schedule (which would include any utility rate
changes) will be presented to the City Council in December to be adopted
with the budget as an ordinance amendment.
The utility rates fund water, sewer and storm water operations, utility capital
improvements that are part of street reconstruction projects, interfund
transfers (general fund, equipment, etc.), and debt service.
Topic
Staff is proposing the following utility fee changes to the fee schedule.
Proposed
Change
Fee Description 2016 Amount Proposed 2017
Amount
Utility Billing:
1a. Water Rate – First
25,000 gallons
$4.53/1,000
gallons
$4.67/1,000
gallons
1b. Water Rate – Over
25,000 gallons
$6.25/1,000
gallons
$6.44/1,000
gallons
1c. Storm Water Charge $13.93
(residential)
$41.79/acre
$14.34
(residential)
$43.02/acre
2a. Met Council Sewer
Rate (MCES)
$2.57/1,000
gallons
$2.70/1,000
gallons
2b. Sewer Rate – City $2.69/1,000
gallons
$2.94/1,000
gallons
Page 2
Explanation of Proposed Changes
1a-1c. Water Rates and Storm Water Charge increases are based on Staff
recommendations made in conjunction with the annual review of the Capital
Improvement Program. These rates are charged each billing cycle and
intended to reimburse the City for operating costs for each utility and a portion
of the capital costs.
In the approved Transportation Plan, there are $4.1million of water projects
and $1.4 million of storm water utility projects planned over the next five
years. Staff is proposing to issue debt for the utility work for the 2018
Franklin Area improvement projects ($330,000) and fund the remainder of
the capital utility improvements out of fund balance. By issuing debt for one
of the improvement projects, we can fund expenditures with a modest rate
increase of 3% for the Water and Storm Water rates.
2a & 2b. City Portion of Sewer Rate and Met Council Portion of Sewer
Rate (MCES):
MCES Rate: Based on the MCES budget workshop information presented in
May, the proposed 2018 rate increase is 3.7%. The Sewer plan currently
reflects a 5% increase in the MCES, which will be adjusted when the final
information is received from the MCES in late August.
For the 2018 MCES rate, staff recommends the rate of $2.70 to cover the
actual cost of the service. This is an increase of $0.13 over the 2017 rate of
$2.57. As mentioned previously, if the MCES proposed rate comes in at
3.7%, the rate increase will be adjusted down to reflect the actual % change.
City Sewer Rate:
As discussed with the Council at the August 7 budget workshop and CIP
Council meeting presentation, Staff has been evaluating the impact of billed
sewer flows on revenues and the impact of capital project expenditures on
the sewer fund reserves. This will be evaluated on an on-going basis as
conditions change and continues to be a focus of our planning process.
Based on the current plans it is likely that the fund balance will drop below
the recommended amount in 2018.
In the approved Transportation Plan, there are $2.4 million of sewer projects
planned over the next five years. Staff is proposing to issue debt ($550,000)
for the utility work for the 2018 Franklin Area improvement projects and fund
the remainder of the capital utility improvements out of fund balance.
To fund the remaining utility improvements out of fund balance, staff
recommends the rate of $2.94/1,000 gallons for the City portion of the sewer
rate. This is an increase of $0.25 over the 2017 rate of $2.69. This rate is
recommended to keep the total sewer rate increase for the combined City
and MCES portions at $0.38 per 1,000 gallons or about a 7% increase.
Page 3
Historical rate change information is shown in the chart below.
Conclusion
Is the City Council comfortable with the utility rate and debt issuance
proposed? If not, staff would like direction on how to proceed.
Wastewater System Rates 2014 2015 2016 2017 2018
MCES Wastewater Rate (Per 1000 gal)$2.11 $2.16 $2.22 $2.57 $2.70
Prior Lake Wastewater Usage Charge (Per 1000 gal)$1.96 $2.02 $2.52 $2.69 $2.94
Total Wastewater Usage Charge (Per 1000 gal)$4.07 $4.18 $4.74 $5.26 $5.64
Capital Facilities Charge (Per Billing Cycle)$5.00 $5.00 $5.00 $5.00 $5.00
Percent Increase 0%3%13%11%7%