10.1. SR 11-01-2021 - Laserfiche WebLink

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Summary Memorandum Re: Sewer Revenue Adequacy October 21, 2021 SUMMARY OF FINDINGS AND RECOMMENDATIONS years old. Anticipating that significant renewal and replacement of Sewer infrastructure will be coming in the near future, the City has identified the need to develop a rate strategy designed to achieve full cost recovery and support future renewal and replacement. The following recommendations have been developed for consideration moving forward. For 2022, adopt increases of five percent (5.0%) for the Sewer volumetric and minimum charges for Domestic (City) users. Because the rate adjustment projections for Scenarios 1 and 2 are very similar, we recommend adopting the Scenario 1 adjustment for 2022 and discussing the desired future approach over the course of the next year in conjunction with capital planning discussions. For 2022, adopt a three percent (3.0%) increase to the volumetric charge for leachate treatment. Consider annually indexing this charge by three percent, as has generally been the practice. Further develop the Sewer Utility CIP to identify strategic infrastructure renewal and replacement items for the next 10- for on-going reserve-planning, and that will change over time. Adopt a strategy/policy for capital R&R planning that can guide City staff in setting future rates and prioritizing capital. Adopt an approach to rate planning that incorporates full-cost pricing and eliminates the revenue deficiency over an identified planning period. Revisit this plan annually and determine whether to continue funding depreciation only or to fund a value more closely representing the future costs of infrastructure replacement. Inform decision-makers and the public as to your goals and approach to financial sustainability. This should include a look-ahead at potential rate adjustments for future years, with the explanation that the City will review annually and adjust to reflect current conditions. Based on recent growth, it appears that the existing SAC will be adequate to address debt service requirements in 2022 unless additional capital investment will be needed in the near- term to accommodate the new growth. However, the City could justify an increase to the SAC in 2022 based on the most recent construction cost indices, which indicate that construction costs have increased in the range of five to six percent from 2020 to 2021. If new infrastructure is required to accommodate growth in the near future, the SAC should be reviewed at that time. AE2S Nexus appreciates the opportunity to assist the City with this effort. If there are any questions regarding information within this Summary Memorandum, please do not hesitate to contact us at (701) 746-8087. Project Number Page 20 of 20 Think Big. Go Beyond. www.ae2s.com