HomeMy WebLinkAbout5.i. Water / Sewer Rate Review ReportCITY OF ROSEMOUNT
EXECUTIVESUMMARY FOR ACTION
CITY COUNCIL MEETING DATE: April 16,' 1991
AGENDA ITEM: Water/Sewer Rate Review Report: AGENDA SECTION:
-
This item consist of updating the Council regarding the water & sewer
rates from the April 8,'1991 Utility Commission meeting.
It was agreed upon by the Commission that the rates should stay in
place as they are, however they will implement an exemption for senior
citizens to correspond with the surcharge exemption that was put in
place at their October 16, 1989 meeting. The resolution will now
exempt qualifying seniors of the minimum water and sewer charges,
however they will still pay on their actual usage.
Attached to this is a letter which has been reviewed by the Utility
Commission. The portion regarding the exemption of seniors has been
added.
Also attached is a memo very briefly summarizing and comparing the
existing rate structure to fixed costs. _There are also three options
which were considered by the Utility Commission at their last meeting.
Steve Jilk has prepared these examples and .will verbally review them
with you at the meeting.
Old Business
PREPARED BY:
Ron Wasmund
AGENDAEM
Public Works Director
'V' #5 1
ATTACHMENTS:
Letter to Residents, Memo,
APF VED BY:°
1.
Sample Calculations
This item consist of updating the Council regarding the water & sewer
rates from the April 8,'1991 Utility Commission meeting.
It was agreed upon by the Commission that the rates should stay in
place as they are, however they will implement an exemption for senior
citizens to correspond with the surcharge exemption that was put in
place at their October 16, 1989 meeting. The resolution will now
exempt qualifying seniors of the minimum water and sewer charges,
however they will still pay on their actual usage.
Attached to this is a letter which has been reviewed by the Utility
Commission. The portion regarding the exemption of seniors has been
added.
Also attached is a memo very briefly summarizing and comparing the
existing rate structure to fixed costs. _There are also three options
which were considered by the Utility Commission at their last meeting.
Steve Jilk has prepared these examples and .will verbally review them
with you at the meeting.
TO:
FROM:
DATE:
RE:
M E M O
MAYOR NAPPER
COUNCIL MEMBERS: KLASSEN
OXBOROUGH
WILLCOX
WIPPERMANN
CITY ADMINISTRATOR JILK
RON WASMUND, PUBLIC WORKS DIRECTOR J-
-
APRIL 11, 1991
REVIEW OF WATER AND SEWER RATES
Attached are calculations comparing the existing rate structure
to fixed costs of operation and 3 options that have been reviewed
by the Utility Commission. These are presented for your review
and comments.
With the present rate structure the minimum water charge is
$6.00/month or $18.00/quarter. . A meter maintenance of
$1.00/month or $3.00/quarter is added to bring the total
quarterly minimum water charge to $21.00. The minimum water rate
is based upon 18,000 gallons/quarter consumption. Sewer is set
at $9.25/month or $27.75/quarter based upon 15,000 gallons per
quarter. Both water and sewer are then charged at $1.10 /1000
and $1.85/1000 respectively for actual usage above the minimum
amounts.
Under the present rate structure and current costs you will see a
bottom line for water as a net gain of $50,217 which is an
approximate 12% above actual costs. This would allow for a
couple of years of stable rates even if we experience slight
increases in electrical rates, water testing rates or minor
repair bills. The bottom line for sewer shows a net gain of
$129,431 or an approximate 30% above costs. This number is
somewhat misleading and would probably not end up that high. It
is difficult to project what actual sewage flow will be for any
given year and therefore hard to know what actual M.W.C.C.
billings to the City will be. Last year, for example, we were
billed $18,000 more by M.W.C.C. than we had estimated. With the
amount of net gain we could be relatively sure we would generate
enough income and maintain a consistent sewer rate for the next
couple of years.
All three of the Alternatives are prepared with the thought of
reducing the minimum charge by 50% and causing an adjustment to
the actual usage charge per 1,000 gallons. This consideration
was given in the event the City wanted to try to balance more
closely to -0- with fixed costs and revenue.
In Alternate #1 the minimum is reduced to $3.00 per month and the
usage rate is maintained at $1.10/1,000 gallons. This example
produces a net loss for water operation of $73,419 annually or
.30/1,000 gallons pumped.
In Alternate #2 we kept the minimum at $3.00 but add the
.30/1,000 gallon from the example above to create a new usage
after expenses of $319. This would not provide an option to
absorb an fluctuations in our operating costs.
Alternate #3 uses a sliding or adjusted rate schedule which would
place more financial burden on the heavy users by charging a
higher rate per 1,000 gallons as the usage continues. This
method does affect the operating cost and provide a net gain of
$25,955. However it affects the greatest number of users with a
higher increase in billing. In this example there would be no
minimum charge, users would be charged for every gallon consumed.
The last page of examples is a table of comparison showing the
current and each of the three alternatives I've briefly
explained.
Each of the alternatives shows a savings to the lower user groups
with the greatest savings to the two groups with 3,000 & 6,000
gallons per quarter. Keep in mind however, that those two groups
combined represent only 255 users in the City. All other have
either a very slight savings or an increase over the current rate
structure. In most cases approximately 89% will experience an
increase in quarterly billing.
The average water customer based upon our records show an 8,000
gallon per month or 24,000 gallon per quarter usage using the
average they would realized the lowest bill at the current
structure.
The last consideration I will cover in this memo relates to the
lower end users from 0-9,000 gallons per quarter. I think that
we would find, if records were examined, is that the largest
majority of these customers are elderly and on fixed income. To
lessen the impact on them the Utility Commission has agreed to
extend the exemption criteria for surcharge waiver to include
minimum water and sewer charges. Qualifying.seniors would pay
only for actual usage. By extending this courtesy to seniors
only high usage customers would see significant increases in
their water and sewer bills. Anybody above the average rate of
consumption could control their water bills by conservation!
Steve will present this information to you in more detail at the
meeting if you desire.
"DRAFT"
"Date"
Dear Resident:
You have recently received your first water and sewer billing since
the quarterly billing cycle was reinstated. In addition to
returning to quarterly billing it was also the first bill
reflecting the new minimum rates for both sewer and water.
The reason for the change to monthly billings in 1990 was an
attempt to reduce the number of delinquent payments thus improving
cash flow for the water and sewer utilities. This proved to be an
ineffective method and the City still ended up certifying over
$23,370.00 for collection on taxes. Those delinquent utility bills
will now be paid a little at a time with tax payments and do
nothing for cash flow. There was also an overwhelming request to
return to quarterly bills from you the consumers.
The new minimum rate for water and sewer was acted on and approved
by the Utility Commission and City Council in November and December
of 1990. Those rates were established at $6.00/6,000 gallons per
month for water, and $9.25/5,000 gallons per month for sewer.
There is also a $1.00/month meter maintenance charge and
$1.50/monthly surcharge for debt service on the water towers and
wells.
This translates to $18.00 per quarter for 0-18,000 gallons of
water, $27.75 per quarter for 0-15,000 gallons of sewer, $3.00 per
quarter for meter maintenance and $4.50 per quarter for surcharge.
All usage above the 18,000 gallons of water will be charged at
$1.10 per thousand gallons and above 15,000 gallons of water will
be charged $1.85 per thousand gallons on sewage.
Based upon minimum water usage the fixed or minimum water and sewer
bill will be $53.25. The change to minimum billing will only
affect those that use less than 18,000 gallons of water per
quarter.
This change to quarterly minimum was implemented in an attempt to
make the water and sewer utilities self supporting. Based upon the
previous billing rate and method, money had to be allocated from
the General Fund to subsidize the annual fixed costs of operation
of $270,000 for water and $155,000 for sewer. These fixed costs
of operation do not include any replacement cost for infrastructure
such as water and sewer mains, hydrants or lift stations. Those
items must still be financed by other sources.
The City has 2,064 billed customers currently on the water system.
The minimum rates will generate $148,608 in revenue for water and
$229,104 for sewer. The balance of the operating funds should be
able to be collected from water usage above the minimum of 18,000
gallons. Any revenue generated above the fixed operating costs
will be used to offset repair/replacement costs and the anticipated
increase in water testing costs.
At their regular meeting of April 8, 1991 the Utility Commission
voted to modify the Resolution granting exemptions of surcharge to
qualifying seniors to also include an exemption of the minimum
water and sewer billings. Qualifying seniors would pay based upon
actual consumption at the rate of $1.10/1,000 gallons on water and
$1.85/1,000 gallons on sewer based on water consumption. To
qualify seniors must be 65 years of age, reside at the residence
and be responsible for the bill, and quarterly usage based upon
previous four quarters must be 10,000 gallons or less.
We have received some calls regarding the new rates and the first
billings under this system. This second letter is intended to help
understand what and why the City has done this with the utility
billing. By guaranteeing that fixed cost of operation can be met,
we can guarantee to you, our customers, that a safe and adequate
supply of drinking water can be provided.
Please feel free to contact myself or the utility secretary at 322-
2055 if you have any further questions.
sincerely,
Ron Wasmund
Public Works Director
City of Rosemount
PHONE 1612) 423-4411 2875 - 145th Street West, Rosemount. Minnesota
FAX 16t2) 423-5203 Mailing Address:
P. O. Box 510, Rosemount, Minnesota 55068-0510
TO: Chairman Walsh, Utilities Commission
Commissioner Mulhern
Commissioner Werner j
FROM: Stephan Jilk, City Administrator,
DATE: April 5, 1991
RE: Utility Rate Review/Discussion
Attached please find information regarding my review of the
current rates for water and sewer utilities.
MAYOR
Vernon Napper
COUNCILMEMBERS
Sheila Klassen
John Oxborough
Harry Willcox
Dennis Wippermann
ADMINISTRATOR
Stephan Jilk.
I have used current information on the number of connections and
usage projections to determine revenue projections and net
profit/loss.
I felt it would be good to conduct that review again using
current numbers.
I have also listed three different alternatives for new water
rates. These alternatives are rather elementary in approach but
I feel they represent most alternatives we could present and give
us a good idea of how a combination of lower rates and a sliding
or a fixed rate structure would affect users.
I will provide a review of the data at the meeting to enable
discussion on the data.
6VO-Y1111n9rs eom>nq 'I'll JRosemoun}1(
4n 11..--
April 5, 1991
0110201
PRESENT RATE STRUCTURE
Minimum Charge Each Connection $6.00/mo
Meter Replacement Charge 1.00/mo
Total $7.00/mo
Usage Rate $1.10/1000 gal. 6000 gal/mo
SEWER
COST
Minimum Charge Each Connection $9.25/mo
Usage Rate $1.85/1000 gal. >
(treated) 6000 gal/mo
- based on 800 of 1000 gal. metered
WATER:
SEWER:
Fixed Costs
Operating Costs
Total
Fixed Costs
Operating Costs
Total
$269,913/yr
149, 900/yr
$419,813 for 1991
$154,854/yr
271,355/yr
$426,209 for 1991
$21.00/qtr
18000 gal/qtr
$27.75/qtr
REVENUE - EXISTING RATES
WATER
Minimun Charge $6.00 x 2113 Connections = $12,678 X 12 = $152,136
Meter Maintenance $3.00 x 2113 Connections = $ 6,339 X 12 = $ 76,068
TOTAL Minimum Charge Revenue $228,204
*Estimated Revenue to be Brought in from Water Usage @ $1.10/1000gal.
REVENUE - Existing Rates (con't)
Number of users using less than 6000 gal/mo or 18000/qtr
105 users x 3000 x 12 = 3,780,000 gal
155 users x 4000 x 12 = 7,440,000 gal
195 users x 5000 x 12 = 11,700,000 gal
178 users x 6000 x 12 = 12,816,000 gal
Total gal. not charged for @ $1.10/1000 gal =
Estimated Number of Gallons to be charged @ $1.10/1000
35,736,000
245,760,000
Less Gal. Not Charged -(35,736,000)
210,024,000
X 1. 10
Revenue @ $1.10/1000 $ 231,026
Average No. of New Connections in 1991:
Minimum - 200 total/2 = 100 x 6 x 12 = $ 7,200
Meter Maintenance 200/2 = 100 x 3 x 12 = 3,600
TOTAL REVENUE
TOTAL $ 10,800
Existing Minimum $ 152,136
New Minimum 7,200
Existing Meter Maintenance 76,068
New Meter Maintenance 3,600
Usage 231,026
Total $ 470,030
Total Fixed Costs $ 269,913
Total Revenue Fixed 228,204
Not Recovered by Fixed Rev. $ 41,709
Fixed Cost Percent Recovered = 85%
through Fixed Revenue
Available to retained Earnings:
Total Expense
Total Revenue
$ 419,813
470,030
Net Gain $ 50,217
Total Average Cost per 1000 gal = $419,813/245,760,000 = $1.708/1000
SEWER
Minimum Charge $9.25 x 2113 connections = $19,545 x 12 = $234,540
Average New $9.25 x 100 x 12 = $ 11,100
Total $245,640
*Estimated Revenue to be Brought in from
Sewer Charge @ $1.85/1000 gallons treated.
Number of users using less than 6000 gallons per month or 18000
gallons per quarter.
105
Users
x 3000
x 12 =
3,780,000
155
Users
x. 4000
x 12 =
7,440,000
195
Users
x 5000
x 12 =
11,700,000
178
Users
x 6000
x 12 =
12,816,000
Total = 35,736,000
X .80
Total Gal. Not Charged @ $1.85/1000 gal 28,588,800
Estimated Number of Gallons treated and
Charged for @ $1.85/100 =(245,760 x
.80) =
196,608,000
Less Gallons covered
by minimum
- (28,589,000)
Total
Sum
= 168,019,000
Revenue from $1.85/1000
gal.
X 1.85
Total
Sum
$310,000
Fixed or Minimum Revenue
$245,640
Total
Revenue
$555,640
TOTAL FIXED COSTS
$154,854
TOTAL REVENUE FIXED
$245,640
EXCESS _
$ 901786
TOTAL SEWER EXPENSES
$426,209
TOTAL SEWER REVENUE
$555,640
NET
$129,431
Available to Retained Earnings
$129,431
Available to Reduce Min. Rate
$129,431
Difference between Fixed Cost
$154,854
and Fixed Revenue
245,640
$ 90,786
Amount available to reduce minimum = $90,786/2113/12 = $3.58 mo
Difference between Operating Rev. $310,000
and Operating Costs 271,355
Totals $ 38,645
Amount Available to Reduce Rate $ 38,645/168,019 = .23/ 1000 aal.
WATER RATES
ALTERNATIVE ti
$3.00 Minimum
1.10 per 1000 gal., all gallons metered
$3.00 x 2113 x 12 = $ 76,068
1.10 x 2451760 = 270,336
Revenue = $346,394
Expenses (419,813)
Revenue 346,394
Net Loss L-23_,_419 /245,760 = .30/1000 gal.
ALTERNATIVE #2
$3.00 Minimum
1.40 per 1000 gal., all gallons metered
$3.00 x 2113 x 12 = $ 76,068
1.40 x 245,760 = $344,064
Revenue = $420,132
Revenue
$420,132
Expenses
- (419,813)
Net Gain
$ 319
ALTERNATIVE 03
$3.00 Minimum x
2213 x 12 =
$ 79,668
1.00/1000 0
- 3000/qtr x
3,780,000 =
3,780
1.10/1000 9001
- 12000/qtr x
7,440,000 =
8,184
1.20/1000 12001
- 15000/qtr x
11,700,000 =
14,040
1.30/1000 15001
- 18000/qtr x
12,816,000 =
16,660
1.40/1000 >18,000/qtr
x
231,026,000 =
323,436
Total
Estimated Revenue
$445,768
Total
1991 Cost
(419,813)
Net
Gain
$ 25,955
ALTERNATIVE COMPARISONS FOR #1, #2, & #3
EXISTING NEW NEW NEW
GAL./MO GAL./QTR $/QTR #1 DIFF. #2 DIFF. #3 DIFF.
1000/mo
2000/mo
3 000/mo
4000/mo
5000/mo
6000/mo
7000/mo
8000/mo
9000/mo
10000/mo
11000/mo
12000/mo
3000/qtr
6000/qtr
9000/qtr
12000/qtr
15000/qtr
18000/qtr
21000/qtr
24000/qtr
27000/qtr
30000/qtr
33000/qtr
36000/qtr
21.00
21.00
21.00
21.00
21.00
21.00
24.30
27.60
30.90
34.20
37.50
40.80
12.30(8.70)
15.60(5.40)
18.80(2.20)
22.20
+1.20
25.50
+4.50
28.80
+7.80
32.10
+7.80
35.40
+7.80
38.70
+7.80
42.00
+7.80
45.30
+7.80
48.60
+7.80
13.20 (7.80)
17.40 (3.60)
21.60 +.60
25.80 +4.80
30.00 +9.00
34.20 +13.20
38.40 +14.10
42.60 +15.00
46.80 +15.90
51.00 +15.80
55.20 +17.70
59.40 +18.60
12.00(9.00)
15.00(6.00)
18.00(3.00)
22.20 +1.20
27.00 +6.00
32.40 +11.40
38.40 +14.10
42.60 +15.00
46.80 +15.90
51.00 +16.80
55.20 +17.70
59.40 +18.60