05.03 Rate Study - Laserfiche WebLink

Home Browse Search

Replacement when a City is growing and investing in new infrastructure it can be cost Reserves prohibitive to customers to simultaneously expand the system and fund its replacement. The replacement reserves have been calculated at 90 days of operating expenses,plus 100% of next year's debt service,plus 100%of the current year's equipment purchases,plus 100%of the current year's depreciation. Using this calculation,the water fund generally meets its capital reserve and represents an average of 10%of the accumulated depreciation balance.The sewer fund also generally meets its capital reserves and represents an average of 17%of accumulated depreciation balance. See Exhibit E for a graph depicting capital reserve requirements and potential cash shortages. Utility customers typically regard their fee increases for water and sewer in total. The attached Exhibit A shows the projected combined increase in utility fees and hook-up fees charges needed to maintain minimum cash balances. Findings The recommended connection and user fees do need to increase over time for the following reasons: 1) Capital costs have been projected for the sanitary sewer system, with the expectation of an expansion to the system at some point. 2) The City has previously agreed to credit the developer a total of$164,563 from future connection fees for project costs the developer undertook to perform. This has been split 50150 between the water and sewer fund. 3) A slow-down in the housing market has slowed the anticipated pace of growth from the developer's projections. Coupled with the credit described above, the City is relying on connection fees to pay for roughly 28% of the construction costs for the treatment plant expansion. Water connection fees represent 10% of the water distribution system, which includes the Industrial Park area, the hydrant project and the Highway 371 realignment. Recommendation #1: Update the rate study at least every 2 years to update capital projects, monitor trends and adjust rates accordingly. Recommendation #2: Institute the proposed monthly meter charges shown in order to provide a funding source for the cost of replacing and maintaining meters. From discussions with staff, it appears that there is no charge if an existing meter fails and needs to be replaced. Meters also become less efficient over time and the usage shown on the meter may not reflect the actual usage. Or, in other words, the charges being calculated from an old meter may not be accurate. As was stated above, special assessments were levied for the original industrial park. The study contemplates an estimate for special assessment revenue. Research and institute a special assessment process for the Industrial Park area expansion. 3060 Centre Pointe Drive (651)697-8500 Fax:(651)697-8555 Roseville,MN 55113-1105 http://www.ehlers-inc.com 3