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Enterprise Fund Budgets and Utility Rate Review; Bishop CITY OF HOPKINS Memorandum To: Honorable Mayor and Council Members Mike Mornson, City Manager From: Nick Bishop, Finance Director Date: October 11, 2022 Subject: Enterprise Fund Budgets and Utility Rate Review _____________________________________________________________________ PURPOSE No formal action is required at this meeting. Staff is requesting input on the proposed budgets for enterprise funds and utility rates. INFORMATION Pavilion Fund The Hopkins Pavilion is a multi-use, year-round arena and community facility. The arena is used for a multitude of activities including ice skating, broomball, soccer, lacrosse, inline skating, rugby, baseball, softball, concerts, company picnics and other community and private events. The main revenue sources are a property tax levy, facility rentals and leases. The main expenses are depreciation, salary, benefits and bond interest. The budget is projecting a decrease in net position of $261,961, which includes $477,786 of depreciation. The funds cash flow is projected to increase. Pavilion Proposed 2022 2023 %age Budget Budget Incr (Decr) Revenues 836,500$ 819,000$ -2.09% Expenditures 1,086,448$ 1,080,961$ -0.51% Revenues over (under) Expenditures (249,948)$ (261,961)$ Finance Department Utility Funds The City has four separate utility funds to provide: water, sanitary sewer, storm sewer and refuse collection services. They are classified as enterprise or business-type funds. The main source of revenue for all funds is user charges. The main expenses are salaries, benefits, depreciation, bond costs, municipal wastewater charges and contracted services for recycling and organic pickup. Collectively, the funds are projected to end the year with a cash balance of $5.8 million and a net position (fund balance) of 29.3 million. The sanitary sewer, storm sewer and refuse funds have a positive cash flow projection in 2022. The water fund is projected to slightly decrease its cash position in 2022, which can be absorbed within the fund. Water Proposed 2022 2023 %a ge Budget Budget Incr (Decr) Revenues 2,366,750$ 2,513,000$ 6.18% Expenditures 2,364,599$ 2,627,587$ 11.12% Revenues over (under) Expenditures 2,151$ (114,587)$ Sanitary Sewer Proposed 2022 2023 %a ge Budget Budget Incr (Decr) Revenues 3,213,750$ 3,460,000$ 7.66% Expenditures 3,152,338$ 3,397,964$ 7.79% Revenues over (under) Expenditures 61,412$ 62,036$ Storm Sewer Proposed 2022 2023 %age Budget Budget Incr (Decr) Revenues 792,332$ 793,522$ 0.15% Expenditures 679,722$ 819,000$ 20.49% Revenues over (under) Expenditures 112,610$ (25,478)$ Refuse Proposed 2022 2023 %a ge Budget Budget Incr (Decr) Revenues 1,254,420$ 1,271,200$ 1.34% Expenditures 1,329,059$ 1,324,891$ -0.31% Revenues over (under) Expenditures (74,639)$ (53,691)$ Water & Sanitary Sewer Rates Proposed Water and Sanitary Sewer fund budgets have been prepared for 2023. The Water and Sanitary Sewer budgets being proposed include rate increases of approximately 7% based on operational needs, capital needs and debt repayment. The City has a tiered rate structure for water consumption. 2022 2022 Percent Current Proposed Increase Flat Rates Per Meter Per Month Residential - 5/8" meter 3.12 3.34 7.05% Residential - 1" meter 3.12 3.34 7.05% Apt/Commercial - 1-1/2" to 2" meter 6.25 6.69 7.04% Apt/Commercial - 3" meter 9.38 10.04 7.04% Apt/Commercial - 4" meter 12.48 13.35 6.97% Apt/Commercial - 6" meter 18.73 20.04 6.99% Consumption Rates, Per 1,000 Gallons Residential and Multi-Family 0 - 3,000 gallons 3.20 3.42 6.87% 3,001 - 5,000 gallons 3.68 3.94 7.07% 5,001 and over 4.22 4.52 7.11% Commercial 0 - 10,000 gallons 3.06 3.27 6.86% 10,001 - 20,000 gallons 3.50 3.75 7.14% 20,001 and over 4.04 4.32 6.93% Irrigation - all usage 3.82 4.09 7.07% Production meter 3.22 3.45 7.14% Sanitary Sewer 7.08 7.58 7.06% The two following charts show the impact of the water and sewer rate increases for different user types. Actual 2021 Proposed 2022 $ Increase % Increase Single Family Residential (Lower User) Water (1,500 Gallons)7.92$ 8.47$ 0.55$ 6.94% Sewer (1,500 Gallons)10.62$ 11.37$ 0.75$ 7.06% Total Monthly Bill 18.54$ 19.84$ 1.30$ 7.01% Single Family Residential (Median User) Water (4,000 Gallons)16.40$ 17.54$ 1.14$ 6.95% Sewer (3,000 Gallons)21.24$ 22.74$ 1.50$ 7.06% Total Monthly Bill 37.64$ 40.28$ 2.64$ 7.01% Single Family Residential (High User) Water (8,800 Gallons)36.12$ 38.66$ 2.54$ 7.03% Sewer (4,800 Gallons)33.98$ 36.38$ 2.40$ 7.06% Total Monthly Bill 70.10$ 75.04$ 4.94$ 7.05% Impact on Low, Median and High Residential User Actual 2021 Proposed 2022 $ Increase % Increase Commercial Property (Low User with a 1" Meter) Water (3,000 Gallons)15.43$ 16.50$ 1.07$ 6.93% Sewer (3,000 Gallons)21.24$ 22.74$ 1.50$ 7.06% Total Monthly Bill 36.67$ 39.24$ 2.57$ 7.01% Commercial Property (High User with a 2" Meter) Water (35,000 Gallons)132.45$ 141.69$ 9.24$ 6.98% Sewer (35,000 Gallons)247.80$ 265.30$ 17.50$ 7.06% Total Monthly Bill 380.25$ 406.99$ 26.74$ 7.03% Impact on Low and High Commercial User Storm Sewer Rates A proposed Storm Sewer fund budget has been prepared for 2022. Residential storm sewer fees are $5.00/month. There is no proposed rate increase. Refuse Rates A proposed Refuse fund budget has been prepared for 2023. New rates and rate increases are being proposed for operational needs. The current refuse collection rates remain unchanged from 2022. A new option for every-other-week pick up is also being proposed. The memo from Pam Hove, Solid Waste Coordinator, is attached explaining the program. The City has a five year contract with an outside service provider to provide recycling and organic recycling. Rates are being increased based the contract. 2022 2023 Percent Current Proposed Increase Refuse Collection 35 Gallon - Every Other Week N/A 13.85 100.00% 35 Gallon 18.85 18.85 0.00% 65 Gallon 22.85 22.85 0.00% 95 Gallon 26.30 26.30 0.00% Pick up - Once in Two Weeks Recycling 5.25 5.50 4.76% Organic Recycling 5.50 5.75 4.55% Annual Service Cost for Median Value Home Based on the preliminary tax levy passed on September 6th and the utility rates proposed in this memo the annual service cost for a median value home is projected to increase by $246.80 or $20.57 per month. The median value home was $315,000 in 2021 and $361,000 in 2022. Actual Proposed 2022 2023 $ Increase % Increase City Property Taxes (3.45% Levy Increase)2,003.00$ 2,188.00$ 185.00$ 9.24% Water - Consumption 7,500 gallons per month $3.20/$3.68/$4.22 Tiered Rates 367.56$ $3.42/$3.94/$4.52 Tiered Rates 393.36$ Sewer - Consumption 5,000 gallons per month $7.08/ 1,000 gallons 424.80$ $7.58/ 1,000 gallons 454.80$ Refuse Collection Garbage, 65 Gallon 274.20$ 274.20$ -$ 0.00% Recycling 63.00$ 66.00$ 3.00$ 4.76% Organic Recycling 66.00$ 69.00$ 3.00$ 4.55% Storm Sewer 60.00$ 60.00$ -$ 0.00% Franchise Fees 84.00$ 84.00$ -$ 0.00% Total 3,342.56$ 3,589.36$ 246.80$ 7.38% 25.80$ 30.00$ Annual Service Cost for Median Value Home 7.02% 7.06% CITY OF HOPKINS Memorandum To: Honorable Mayor and Council Members Mike Mornson, City Manager From: Pam Hove, Solid Waste Coordinator Date: October 11, 2022 Subject: Proposal of Every-Other-Week Garbage Service in 2023 _____________________________________________________________________ PURPOSE Staff proposes to Council that the City offer a reduced level of garbage service at a reduced rate. INFORMATION Hopkins requires all single-family, duplex, triplex and four-plex properties to have City refuse service. Approximately 22% of the City’s refuse customers have the minimum level of garbage service, the 35 gallon cart, which is currently charged at $18.85 per month. As the residential curbside organic recycling program rolled out this year, staff became aware of the desire for a reduced level of garbage service. As participation in the new program grew (we are currently on the cusp of 30% participation), a significant increase in requests to downsize the size of residents’ garbage carts have been received. Residential curbside organic recycling has had a reducing effect on both the volume and odor of household garbage. Therefore, since the City requires these residents to have refuse service, staff believes it is reasonable that a reduced level of service be offered. Single-sort and organic recycling rates will be increasing in 2023 to reflect the 3.5% rate increases per the City’s contract with Republic Services. For that reason as well, staff would like to offer a reduced level of garbage service at a reduced rate. Staff proposes that the City of Hopkins offer every-other-week (EOW) garbage service to those dwelling units who have the smallest level of available service, a 35 gallon cart, and also participate in the residential organic recycling program. This EOW service would be provided on the weeks opposite of single-sort recycling collection, in order to optimize the spacing of carts. Staff proposes a 30% rate reduction for this service, which equates to a charge of $13.20 per month for those that participate. Staff believes that the decrease in revenue that could be incurred by those eligible to participate in EOW service will be offset by the reduction in operational expenses. Dwelling units who sign up for this service will have the large white sticker on their cart that is labeled Public Works with their address replaced with a colored one, this will identify the cart as an EOW collection to the City’s garbage truck driver. St. Louis Park has offered EOW garbage service since 2019 with success. Initial concerns surrounding potential odor from bi-weekly garbage service, in fact, never came to fruition. This is due to the requirement that the property participate in weekly organic recycling service. Therefore City of Hopkins proposes the same requirement and does not foresee this as a problem. FUTURE ACTION The added garbage service level and rate will be included in a Council Report and Resolution presented to Council later this year by the Finance Director. The single-sort and organic recycling rate increases for 2023 will also be included at that time. After approval, the new service level and rates will be communicated in City publications and online.