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operations, future capital and future debt for needed improvements. We are recommending the 6.75% <br />annual rate increases in order to provide for positive cash flow. <br />The chart below shows the existing water rate for 2011 and the proposed rates for 2012 and beyond. A <br />one person household would experience a $1.22 increase in their monthly water bill (4 cents per day), <br />and a two person household would receive a $1.86 increase in their monthly bill (6 cents per day). <br />Flat Rates <br />Residential <br />Single <br />18.00 <br />19.22 <br />20.51 <br />21.90 <br />23.37 <br />Two or more <br />27.50 <br />29.36 <br />31.34 <br />33.45 <br />35.71 <br />Outside city limits <br />35.75 <br />38.16 <br />40.74 <br />43.49 <br />46.42 <br />Vacant <br />12.30 <br />13.13 <br />14.02 <br />14.96 <br />15.97 <br />Commercial <br />Outside city limits <br />35.75 <br />38.16 <br />40.74 <br />43.49 <br />46.42 <br />Retail, municipal <br />23.30 <br />24.87 <br />26.55 <br />28.34 <br />30.26 <br />Beauty shops, post office, churches <br />30.15 <br />32.19 <br />34.36 <br />36.68 <br />39.15 <br />Board and care <br />159.00 <br />169.73 <br />181.19 <br />193.42 <br />206.48 <br />Vacant <br />12.30 <br />13.13 <br />14.02 <br />14.96 <br />15.97 <br />Motel -per unit <br />11.40 <br />12.17 <br />12.99 <br />13.87 <br />14.80 <br />Manufacturing <br />101.35 <br />108.19 <br />115.49 <br />123.29 <br />131.61 <br />Office buildings <br />71.95 <br />76.81 <br />81.99 <br />87.53 <br />93.43 <br />Trailer court <br />18.00 <br />19.22 <br />20.51 <br />21.90 <br />23.37 <br />Usage Rates <br />First 2,000 gallons <br />27.50 <br />29.36 <br />31.34 <br />33.45 <br />35.71 <br />Usage over 2,000 gallons <br />2.93 <br />3.13 <br />3.34 <br />3.56 <br />3.80 <br />Because this report proposes reductions in the property tax levied for utilities, the overall monthly cost for <br />water and wastewater is projected to decline in 2012 (See chart of page 6) <br />State of Minnesota Conservation Law <br />In 2008 the State of Minnesota adopted legislation requiring all water utilities to adopt conservation rate <br />structures. All cities in greater Minnesota serving more than 1,000 people, including the City of Two <br />Harbors, are required to comply with the conservation rate law by January 1, 2013. Based on current <br />guidance from the MN Department of Natural Resources (DNR), the existing residential and commercial <br />rate structures would not be considered a "conservation rate" structure. The conservation rates are <br />enforced by the DNR and the requirement to adopt a conservation rate becomes important if the City <br />intends to apply for a new well permit or other DNR approval. At this time, the DNR is not routinely <br />monitoring utilities' compliance with conservation rate requirements. <br />Examples of rates based on water consumption, including conservation rates, are attached in Exhibit C. If <br />and when water meters are installed and the City had collected water usage data for a period of time, the <br />City may consider moving to a new rate structure based on water usage. <br />