VII.4. Proposed Water Utility and Sanitary Sewer Utility Rate Increases; Harkess (CR2016-107)
October 18, 2016 Council Report 2016-107
PROPOSED WATER UTILITY AND SANITARY SEWER UTILITY
RATE INCREASES
Proposed Action
Staff recommends adoption of the following resolution: Move to adopt Resolution No. 2016-071 increasing
water and sanitary sewer rates effective January 1, 2017.
Adoption of this motion will result the implementation of a tiered water rate structure, the implementation of a
water production rate and an increase in sanitary sewer rates.
Overview
In 2016 staff enlisted the services of Ehlers to complete a rate study on our water and sewer fund in response to
the financial challenge within each of these funds. Water consumption of our customers has been going down and
therefore revenues in both the water and sewer funds have been declining. Due to the operational and capital
demands on these funds we needed to explore the rate structure and how revenues are being generated. We also
need to balance usage revenue by user type so one class of customer is not subsidizing another.
As a result we are recommending a tiered water rate structure while remaining with a flat sanitary sewer structure
that continues to use a winter average for summer billing.
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 and sewer funds, finance recommends
approval of the resolution. The change in rates would take effect January 1st, 2017.
Supporting Information
Resolution No. 2016-071
Christine M. Harkess, CPA, CGFM
Finance Director
Financial Impact: Water $640,000; sewer $641,000 Budgeted: Y/N X N
Source: Water, Sewer, Refuse Funds
Related Documents (CIP, ERP, etc.): __ERP, CIP and 2016 Utility Rate Study_ _
Notes: ______________________________________________________________________________________
Additional Information Regarding Rate Increases
Rate Increases and Effect on Residents
Shown below is the analysis of the impact on the water and sewer rate increased for various classes of
residential customers.
Shown below is the impact for an average commercial customer.
Why are the Rate Increases Recommended?
In 2016 staff worked with Ehlers, our financial advisors to look at a 10 year projection of activity.
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 and sanitary sewer funds, scheduled
rate increases are necessary as cash balances are not sufficient to fund the level of operations and capital
needs projected. Past rates were based on an average consumption of 7,500 gallons. Upon reviewing
our customer usage we find that 39% of our customers use less than 3,000 gallons, another 33% uses
between 3,000 and 5,000 and 28% use over 5,000 gallons. We also analyzed the percentage of revenue
from each customer class and are recommending a rate structure where one class of customer is not
substantially subsidizing another class.
What are the proposed capital improvement projects?
Water – Over the next ten years we have identified over $17.8 in capital infrastructure needs some of
which are related to the ongoing utility improvements as part of the road reconstruction projects.
Sanitary Sewer – Over the next ten years we have identified over $10.07 in capital infrastructure needs
some of which are related to the ongoing utility improvements as part of the road reconstruction
projects.
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 2016-071
WATER AND SANITARY SEWER 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
WHEREAS, the ordinances authorizes water and sanitary sewer to be set forth by
council resolution; and
WHEREAS, a comprehensive Utility Rate Analysis was completed to determine the long-term
viability of the water and sewer fund; and
WHEREAS, it was determined that current rates are insufficient to meet operational and capital
needs;
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 Utilities at the following rates to be paid to the
City upon billing therefore as follows:
The water service usage charge be set at the rates shown.
Flat Rates per 1,000 gallons
Residential – 5/8” meter 2.39
Residential – 1” meter 2.39
Apt/Commercial – 1-1/2” to 2” meter 4.77
Apt/Commercial – 3” meter 7.16
Apt/Commercial – 4” meter 9.54
Apt/Commercial – 6” meter 14.31
Residential and Multi-Family
0 – 3,000 gallons 2.44
3,001 – 5,000 gallons 2.81
5,001 and over 3.23
Commercial
0-10,000 gallons 2.33
10,001 – 20,000 gallons 2.68
20,001 and over 3.08
Irrigation – all usage 2.92
Production Meter 2.45
All water rates are per 1,000 gallons of water consumed.
The sanitary sewer service charge for all classes of users on the system at $5.81 per 1,000 gallons
of water used.
EFFECTIVE DATE: The provisions of this resolution shall be effective January 1, 2017.
Adopted by the City Council of the City of Hopkins, Minnesota, this 18th day of October 2016.
_______________________________
Molly Cummings, Mayor
ATTEST:
___________________________________
Amy Domeier, City Clerk