5.1. ERMUSR 07-12-2011 - Laserfiche WebLink

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Elk River Municipal Utilities 1306) Orono Parkway • P.O. Box 430 Elk River, MN 55330-0430 UTILITIES COMMISSION MEETING Phone: 763.441.2020 Pax' 763.441.8099 TO: FROM: Elk River Municipal Utilities Commission Theresa Slominski -Finance Director John Dietz, Chair Daryl Thompson, Vice Chair ~ Allan Nadeau, Trustee MEETING DATE: AGENllA ITEM NUMBER: July 12, 2011 5 ~ 1 ~' SUBJF,CT: Review and Consider Water Rate Anal psis BACKGROUND: At our May Commission meeting "Tim Simon, City of Elk River Finance Director, was asked to work with Troy Adams and Dave Berg to review our tiered water rate structure, exploring the option of two tiers versus three tiers, using the model that Tim had created in 2010. As Utility staff input was necessary to gather appropriate consumption information for this analysis, myself and Lorrie Franz, Utility Staff Accountant, have been included in this analysis. With the recent changes in Tim's responsibilities, we have taken on more of the model input and analysis and have worked with Tim on perfecting it. DISCUSSION: Currently we have three tiers for water rates, which we implemented when we requested our change in appropriations, per DNR recommendation. The actual enforceable requirement is only for two tiers. Recognizing that we made this change in the spirit of water conservation and not revenue enhancement, we made the change "revenue neutral" and the highest water users pay a premium for their excessive water use. For this requested analysis, to remove the third tier and have only two tiers, there would be a revenue shift to other users, or an overall reduction to revenue. The information presented is a graph showing the current cash flow projections assuming no significant structural rate changes (status quo). The second graph presents the impact to cash flow projections of removing the third tier revenue. The final document is a summary of the dollar impact of condensing to two tiers including the rate increases necessary to combine the second and third tier, or absorbed the revenue impact into the first tier. ACTION REQUESTED: Recognizing that this analysis is a starting point for discussion, staff is seeking direction from the Commission on the parameters the Commissioners would like to set for further analysis and scenario building.