CR2012-144 Proposed Water Utility, Sanitary Sewer Utility and Refuse Rate INcreasesi:aDecember 18, 2012 Council Report 2012-144
City of Hopkins
PROPOSED WATER UTILITY, SANITARY SEWER UTILITY
AND REFUSE RATE INCREASES
Proposed Action
Staff recommends adoption of the following resolution: Move to adopt Resolution No. 2012-093 increasing
water, sanitary sewer and refuse rates effective January 1, 2013.
Adoption of this motion will result in increasing the water rate from $1.96 to $2.02, the sanitary sewer rate from
$3.75 to $3.90 per 1,000 gallons of water used, and the refuse rates to $16.85 for a 30 -gallon container (no
change), $20.85 for a 60 -gallon container, and $24.30 for a 90 -gallon container per month effective January 1,
2013 and thereafter.
Overview
Water and Sewer Funds — In 2007 staff prepared a Utility Master Plan which sets forth operational, debt
and capital requirements of the water, sanitary sewer and storm sewer systems for the next 10 years. This plan
was reviewed and updated in 2009 and 2011. As a result of that plan we presented a schedule for rate adjustments
over that same period of time that will allow us to meet the needs of the utility system while maintaining our
utility infrastructure. These proposed rate increases are a result of the prior adoption of the Utility Master Plan.
Refuse Fund — The present refuse rates provide for the disposal operations of the Refuse Department as well
as the bulk pick-up, yard waste pick up brush pick up programs. We have a fleet of two refuse and one yard waste
truck which are on a scheduled replacement plan. Maintaining competitive rates allows us to replace our fleet as they
age and allows for a cost effective operation.
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, sewer and refuse funds, finance
recommends approval of the resolution. The change in rates would take effect January 1 s`, 2013.
Supporting Information
• Resolution No. 2012-093
• Water, Sanitary Sewer, and Refuse CIP Cash Flow analysis
Christine M. Harkess, CPA, CGFM
Finance Director
Financial Impact: $114,000 sewer, $50,340 refuse Budgeted: Y/N X N
Source: Sewer, Refuuse Funds
Related Documents (CIP, ERP, etc.): ERP, CIP and 2007 Utility Master Plan (as revised) Notes:
Additional Information Regarding Rate Increases
Rate Increases and Effect on Residents
Water — The rate adjustment will increase an average residential water bill (a customer using 7,500
gallons) will be $0.45 a month and will maintain Hopkins' rank as in the bottom 1/3rd of Metro cities.
The rate increase proposed is important in allowing staff to make necessary improvements to the
reliability of the water system.
Sanitary Sewer — The rate adjustment will increase an average residential sanitary sewer bill by
approximately $1.13 per month and also will maintain Hopkins' rank in the bottom 1/3rd of Metro
cities. The rate increase is a result of Met Council advising us that their annual increase will be in the 5-
7% range for the next 5 years and to provide for necessary improvements to the sanitary sewer system.
Refuse - Refuse rates were last increased in 201 l . As a result of the 2013 budget process and an
analysis of operational costs and equipment replacement costs a refuse rate adjustement was proposed.
The rate increase will afect a residential customer using a 60 gallon container, the most common size
used, by $1.00 a month. There is no effect on businesses as the city does not service commercial
customers.
Why are the Rate Increases Recommended ?
In 2007 staff developed a Utility Master Plan covering the next 10 years which was revised in 2009 and
again in 2011. 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, sanitary sewer and storm
sewer funds scheduled rate increases are necessary. In the past rates were adusted every 3-5 years and
in the case of the sanitary sewer rates were actually decreased for a 6 year period. Rates unfortunately
have not kept up with the needs of the water and sanitary sewer funds and staff recommends annual
incremental increases to minimize the effect on customer budgets.
What are the proposed capital improvement projects?
Water — Over the next 5 years we have scheduled $2.659.000 in capital infrastructure needs the largest
of which is water infrastructure related to street improvements totaling $2,300,000 over the 5 year
period. Also included is $211,000 for the emergency connection to St. Louis Park.
Sanitary Sewer — Over the next 5 years we have scheduled $1.615.000 in capital improvements the
largest of which is sewer- infrastructure related to street improvements totaling $1,440,000 over the 5
year period. Also included is $160,000 for rehab of Lift Station #4
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.
Refuse Fund — Trucks are scheduled for replacement in 2014 for a yard waste truck and in 2015 for a
refuse truck.
CITY OF HOPKINS
HENNEPIN COUNTY, MINNESOTA
RESOLUTION 2012-093
WATER, SANITARY SEWER
AND REFUSE 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 Ordinance No. 92-707, City Code section 605.04 which defines refuse charges for
collection services; and
WHEREAS, the ordinances authorizes water, sanitary sewer and refuse rates to be set
forth by council resolution; and
WHEREAS, it is estimated the present water and sewer utility rates are not sufficient to cover
operating expenses over the next five years and will not provide sufficient funding for capital
improvement projects identified in the 2012 - 2015 Capital Improvement Plan and the 10 year Utility
Master Plan completed in 2007 and revised in 2009 and 2011; and
WHEREAS, it is estimated the present refuse rates need to incorporate future equipment 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 and Refuse Programs at the following
rates to be paid to the City upon billing therefore as follows:
The water service usage charge for all classes of users on the system at $2.02 per 1,000 gallons of
water used.
The water service charge for metered sprinklers for all classes of users on the system at $2.40 per
1,000 gallons of water used — no change.
The sanitary sewer service charge for all classes of users on the system at $3.90 per 1,000 gallons
of water used.
The refuse rates at $16.85 for a 30 gallon container (no change), $20.85 for a 60 gallon container;
and $24.30 for a 90 gallon container.
EFFECTIVE DATE: The provisions of this resolution shall be effective January 1, 2013.
Adopted by the City Council of the City of Hopkins, Minnesota, this 18th day of December 2012.
Eugene J. Maxwell, Mayor
ATTEST:
Kristine A. Luedke, City Clerk
WATER FUND - WORKING CAPITAL PROJECTION 07/19/2012
Actual
Projected
Projected
Projected
Projected
Projected
Projected
2011
2012
2013
2014
2015
2016
2017
Working Capital Beginning Year
(268,206)
(488,484)
252,992
265,385
400,298
824,120
518,919
Revenues:
Operating Revenues
1,265,930
1,262,050
1,300,600
1,339,150
1,377,850
1,416,550
1,461,500
Other
132,583
129,480
140,280
152,149
158,533
165,235
172,272
Interest
(2,329)
0
0
0
0
0
0
Bond Issuance
760,519
1,200,000
1,200,000
Total Revenues
1,396,184
2,152,049
2,640,880
1,491,299
2,736,383
1,581,785
1,633,772
Expenditures:
Operation Expense
986,607
969,448
1,002,998
1,037,781
1,073,846
1,111,244
1,150,027
Other Exp - int on current bonds
36,913
0
0
Other Exp - int on refunded bonds
14,825
11,475
7,587
2,700
Other Exp - int on 2009 bonds
26,300
25,350
24,225
22,850
21,350
19,725
Other Exp - int on 2012 bonds
5.664
16,793
16.365
15,893
15,375
Other Exp - int on 2013 bonds
65.000
62,500
59,750
Other Exp - int on 2015 bonds
65.000
62.500
Equipment Replacement Items
0
0
75,000
0
6,800
0
61.700
Capital Improvements
384,169
190,000
1,248,000
0
800,000
411,000
200,000
Principal Bond payment
200,000
Principal Bond payment - refunded
165,000
170,000
175,000
180,000
Principal Bond pymnt - 2009 debt
45,000
50,000
50,000
50,000
50,000
50,000
Principal Bond pymnt - 2012 debt
40,000
45.000
45.000
45,000
45,000
Principal Bond pymnt - 2013 debt
50,000
55,000
60.000
Principal Bond pymnt - 2015 debt
50.000
55,000
Capital Lease (PW Facility) (1)
0
0
0
0
0
0
0
Total Expenditures
1,607,689
1,410,573
2,628,487
1,356,386
2,312,561
1,886,987
1,779,077
Change in available funds
(211,505)
741,476
12,393
134,914
423,822
(305,202)
(145,305)
Inventory change
194
Bond Premium/Discount Exp
(8.967)
Working Capital Ending Year
(488,484)
252,992
265,385
400,298
824,120
518,919
373,614
(1) Capital Lease moved to Storm Sewer
Rate History
2012 - 2017 financial
data w%,s
ration /tom
the Utility Master
Plan done by City Engineer
1984 $0.85
1993 $1.05
Notes -
1997 $1.10
Income - 2008 and forward used utility master plan rates (fixture/no
surcharge option)
2000 $1.20
2005 $1.40
Per Utility Master Plan (10/07)
2008 $1.65
2009 $1.86
2010 $1.90
2011 $1.94 - not increased, left at $1.90
2012 $1.96
2013 $2.02
2014 $2.08
Projected rate
Increases
2015
2016 $2.20
2017 $2.27
Working Capital Beginning Year
Revenues:
Operating Revenues
Other
Interest
Bond Issuance
Total Revenues
Expenditures:
Operation Expense
MWCC Charges (3% inflation)
Interest Expense - 2009 Debt
Interest Expense - 2012 Debt
Interest Expense - 2013 Debt
Interest Expense - 2015 Debt
Equipment Replacement Items
Capital Improvements
Principal Bond payment (2009)
Principal Bond payment (2012)
Principal Bond payment (2013)
Principal Bond payment (2015)
Capital Lease (PW Facility) (1)
Total Expenditures
Change in available funds
Inventory change
Bond Premium/Discount Exp
Working Capital Ending Year
(1) Capital Lease moved to Storm Sewer
Rate History
1983 $1.50
1989 $1.75
1991 $2.00
1993 $2.50
1999 $2.25 Rate DECREASE
2006 $2.50 rate increase
Per Utility Master Plan (10/07)
2008$2.70
2009$3.10
2010$3.40
2011 $3.70 - act 3.60
2012 $3.75
2013 $3.90 projected rate
2014$4.05 increases
2015$4.21
2016$4.38
2017$4.55
these are the correct rates per the UMP
SEWER FUND - WORKING CAPITAL PROJECTION
07/19/2012
Actual
Projected
Projected
Projected
Projected
Projected
Projected
2011
2012
2013
2014
2015
2016
2017
79,006
98,771
398,662
619,769
763,261
943,574
778,988
1,823,054
2,137,500
2,223,000
2,308,500
2,399,700
2,496,600
2,593,500
15,895
23,000
20,000
20,000
20,000
20,000
20,000
421
2,469
997
1,549
1,908
2,359
1,947
170,520
700,000
500,000
1,839,369
2,333,489
2,943,997
2,330,049
2,921,608
2,518,959
2,615,447
473,113
516,840
534,037
551,833
570,253
589,319
609,053
1,148,036
1,309,108
1,371,126
1,436,144
1,504,307
1,575, 771
1,650,698
32,651
32,650
31,450
30,100
28,450
26,575
24,463
1,277
3,780
3,685
3,580
3,465
21,000
19,800
18,700
17,500
15,000
14,100
0
0
0
35,700
6,800
33,600
26,400
114,363
115,000
715,000
0
500,000
280,000
120,000
50,000
60,000
60,000
60,000
60,000
65,000
65,000
10,000
10,000
10,000
10,000
10,000
38,000
38,000
38,000
38,000
28,000
28,000
0
0
0
0
0
0
0
1,818,163
2,033,598
2,722,890
2,186,557
2,741,295
2,683,545
2,606,679
21,207
299,891
221,107
143,492
180,313
(164,586)
8,768
0
(1,442)
98,771
398,662
619,769
763,261
943,574
778,988
787,757
2009 - 2017 financial data was taken from the Utility Master Plan done by City Engineer
Working Capital Beginning Year
Revenues:
Operating Revenues
Refuse Collection
Recycling Rates
Bulk Collection
Yard Waste
Recycling rebates
Miscellaneous (penalties)
Grants
Gain on sale of assets
Interest
Total Revenues
Expenditures:
Operation Expense
Transfer Out
Capital Outlay (per ERP)
Capital Projects per CIP
Capital Lease (PW Facility)
Total Expenditures
Change in available funds
Inventory change
Working Capital Ending Year
Rate History
1989 $15.10
1991 $17.25
1995 $11.00-14.45 refuse
$2.25 recycling fee
2002 $2.75 recycle fee
2005 $13.20, 15.90, 17.25, refuse
2008 $3.25 recycling fee
2009 $15.85, 18.55, 21.25, refuse
2009 $3.50 recycling fee
2010 $3.75 recycling fee
2011 $16.85, $19.85, $23.15 refuse
2012 $4.00 recycling fee
2013 $16.85, $20.85, $24.30 refuse
2014 $4.25 recycling fee
2015 $18.85; $21.85; $25.15 refuse
2016 $4.50 recycling fee
2017 $19.85; $22.85; $26.15 refuse
2018 $4.75 recycling fee
2019 $20.85; $23.85; $27.15 refuse
2020 $5.00 recycling fee
REFUSE FUND - WORKING CAPITAL PROJECTION
07/19/2012
Actual
Projected
Projected
Projected
Projected
Projected
Projected
2011
2012
2013
2014
2015
2016
2017
477,030
531,787
624,922
703,458
671,238
576,411
675,842
x 710,371
727,860 x
738,786
738,786 x
788,786
788,786 x
838,786
129,992 x
138,092
138,092 x
146,192
146,192 x
154,292
154,292
12,073
15,000
12,000
12,000
12,000
12,000
12,000
10,028
18,500
10,000
10,000
10,000
10,000
10,000
64,540
30,000
30,000
30,000
30,000
30,000
30,000
13,152
7,000
10,000
10,000
10,000
10,000
10,000
43,697
28,000
19,000
18,500
18,000
17,500
17,000
23,671
3,482
2,659
3,125
3,517
3,356
2,882
3,379
1,011,005
967,111
961,002
968,995
1,018,334
1,025,460
1,075,457
721,778
848,976
857,466
874,615
883,361
901,028
910,039
210,833
0
0
101,600
204,800
0
0
25,000
25,000
25,000
25,000
25,000
25.000
25,000
957,611
873,976
882.466
1,001,215
1,113,161
926,028
935,039
53,395
93,135
78.537
(32,220)
(94,827)
99,431
140,418
1.362
531,787
624,922
703,458
671,238
576,411
675,842
816,260
x = year this rate will be raised
Refuse accounts as of 7/2012 = 2,742
On average recycling accounts total 2700 per month
Each $0.25 increase generates approximately $8,100 additional revenue per year