09.02 - Utility Rate Study Proposals

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What is a Utility Rate Study? A multi -year fiscal plan for your water and sewer utilities. An Ehlers utility rate study: Integrates all aspects of utility operations: • Capital Improvement Plans • Future operating expenses • Existing and future debt • Customer growth (or loss) Recommends rate structures and/or multi -year rates that: • Are reasonable and equitable across your user classes • Cover current and future capital and operating costs • Meet your community's goals Compares your utility rates to standards: • DNR requirements for conservation rates Comparable communities Goal of Utility Rate Studies Local governments are challenged to maintain the right balance of providing superior service, at a reasonable and equitable cost. Each City has unique goals, but the primary goal of a rate study is to provide a long -term financial plan for the utility funds' operations, given current and expected trends. It provides a platform for the City to make rate - setting decisions today that position the City to meet its long -term operating and capital needs. It will also allow the City to allocate the costs across users of the system — making it an area that cities can direct policy, unlike tax decisions which are made by the State. Lastly, rate studies address evolving regulatory requirements, such as the State of Minnesota's conservation rates mandate. Scope of the Study The purpose of this study is to assess and update the historic, current and future financial condition of the water and sewer operations for the City of Pequot Lakes and provide the information needed to update user rates and charges and connection fees in order to efficiently operate City utilities now and in the future. We will provide the following services: • Update the Water and Sewer fund analysis last completed by Ehlers in 2007. • Complete a Pequot Lakes utility fee comparison to other communities. • Evaluate and recommend user fees and connection charges for the next five years. • Prepare Utility Rate Study report and attend staff meeting(s) and make a presentation to the City Council. Proposal for a Utility Rate Analysis to the Page 1 City of Pequot Lakes, Minnesota January 2012