CR 98-193 Storm Sewer Rate Adjustments
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December 1, 1998 ,y c, Council Report 98-193
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. APPROVE SANITARY AND STORM SEWER RATE ADJUSTMENTS
Proposed Action
Staff recommends adoption of the following: Move to approve Resolution No. 98-087 which
increases the storm sewer utility rate by $2.40 per residential equivalency factor. per quarter and
decreases the sanitary sewer rate by $.25 per 1,000 gallons of metered water usage.
Adoption of this motion will result in staff moving forward with changing the storm sewer rate and
the sanitary sewer rate effective with all billings from January 1, 1999 and there after.
Overview
The 1999 budget proposal includes a proposed rate increase of $2.40 per quarter for storm sewer
utilities and a proposed rate decrease of $.25 per 1,000 gallons of metered water usage for sanitary
sewer. The current rate for storm sewer utility is $9.60 per residential equivalency factor (ref) per
quarter, the proposed rate would be $12.00 per ref per quarter. This rate increase is necessary to cover
the costs of upgrading and maintaining the storm sewer system in Hopkins. The current rate for
sanitary sewer utility is $2.50 per 1,000 gallons of metered water usage, the proposed rate would be
$2.25 per 1,000 gallons. This rate decrease is to reduce the amount of working capital accruing in the
e sanitary sewer fund and to offset the effect of the increase in the storm sewer utility.
The increase in storm sewer and the decrease in sanitary sewer is proposed to transfer the earnings from
sanitary sewer to storm sewer. The storm sewer fund has incurred millions of dollars in construction
and maintenance costs over the past five years and will continue to incur costs into the near future. The
Sanitary Sewer fund has not incurred these same costs, therefore allowing the fund to build a healthy,
retained earnings balance.
Primary Issues to Consider
. How will these rates effect the citizens and businesses in the City of Hopkins?
. The last rate increase for storm sewer utilities was in 1998. The rate increase at that time was $.60
per ref. This was to alleviate the effects of the more recent projects that had been identified and
completed since 1992 which have left the fund with a negative working capital balance.
. The 1997 storms helped to identify other drainage improvement needs within the City. The 1999 -
2003 capital improvement plan (erp) calls for $1,200,000 in additional projects over the next five
years. The current rate of $9.60 per residential equivalency factor (REF) per quarter is not sufficient
to do these additional projects and regain a positive working capital balance within this fund.
. The last rate change for sanitary sewer utilities was in 1993. The rate increase at that time was $.50
. per ref. This was done to prevent operating losses to continue and to build working capital for lift
station reconstruction. Both objectives have been met and the sanitary sewer fund continues to
build its working capital balance.
. The current rate of $2.50 per 1,000 gallons is more than is needed in this fund to maintain a healthy
working capital balance and cover its operating and capital costs. Reducing the rate by $.25 will
. enable the city to continue to build its working capital balance and offset the increase in storm sewer
rates.
Staff Recommendation
Finance recommends increasing the current storm sewer utility rate by $2.40 per ref to eliminate the
negative working capital balance in the Storm Sewer Utility Fund and provide for capital improvements
in the future. Finance also recommends decreasing the current sanitary sewer utility rate by $.25 per
1,000 gallons of water usage to reduce the amount of working capital accruing in this fund and to offset
the effects of the rate increase from the storm sewer utility.
Supportim:! Information
. Resolution No. 98-087
. Resolution No. 98-088
. Staff analysis
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. Lori Yager !I
Finance Director
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PRIMARY ISSUES
. The first issue to be considered is how these rate changes will effect residents and businesses of the City
of Hopkins. In analyzing various different rate scenarios the two rates that have the least affect on the
majority of residents and businesses are the ones finance has proposed. To best illustrate this, attached
are tables and graphs depicting a few different levels of water usage and land occupancy.
As you can see, if residents use a minimum of 15,000 gallons of water per quarter they will see a slight
decrease in their quarterly utility bill, (15,000 gallons of water usage in one quarter is considered low
usage). The more water a resident uses on average, the larger decrease they will see in their utility bill
do to the rate adjustments.
For commercial and industrial companies the water usage and land size playa larger factor in how the
rate adjustments will affect their utility bills. If a company owns a large lot or many lots and does not
use much water they will experience an increase in their monthly utility bills do to the storm sewer rate
increase which is based on property. On the hand, if a company uses a lot of water but has a relatively
small lot size their utility bills will go down do to the decrease in the sanitary sewer rate which is based
on water usage.
Overall these two rate adjustments should offset each other and accomplish the goal of transferring
income from the sanitary sewer fund to the storm sewer fund.
e
The second issue to consider is the recent increase of $.60 per ref in the storm sewer fund and what was
that to accomplish. The goal of the rate increase this year was to work towards reducing the negative
working capital balance in the storm sewer fund over the years and to help pay for future projects that
had been identified. The plan was to continue increasing the storm sewer rate $.40 a year for the next
three years. Since then more projects have been identified. After further analysis finance believes this
large rate increase for the storm sewer utility to be a solution to a continuing issue.
The final issue considered was the decrease in revenues to the sanitary sewer fund and how this would
affect its future working capitaL This was harder to predict because water usage fluctuates from year to
year and month to month. Analysis included going back and analyzing old rates, factoring in the
growth of the city and increased costs of the fund. Finance is predicting that the new rate will be
sufficient to cover operations, capital and construction projects of the future, and continue to build to
the working capital balance of this fund.
The proposed storm sewer rate increase of $2.40 per ref would increase single family & duplex resident
rates from $3.20 a month ($9.60 per quarter) to $4.00 a month ($12.00 per quarter). The proposed
sanitary sewer rate decrease of $.25 per 1,000 gallons of water usage would decrease single family &
duplex resident rates from an average of $40 per quarter to an average of $36 per quarter, (depending on
e water usage). Overall experiencing a net average decrease of $1.60 per quarter.
CITY OF HOPKINS
. HENNEPIN COUNTY, MINNESOTA
RESOLUTION 98-088
SANITARY SEWER UTILITY RATE DECREASE
WHEREAS, the City of Hopkins has established Ordinance No. 92-712, City Code
section 715 - Sewer and Water Utility rates effective 1993; and
WHEREAS, the ordinance authorizes sanitary sewer utility drainage charge rates
to be set forth by council resolution;
NOW, THEREFORE, be it hereby resolved that the City Council of the City of
Hopkins hereby sets the service charge for the Sanitary Sewer Utility at the following rates
to be paid to the City upon billing therefore as follows:
The sanitary sewer service charge for all classes of users on the system at $2.25 per
1,000 gallons of water used.
The provisions of this resolution shall take effect and be in force in connection with all
. billings rendered hereunder from and after January 1, 1999.
Adopted by the City Council of the City of Hopkins this 151 day of December, 1998.
Charles D. Redepenning, Mayor
Date
ATTEST:
Terry Obermaier, City Clerk
.
Date
CITY OF HOPKINS
HENNEPIN COUNTY, MINNESOTA
. RESOLUTION 98-087
STORM SEWER UTILITY RATE INCREASE
WHEREAS, the City of Hopkins has established Ordinance No. 89-640, City Code
section 720 - Stann Sewer Drainage Utility effective September 5, 1989; and
WHEREAS, the ordinance authorizes storm sewer utility drainage charge rates to be set
forth by council resolution;
NOW, THEREFORE, be it hereby resolved that the City Council of the City of Hopkins
hereby sets the service charge for the Stonn Sewer Utility at the following rates to be paid to the
City upon billing therefore as follows:
Storm
Charge Water
REF Rate Drainage
*Class Land Uses Rate Per REF Rate/Month
1 Single family & duplex residential 1/3 $12.00 $ 4.00/unit
2 Multiple family residential 3 $]2.00 $ 36.00/acre
3 Commercial institutional uses 5 $12.00 $ 60.00/acre
. 4 Public and private schools 1.25 $12.00 $ ] 5.00/acre
5 Churches 3 $12.00 $ 36.00/acre
6 Parks 0.25 $12.00 $ 3.00/acre
7 Golf courses 0.25 $12.00 $ 3.00/acre
8 Vacant improved and unimproved 0 $12.00 0
9 Industrial 5 $12.00 $ 60.00/acre
*as established by Ordinance code section 720.05
The monthly storm water drainage fee is determined by multiplying the storm water drainage rate
by the parcel's acreage for all classes except single family and duplex residential (C]ass 1). Single
family and duplex residential is determined by the storm water drainage unit rate for each Class I
parcel regardless of acreage.
EFFECTIVE DATE: The provisions of this resolution shall take effect and be in force in
connection with an billings rendered hereunder from and after January], ]999.
Adopted by the City Council of the City of Hopkins, Minnesota, this 1 st day of December, 1998.
Charles D. Redepenning, Mayor
ATTEST:
.
Terry Obermaier, City Clerk
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