CR 2013-125 Proposed Water Utility, Sanitary Sewer Utility and Refuse Rate IncreasesDecember 4, 2013 city of KoPkins Council Report 2013-125
PROPOSED WATER UTILITY, SANITARY SEWER UTILITY
AND REFUSE RATE INCREASES
Proposed Action
Staff recommends adoption of the following resolution: Move to adopt Resolution No. 2013-077 increasing
water, sanitary sewer and recycling rates effective January 1, 2014.
Adoption of this motion will result in increasing the water rate from $2.02 to $2.10, the water service charge for
metered sprinklers from $2.40 to $2.50 per 1,000 gallons of water used, the sanitary sewer rate from $3.90 to
$4.10 per 1,000 gallons of water used, and the and the recycling rate from $4.00 to $4.25 per month effective
January 1, 2014 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, 2011 and 2013. 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 recycling rates are not funding the recycling operations of the refuse program.
Recycling program operating costs have increased over 11 % from 2011 primarily due to contractual obligations and
fuel related costs. In addition with the fluctuation of the market for recyclable goods our rebate income has decreased.
With the proposed recycling rate increase we are projecting a 2014 recycling departmental net loss of $6,080. This
may be mitigated if the market for recyclables goes back up.
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 ", 2014.
Supporting Information
• Resolution No. 2013-077
• 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 2013 Utility Master Plan (as revised) Notes:
Additional Information Reaardin<g, 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) approximately $0.60 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 $1.50 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 3% for
2014 and to provide for necessary improvements to the sanitary sewer system.
Refuse - Recycling rates were last increased in 2012. As a result of the 2014 budget process and an
analysis of increasing operational costs of contractual arrangements and fuel related costs a recycling
rate adjustment was proposed. The rate increase is a flat $0.25 per month.
Why are the Rate Increases Recommended ?
In 2007 staff developed a Utility Master Plan covering the next 10 years which was revised in 2009,
2011 and again in 2013. 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. 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 proiects?
Water — Over the next 5 years we have scheduled $1,786,000 in capital infrastructure needs the largest
of which is water infrastructure related to street improvements totaling $1,550,000 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 $1,150,000 in capital improvements the
largest of which is sewer infrastructure related to street improvements totaling $965,000 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 — Two refuse trucks totaling $306,400 are scheduled for replacement in 2015, one a rear
loader and one an automated side loader.
CITY OF HOPKINS
HENNEPIN COUNTY, MINNESOTA
RESOLUTION 2013-077
WATER, SANITARY SEWER
AND RECYCLING 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 recycling 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 2014-2018 Capital Improvement Plan and the 10 year Utility
Master Plan completed in 2007 and revised in 2009, 2011 and 2013; and
WHEREAS, it is estimated the present recycling rates are not sufficient to cover current and
future operating expenses for the recycling program;
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 Utililities and Recycling 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 $2.10 per 1,000 gallons of
water used.
The water service charge for metered sprinklers for all classes of users on the system at $2.50 per
1,000 gallons of water used.
The sanitary sewer service charge for all classes of users on the system at $4.10 per 1,000 gallons
of water used.
The recycling service charge for all users on the system at $4.25 per month, per recycling unit.
EFFECTIVE DATE: The provisions of this resolution shall be effective January 1, 2014.
Adopted by the City Council of the City of Hopkins, Minnesota, this 3`d day of December 2013.
Eugene J. Maxwell, Mayor
ATTEST:
Kristine A. Luedke, City Clerk
Working Capital Beginning Year
Revenues:
Operating Revenues
Other
Interest
Bond Issuance
Total Revenues
Expenditures:
Operation Expense
Other Exp - bond issuance -fiscal fee
Other Exp - int on current bonds
Other Exp - int on refunded bonds
Other Exp - int on 2009 bonds
Other Exp - int on 2012 bonds
Other Exp - int on 2013 bonds
Equipment Replacement Items
Capital Improvements
Principal Bond payment
Principal Bond payment - refunded
Principal Bond pymnt - 2009 debt
Principal Bond pymnt - 2012 debt
Principal Bond pymnt - 2013 debt
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 (water/sorink/er)
1984 $0.85
1993 $1.05
1997 $1.10
2000 $1.20
2005 $1.40
Per Utility Master Plan (10107)
2008 $1.65
2009 $1.86
2010 $1.90
2011 $1.94/2.40 - not incr, left at $1.90
2012 $1.96/2.40
2013 $2.02/2.40
2014 $2.10/2.50
2015 $2.18/2.60
2016 $2.25/2.70 projected rate
2017 $2.35/2.85 increases
2018 $2.45/3.00
WATER FUND - WORKING CAPITAL PROJECTION
07/26/2013
Actual
Projected
Projected
Projected
Projected
Projected
Projected
2012
2013
2014
2015
2016
2017
2018
(488,484)
76,872
(249,301)
(103,657)
(24,280)
244,951
475,211
1,403,420
1,300,600
1,364,980
1,377,850
1,416,550
1,461,500
1,506,450
134,451
140,280
152,149
158,533
165,235
172,272
179,661
(804)
0
0
0
0
0
0
760,000
868,955
350,000
200,000
430,000
200,000
600,000
2,297,067
2,309,835
1,867,129
1,736,383
2,011,785
1,833,772
2,286,111
1,080,074
21,327
39,470
388,050
210,000
0
1,738,921
558,146
(219)
7,428
76,872
1,002,998
1,037, 781
1,073,846
1,111,244
1,150,027
1,190,249
0
0
0
11,475
7,587
2,700
25,350
24,225
22,850
21,350
19,725
17,887
13,185
14,179
13,379
12,529
11,629
10,729
22,713
17,431
16,431
15,431
14,381
75,000
0
6,800
0
61,700
1,248,000
350,000
200,000
436,000
200,000
600,000
170,000
175,000
180,000
50,000
50,000
50,000
50,000
50,000
55,000
40,000
40,000
40,000
45,000
45,000
45,000
50,000
50,000
50,000
55,000
0
0
0
0
0
0
2,636,008
1,721,485
1,657,006
1,742,554
1,603,512
1,988,246
(326,172)
145,644
79,377
269,231
230,260
297,865
(249,301) (103,657) (24,280) 244,951 475,211 773,076
2014 - 2018 financial data was taken from the Utility Master Plan done by City Engineer
Notes -
Income - 2008 and forward used utility master plan rates (fixture/no surcharge option)
Working Capital Beginning Year
Revenues:
Operating Revenues
Other
Interest
Bond Issuance
Total Revenues
Expenditures:
Operation Expense
MWCC Charges (3% inflation)
Other - Bond Issuance -fiscal fees
Interest Expense
Interest Expense - 2012 Debt
Interest Expense - 2013 Debt
Equipment Replacement Items
Capital Improvements
Principal Bond payment (2009)
Principal Bond payment (2012)
Principal Bond payment (2013)
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 (10107)
2008$2.70
2009$3.10
2010$3.40
2011 $3.70 - act 3.60
2012$3.75
2013$3.90
2014$4.10
2015$4 30
2016$4 55
2017$480 projected rate
increases
2018$5.10
SEWER FUND - WORKING CAPITAL PROJECTION
07126/2013
Actual
Projected
Projected
Projected
Projected
Projected
Projected
2012
2013
2014
2015
2016
2017
2018
98,771
394,411
408,940
363,237
338,286
191,018
241,333
2,131,881
2,223,000
2,308,500
2,399,700
2,496,600
2,593,500
2,696,100
22,424
20,000
20,000
20,000
20,000
20,000
20,000
639
986
1,022
908
846
478
603
170,000
495,102
2,324,944
2,739,088
2,329,522
2,420,608
2,517,446
2,613,978
2,716,703
475,599
534,037
551,833
570,253
589,319
609,053
629,484
1,132,299
1,371,126
1,436,144
1,504,307
1,575,771
1,650,698
1,729,256
10,765
32,462
31,450
30,100
28,450
26,575
24,463
22,187
2,946
3,149
2,949
2,749
2,549
2,349
21,000
19,800
18,700
17,500
0
0
36,800
33,600
26,400
59,700
319,962
715,000
225,000
175,000
305,000
120,000
325,000
60,000
60,000
60,000
60,000
65,000
65,000
65,000
10,000
10,000
10,000
10,000
10,000
10,000
38,000
38,000
38,000
38,000
38,000
0
0
0
0
0
0
2,031,086
2,724,559
2,375,226
2,445,559
2,664,714
2,563,663
2,880,976
293,858
14,529
(45,703)
(24,951)
(147,268)
50,315
(164,272)
(167)
1,949
394,411
408,940
363,237
338,286
191,018
241,333
77,060
2014 - 2018 financial data was taken from the Utility Master Plan done by City Engineer
Notes -
Income - 2008 and forward used utility master plan rates (no fixture option)
REFUSE FUND - WORKING CAPITAL PROJECTION 07/05/2013
Actual
Projected
Projected
Projected
Projected
Projected
Projected
2012
2013
2014
2015
2016
2017
2018
Working Capital Beginning Year
531,787
627,351
748,108
860,763
708,765
853,210
1,039,311
Revenues:
Operating Revenues
Refuse Collection
705,912 x
738,786
738,786 x
788,786
788,786 x
838,786
838,786
Recycling Rates
x 138,097
138,097 x
146,197
146,197 x
154,297
154,297 x
162,397
Bulk Collection
13,328
12,000
12,000
12,000
12,000
12,000
12,000
Yard Waste
9,470
10,000
10,000
10,000
10,000
10,000
10,000
Recycling rebates
28,881
30,000
30,000
30,000
30,000
30,000
30,000
Miscellaneous (penalties)
11,599
10,000
10,000
10,000
10,000
10,000
10,000
Grants
17,795
19,000
18,500
18,000
17,500
17,000
16,500
Gain on sale of assets
0
Interest
3,945
3,137
3,741
4,304
3,544
4,266
5,197
Total Revenues
929,027
961,020
969,224
1,019,287
1,026,127
1,076,350
1,084,880
Expenditures:
Operation Expense
807,192
815,264
831,569
839,885
856,682
865,249
882,554
Transfer Out
Capital Outlay (per ERP)
306,400
Capital Projects per CIP
Capital Lease (PW Facility)
25,000
25,000
25,000
25,000
25,000
25,000
25,000
Total Expenditures
832,192
840,264
856,569
1,171,285
881,682
890,249
907,554
Change in available funds
96,835
120,756
112,655
(151,997)
144,445
186,100
177,326
Inventory change
(1,271)
Working Capital Ending Year
627,351
748,108
860,763
708,765
853,210
1,039,311
1,216,636
Rate History
1989 $15.10
1991 $17.25
x = year this rate
will be raised
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
Refuse accounts as of 7/2012 = 2,742
2012 $4.00 recycling fee
On average recycling accounts
total 2700 per month
2013 $16.85, $20.85, $24.30 refuse
Each $0.25
increase generates approximately
$8,100 additional revenue
per year
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