04 Capital Financial Plan - Laserfiche WebLink

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to encourage communities to deal proactively with providing sustainable drinking water for citizens, businesses,and industry. As part of the planning process,we focused on water rates that assist the City in meeting the DNR mandates for demand reduction measures in a water supply plan. Specifically,we are working to develop a tiered system of rates for residential and commercial for water and sewer. We will review the tiered rate system at greater length with the Council at the budget planning session,with specific recommendations on rates and annual performance moving forward. With this tiered system, it is also important to note that we will advise removing gallons allowed in the base rate. This is,again,to comply with DNR's required demand reduction measures. This will have potential impacts to your small residential and commercial users depending on our final recommendations. Development Fees A quick word about development fees. Pequot Lakes, by far,had the highest development fees of the comparison group. While asking future development to pay its fair share of utility system upgrades is the correct thing to do,at a certain point such fees can be self-defeating. When fees are so high they act as a barrier to new development there is no benefit. We recommend the City put a freeze on raising development fees any higher than current levels. Better yet,a reduction in fees would probably be advisable. Perhaps a fee of$2,000 ERC for Water and$2,000 for ERC for Sewer would be appropriate. This would put Pequot Lakes on equal footing with Cross Lake and Breezy Point. Final Thoughts and Recommendations The City is currently in financially strong health. The City has a healthy amount of reserves in the General Fund and enjoys very low debt levels. Despite contemplating nearly$10 million(present value)in new spending over the next fifteen years the total cost of City services(taxes,water,and sewer) is expected to increase at a very reasonable pace. Ultimately these factors seem to put Pequot Lakes at a competitive advantage over neighboring communities that may be struggling with how to pay for public improvements. Recommendations: 1. Cease or reduce the SAC/WAC fees for the City as noted above. 2. If and when the City receives the County turn-back payments,deposit that money into Fund 402. If and when the City undertakes the new maintenance facility and 2018 street projects (using these same funds),officially establish an internal loan via resolution that clearly states the repayment schedule. This is important so that funds are replenished to take on the Patriot Avenue project with cash in the future. 3. Review utility performance annually. Of particular importance is the Water Fund. The model is making certain assumptions regarding increased sales due to the removal of gallons included in the base rate. Our firm has promised up to 3 free updates to this Plan.