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VI.4. Adopt Resoluton 2014-072, Increasing Water Utility, San. Sewer, and refuse Rates November 5, 2014 Council Report 2014-125 PROPOSED WATER UTILITY, SANITARY SEWER UTILITY AND REFUSE RATE INCREASES Proposed Action Staff recommends adoption of the following resolution: Move to adopt Resolution No. 2014-072 increasing water, sanitary sewer and recycling rates effective January 1, 2015. Adoption of this motion will result in increasing the water rate from $2.10 to $2.18, the water service charge for metered sprinklers from $2.50 to $2.60 per 1,000 gallons of water used, the sanitary sewer rate from $4.10 to $4.30 per 1,000 gallons of water used, and the and the recycling rate from $4.25 to $4.50 per month effective January 1, 2015 and thereafter. Overview Water and Sewer Funds – In 2007 staff prepared a Utility Master Plan which sets forth operational, debt and capital requirements of the water, sanitary sewer and storm sewer systems for the next 10 years. This plan was reviewed and updated in 2009, 2011 and 2013. As a result of that plan we presented a schedule for rate adjustments over that same period of time that will allow us to meet the needs of the utility system while maintaining our utility infrastructure. These proposed rate increases are a result of the prior adoption of the Utility Master Plan. Refuse Fund – The present recycling rates are not funding the recycling operations of the refuse program. Recycling program operating costs have increased over 11% from 2011 primarily due to contractual obligations and fuel related costs. In addition with the fluctuation of the market for recyclable goods our rebate income has decreased. With the proposed recycling rate increase we are projecting a 2014 recycling departmental net loss of $6,080. This may be mitigated if the market for recyclables goes back up. Primary Issues to Consider How will the increased rates affect the residents and businesses in the City of Hopkins? € Why is the rate increase recommended? € What are the proposed capital improvement projects? € Staff Recommendation To provide funding for the operation, debt and capital needs of the water, sewer and refuse funds, finance st recommends approval of the resolution. The change in rates would take effect January 1, 2015. Supporting Information Resolution No. 2014-072 € Water, Sanitary Sewer, and Refuse CIP Cash Flow analysis € Christine M. Harkess, CPA, CGFM Finance Director Financial Impact: $58,000 water, $104,000 sewer; $8,000 refuse Budgeted: Y/N X N Source: Water, Sewer, Refuse Funds Related Documents (CIP, ERP, etc.): __ERP, CIP and 2013 Utility Master Plan (as revised)__ Notes: ______________________________________________________________________________________ Additional Information Regarding Rate Increases Rate Increases and Effect on Residents Water – The rate adjustment will increase an average residential water bill (a customer using 7,500 gallons) approximately $0.60 a month and will maintain Hopkins’ rank as in the bottom 1/3rd of Metro cities. The rate increase proposed is important in allowing staff to make necessary improvements to the reliability of the water system. Sanitary Sewer – The rate adjustment will increase an average residential sanitary sewer bill by approximately $1.13 per month and also will maintain Hopkins’ rank in the bottom 1/3rd of Metro cities. The rate increase is a result of Met Council advising us that their annual increase will be 3% for 2015 and to provide for necessary improvements to the sanitary sewer system. Refuse - Recycling rates were last increased in 2014. As a result of the 2015 budget process and an analysis of increasing operational costs of contractual arrangements and fuel related costs a recycling rate adjustment was proposed. The rate increase is a flat $0.25 per month. This increase is in lieu of the scheduled refuse rate increase and will have a much smaller impact on customers. With this increase we will still have an operational loss from the recycling division but we are moving in the right direction. Why are the Rate Increases Recommended ? In 2007 staff developed a Utility Master Plan covering the next 10 years which was revised in 2009, 2011 and again in 2013. Operations, debt service requirements, capital and infrastructure needs were all reviewed along with associated revenues. In order for us to meet the needs in the water, sanitary sewer and storm sewer funds scheduled rate increases are necessary. Rates unfortunately have not kept up with the needs of the water and sanitary sewer funds and staff recommends annual incremental increases to minimize the effect on customer budgets. What are the proposed capital improvement projects? Water – Over the next 5 years we have scheduled $2,554,000 in capital infrastructure needs the largest of which is water infrastructure related to street improvements totaling $1,650,000 over the 5 year period. Also included is $250,000 for the Mainstreet Rehabilitation project, $211,000 for the St. Louis Park Emergency Connection and $250,000 for Blake Road Corridor improvements. Sanitary Sewer – Over the next 5 years we have scheduled $1,313,000 in capital improvements the largest of which is sewer infrastructure related to street improvements totaling $860,000 over the 5 year period. Also included is $160,000 for rehab of Lift Station #4. The complete detail for all scheduled capital improvements can be found in the Capital Improvement Plan and Equipment Replacement Plan. Both documents are available at City Hall and on our website. With any scheduled capital improvement before deciding to move forward they are reanalyzed for feasibilty, financial availabilty and the capital schedule revised if necessary. CITY OF HOPKINS HENNEPIN COUNTY, MINNESOTA RESOLUTION 2014-072 WATER, SANITARY SEWER AND RECYCLING RATE INCREASES WHEREAS , the City of Hopkins has established Ordinance No. 92-712 Sewer and Water Utility rates, City Code section 715.03 which defines water rates and section 715.07 which defines sanitary sewer rates; and Ordinance No. 92-707, City Code section 605.04 which defines refuse charges for collection services; and WHEREAS, the ordinances authorizes water, sanitary sewer and recycling rates to be set forth by council resolution; and WHEREAS, it is estimated the present water and sewer utility rates are not sufficient to cover operating expenses over the next five years and will not provide sufficient funding for capital improvement projects identified in the 2015-2019 Capital Improvement Plan and the 10 year Utility Master Plan completed in 2007 and revised in 2009, 2011 and 2013; and WHEREAS, it is estimated the present recycling rates are not sufficient to cover current and future operating expenses for the recycling program; NOW, THEREFORE , be it hereby resolved that the City Council of the City of Hopkins hereby sets the service charge for the Water and Sanitary Sewer Utililities and Recycling Programs at the following rates to be paid to the City upon billing therefore as follows: The water service usage charge for all classes of users on the system at $2.18 per 1,000 gallons of water used. The water service charge for metered sprinklers for all classes of users on the system at $2.60 per 1,000 gallons of water used. The sanitary sewer service charge for all classes of users on the system at $4.30 per 1,000 gallons of water used. The recycling service charge for all users on the system at $4.50 per month, per recycling unit. EFFECTIVE DATE : The provisions of this resolution shall be effective January 1, 2015. th Adopted by the City Council of the City of Hopkins, Minnesota, this 5 day of November 2014. _______________________________ Eugene J. Maxwell, Mayor ATTEST: ___________________________________ Amy Domeier, City Clerk WATER FUND - WORKING CAPITAL PROJECTION07/10/2011 ActualProjectedProjectedProjectedProjectedProjectedProjected 201420152016201720182019 2013 Working Capital Beginning Year 76,872597,731873,064838,7111,019,6061,104,7051,219,632 Revenues: Operating Revenues1,468,9561,541,6691,377,8501,416,5501,461,5001,506,4501,551,550 Other14,327152,149158,533165,235172,272179,661187,418 Interest139000000 Gain on Sale of Asset21,855 Bond Issuance860,000195,000200,000780,000400,000850,000268,000 Total Revenues2,365,2771,888,8181,736,3832,361,7852,033,7722,536,1112,006,968 Expenditures: Operation Expense1,069,7411,037,7811,073,8461,111,2441,150,0271,190,2491,231,969 Other Exp - bond issuance-fiscal fee Other Exp - int on current bonds64,620000 Other Exp - int on refunded bonds7,5872,700 Other Exp - int on 2009 bonds24,22522,85021,35019,72517,88715,963 Other Exp - int on 2012 bonds14,17913,37912,52911,62910,7299,829 Other Exp - int on 2013 bonds22,71317,43116,43115,43114,38113,281 017,03521,86133,03734,635 Other Exp -est interest on Future Bonds5,73 Equipment Replacement Items06,800061,700 Capital Improvements462,660197,000250,000786,000400,000850,000268,000 Principal Bond payment260,000 Principal Bond payment - refunded175,000180,000 Principal Bond pymnt - 2009 debt50,00050,00050,00050,00055,00055,000 Principal Bond pymnt - 2012 debt40,00040,00045,00045,00045,00045,000 Principal Bond pymnt - 2013 debt50,00050,00050,00055,00055,000 t13,00026,30078,300104,900161,500 Principal Bond pymnt - Future Deb Capital Lease (PW Facility) (1)045,00045,00045,00045,00045,00045,000 Total Expenditures1,857,0211,613,4851,770,7362,180,8901,948,6732,421,1841,953,177 Change in available funds508,256275,334(34,353)180,89585,099114,92753,791 Inventory change52 Bond Premium/Discount Exp12,551 Working Capital Ending Year597,731873,064838,7111,019,6061,104,7051,219,6321,273,424 (1) Capital Lease moved to Storm Sewer - back to water fund in 2014 Rate History (water/sprinkler) 2014 - 2019 financial data was taken from the Utility Master Plan done by City Engineer 1984 $0.85 1993 $1.05Notes - 1997 $1.10Income - 2008 and forward used utility master plan rates (fixture/no surcharge option) 2000 $1.20 2005 $1.40 Per Utility Master Plan (10/07) 2008 $1.65 2009 $1.86 2010 $1.90 2011 $1.94/2.40 - not incr, left at $1.90 2012 $1.96 / 2.40 2013 $2.02 / 2.40 2014 $2.10 / 2.50 2015 $2.18 / 2.60 projected rate 2016 $2.25 / 2.70 increases 2017 $2.35 / 2.85 2018 $2.45 / 3.00 these are the correct rates per the UMP SEWER FUND - WORKING CAPITAL PROJECTION07/10/2014 ActualProjectedProjectedProjectedProjectedProjectedProjected 201420152016201720182019 2013 Working Capital Beginning Year394,411229,722370,127505,976615,059713,615823,069 Revenues: Operating Revenues1,981,5802,308,5002,399,7002,496,6002,593,5002,696,1002,804,400 Other17,90320,00020,00020,00020,00020,00020,000 Interest335749251,2651,5381,7842,058 Bond Issuance490,000150,0000300,000240,000475,000298,000 Total Revenues2,489,5162,479,0742,420,6252,817,8652,855,0383,192,8843,124,458 Expenditures: Operation Expense551,763551,833570,253589,319609,053629,484650,634 MWCC Charges (3% inflation)1,222,8931,436,1441,504,3071,575,7711,650,6981,729,2561,811,624 Other - Bond Issuance-fiscal fees Interest Expense 45,01530,10028,45026,57524,46322,18719,825 Interest Expense - 2012 Debt3,1492,9492,7492,5492,3492,149 Interest Expense - 2013 Debt12,9439,9189,3188,7198,1197,519 Interest Expense - Future Debt2,1006,4509,60016,03519,341 Equipment Replacement Items06,80033,60026,400 Capital Improvements773,923154,5000300,000240,000475,000298,000 Principal Bond payment (2009)70,00060,00060,00065,00065,00065,00070,000 Principal Bond payment (2012)10,00010,00010,00010,00010,00010,000 Principal Bond payment (2013)30,00030,00030,00030,00030,00030,000 Principal Bond payments Future Debt10,00010,00030,00046,00077,600 Capital Lease (PW Facility) (1)050,00050,00050,00050,00050,00050,000 Total Expenditures2,663,5942,338,6692,284,7772,708,7822,756,4823,083,4303,064,691 Change in available funds(174,078)140,406135,849109,08398,556109,45459,766 Inventory change90 Bond Premium/Discount Exp9,299 Working Capital Ending Year229,722370,127505,976615,059713,615823,069882,835 (1) Capital Lease moved to Storm Sewer - back in fund in 2014 Rate Histor y2014 - 2018 financial data was taken from the Utility Master Plan done by City Engineer 1983 $1.50 1989 $1.75 1991 $2.00 1993 $2.50 Notes - 1999 $2.25 Rate DECREASE Income - 2008 and forward used utility master plan rates (no fixture option) 2006 $2.50 rate increase Per Utility Master Plan (10/07) 2008 $2.70 2009 $3.10 2010 $3.40 2011 $3.70 - act 3.60 2012 $3.75 2013 $3.90 2014 $4.10 2015 $4.30 2016 $4.55 projected rate 2017 $4.80 increases 2018 $5.10 these are the correct rates per the UMP REFUSE FUND - WORKING CAPITAL PROJECTION 06/06/2014 ActualProjectedProjectedProjectedProjectedProjectedProjected 2013201420152016201720182019 Working Capital Beginning Year 621,737773,023928,234921,106983,9601,215,1781,438,892 Revenues: Operating Revenues Refuse Collectionx730,947730,947x780,947780,947x830,947830,947880,947 Recycling Rates138,161x146,261146,261x154,361154,361x162,461162,461 Bulk Collection12,63112,00012,00012,00012,00012,00012,000 Yard Waste11,70310,00010,00010,00010,00010,00010,000 Recycling rebates8,21430,00030,00030,00030,00030,00030,000 Miscellaneous (penalties)12,14710,00010,00010,00010,00010,00010,000 Grants24,58418,50018,00017,50017,00016,50016,500 Gain on sale of assets0 Interest3,8213,8654,6414,6064,9206,0767,194 Net Incr (Decr) in FV of Inv Total Revenues942,208961,5731,011,8491,019,4141,069,2281,077,9841,129,102 Expenditures: Operation Expense766,042781,363789,176804,960813,010829,270837,562 Transfer Out Capital Outlay (per ERP)204,800101,600 Capital Projects per CIP25,00018,000 Capital Lease (PW Facility)25,00025,00025,00025,00025,00025,00025,000 Total Expenditures791,042806,3631,018,976956,560838,010854,270880,562 Change in available funds151,166155,210(7,127)62,854231,218223,714248,540 Inventory change120 Working Capital Ending Year773,023928,234921,106983,9601,215,1781,438,8921,687,432 Rate History 1989 $15.102018 - PW Garage Upgrade 1991 $17.252019 - PW - Replace Overhead Doors 1995 $11.00-14.45 refuse $2.25 recycling fee 2002 $2.75 recycle fee 2005 $13.20, 15.90, 17.25, refuse 2008 $3.25 recycling fee 2009 $15.85, 18.55, 21.25, refuse 2009 $3.50 recycling fee 2010 $3.75 recycling fee 2011 $16.85, $19.85, $23.15 refuse 2012 $4.00 recycling fee 2013 $16.85, $20.85, $24.30 refuse 2014 $4.25 recycling fee 2015 $4.50 recycling fee 2015 $18.85; $21.85; $25.15 refuse - did not implement 2016 $4.50 recycling fee 2017 $19.85; $22.85; $26.15 refuse 2018 $4.75 recycling fee 2019 $20.85; $23.85; $27.15 refuse 2020 $5.00 recycling fee