CR 97-18 Proposed Water Utility Rate Increase
January 28, 1997
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Council Report 97-18
PROPOSED WATER UTILITY RATE INCREASE
Proposed Action.
Staff recommends adoption of the following motion: Adopt Resolution 97-5 increa~inll" the
water utility rate effective on billinll"s rendered from and after March 1 1997.
Overview.
The present water rate of $1.05 per 1,000 gallons of water used has been in effect since
1993, The strong cash position built up over the years is now rapidly declining because of
increased construction cost, operating costs and a decline in the ability to earn interest
revenue due to a decline in the cash balance and investment rates.
An increase of the water rate to $1.10 per 1,000 gallons is recommended,
Primary Issues to Consider.
o Project large construction projects during the next five years,
o Need to restore working capital balance.
o No rate increase since 1993,
Supporting Information.
o Background.
o Five year cash flow analysis.
o Monthly utility bill comparison (1996 vs, 1997) at various levels of usage,
o Rate comparison to other communities.
o Resolution 97-5.
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Council Report 97-18
January 28, 1997
Page 2
Detailed Background
During the years prior to 1993, the requirements for new construction and capital outlay
were relatively small. At the same time, the accumulation of a good cash reserve and higher
interest rates allowed the water operation to function well without a rate increase since 1984,
The above scenario then reversed itself in 1993. Heavy construction needs were funded
through 1996 and are planned to continue through 1999.
Cash flow will be negative for several years, but start to recover by 2001 with planned rate
increases and a reduction in capital spending,
Internal funding will be available to preclude issuing bonds, Bonding only spreads out the
need for more revenue and adds additional interest and issuance costs.
The cash flow analysis is based on five cent raises in each of the years 1997, 1999 and 2001.
As each ensuing budget is prepared, the need for increases will be reevaluated,
The proposed five cent rate increase is further documented in the 1997 Budget and the five
year CIP plan,
WATER FUND - CASH FLOW
(OOO'S Omitted)
1221 1m. 1W 200Q 2llill
Cash Balance Begin Year 203 (339) (549) (774) (509)
Add From Operations 260 290 370 370 370
Rate Increases;
History
1984 .85
1993 1.05
Projected
1997 1.10
1999 1.15
2001 1.20
CIP* 780 470 575 75 75
Capital Outlay 22 30 20 30 20
Balance 12/31/2001 (234)
*CIP;
Repaint Moline Tower 500
Repaint Blake Tower 500
County Road #3 240
Well #4 Rehab 40
Elmo Park Rehab 395
Street Construction 75 75 75 75
780 470 575 75 75
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TOTAL MONTHLY UTILITY BILL
Comparison of 1996 vs, 1997 at Various Levels of Usage
Proposed Monthly
~ 1996 Rates 1997 Rates Increase
2,000 10.10 10,20 0.10
4,000 17,20 17,40 0.20
5,000 20,75 21.00 0.25
8,000 31.40 31.80 0.40
10,000 38.50 39,00 0.50
15,000 56.25 57,00 0.75
20,000 74,00 75,00 1.00
12% l221
Rates:
Water 1.05/1000 gal 1.10
Sanitary Sewer 2.50/1000 gal 2,50
Storm Sewer 3,00 3.00
Refuse
(Includes Taxes)
30 Gallon 12,70 12.70
60 Gallon 15.30 15.30
90 Gallon 16.70 16.70
Refuse charge llQ1 included in above table as container size varies
for each household,
CITY OF HOPKINS
HENNEPIN COUNTY, MINNESOTA
RESOLUTION 97-5
WATER UTILITY RATE INCREASE
WHEREAS, Section 715 of the 1986 Hopkins Code of Ordinances defines sewer
and water rates and Ordinance 91-680 allows adoption of fees through a resolution; and
WHEREAS, it is estimated the present water rate will result in operating losses
over the next ensuing years and will not provide sufficient funding for construction
projects identified in the 1997-2001 Capital Improvement Plan,
NOW, THEREFORE, be it resolved that the City Council of the City of
Hopkins hereby sets:
The gross water service usage charge for all classes of users on the system at
$1.10 per 1,000 gallons of water used plus 10% of the water charge,
EFFECTIVE DATE: The provisions of this resolution shall take effect and be in
force in connection with all billings rendered hereunder from and after March I, 1997.
Adopted by the City Council of the City of Hopkins, Minnesota, this 4th day of February,
1997.
Charles D. Redepenning, Mayor
ATTEST:
Terry Obennaier, City Clerk