CR 98-207 Approve Sanitary & Storm Sewer Rate Adjustments
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December 1, 1998 ~ Council Report 98-207
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. APPROVE SANITARY AND STORM SEWER RATE ADJUSTMENTS
Proposed Action
Staffrecommends adoption of the following: Move to approve Resolution No. 98-087 which increases the storm
sewer utility rate bv $2.40 per residential equivalencv factor and Resolution No. 98-088 which decreases the
sanitary sewer rate bv $.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 April I, 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 sanitary sewer fund and to help offset the effect of the increase in the storm sewer utility.
The increase in storm sewer and the decrease in sanitary sewer are 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 and working capital
e balance.
Primary Issues to Consider
. How will these rates effect the residents and businesses in the City of Hopkins?
. What were the last rate changes?
. Continue supporting storm sewer projects by transferring funds from the sanitary sewer utility.
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 uti lity rate by $.25 per 1,000 gallons of water usage to reduce
the amount of working capital accruing in th is fund and to help offset the effects of the rate increase from the storm
sewer utility. This change in rates would take effect April 1st, 1999.
Supportine Information
. Resolution No. 98-087
. Resolution No. 98-088
. Staff analysis
. Utility bills com arison
.
PRIMARY ISSUES
. How will these changes effect residents and businesses?
The rate changes will effect residents and businesses of the City of Hopkins in different capacities. 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 accomplish the goal of transferring income from the sanitary
sewer fund to the storm sewer fund.
Rate changes for these funds.
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 proj ects that had been identified and completed since
1992, which have left the fund with a negative working capital balance. 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.
In 1998 we have spent $900,000 on storm sewer projects that were identified during the 1997 stonns. 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
1,000 gallons of water used. This was done to prevent operating losses from continuing and to build enough
working capital for lift station reconstruction. Both objectives have been met and the sanitary sewer fund
continues to build its working capital balance. To determine if a lower rate in this fund would be sufficient,
It 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 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 at the same time help offset the increase in storm sewer
rates.
Continue to support storm sewer projects by transferring funds from the sanitary sewer utility.
The amount of funds necessary to cover future costs of construction for the storm sewer fund will be
approximately $150,000 a year for at least the next 10 years. Utility funds are essentially run the same as a
private business in that the intent is to cover costs of providing goods and services to the general public,
which includes capital maintenance. The city can transfer funds from other available sources to cover
shortfalls in operations or construction, but it is not recommended on a continuing basis. To do so, we
would cause the our sanitary sewer customers to pay for our storm sewer capital costs.
Residential affects
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 water usage).
Overall experiencing a net average decrease of $1.60 per quarter.
.
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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 - Storm 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 Storm Sewer Utility at the following rates to be paid to the
City upon billing therefore as follows:
Storm
Charge Water
REF Rate Drainage
*C[ass Land Uses Rate Per REF Rate/Month
] Single family & duplex residential 1/3 $] 2.00 $ 4.00/unit
2 Multiple family residential 3 $12.00 $ 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 $] 2.00 $ 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 (Class 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 all bi Ilings rendered hereunder from and after April 1, 1999.
Adopted by the City Council ohhe City of Hopkins, Minnesota, this 15th day of December, 1998.
Charles D. Redepenning, Mayor
ATTEST:
.
Terry Obermaier, City Clerk
CITY OF HOPKINS
. HENNEPIN COUNTY, MINNESOTA
RESOLUTION 98-088
SANIT ARY 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 April 1, 1999.
Adopted by the City Council of the City of Hopkins this 15th day of December, 1998.
Charles D. Redepenning, Mayor
Date
ATTEST:
Terry Obermaier, City Clerk
.
Date
.
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