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<br />r I ---'\) <br />( )j <br />fl~ <br /> <br />ITEM 3.1.A. <br /> <br /> <br />MEMORANDUM <br /> <br />TO: <br /> <br />MAYOR & CITY COUNCIL <br /> <br />{l~ <br /> <br />FROM: <br /> <br />LORI JOHNSON, FINANCE DIRECTOR <br /> <br />DATE: FEBRUARY 18, 1994 <br /> <br />SUBJECT: SEWER RATE INCREASE <br /> <br />e <br /> <br />At the January 8, 1994, City Council meeting, the City Council was <br />presented with information regarding the Wastewater Treatment Plant <br />expansion and the amount of revenues needed to fund that expansion. In <br />conjunction with the expansion, the City Council talked about sewer rates. <br />As you may recall, the sewer rates structure changed in 1989. At that time, <br />the rate per thousand gallons was not increased; the last rate per gallon <br />increase was in 1986. However, in 1989 there were rate structure changes <br />such as setting minimum and flat unit fees for apartment units and houses <br />when it was not possible to base the sewer rate on the January, February and <br />March meter readings. The 1994 proposed increase would not change the <br />current billing structure, but would increase the per gallon and minimum <br />charges. <br /> <br />There are two components to the sewer user charge. Part is to pay for the <br />ongoing operating expenses associated with running the plant. The second <br />part is to cover expansion and replacement expenses. Certainly our <br />operating expenses have increased since 1989, and as you are very well <br />aware, additional revenues are needed to help fund the upcoming plant <br />expansion. Additional revenues may also mean that the expansion could be <br />accelerated. <br /> <br />e <br /> <br />Attached is a list of several rate increase options ranging from an initial <br />increase of four percent or five percent with increases in the subsequent <br />years of either one and one-half or two and one-half percent. Based on four <br />percent growth in the number of customers, you can see what each of these <br />rate increases would generate in revenues. The revenue estimates are based <br />on current information and best guesses for future growth. If growth exceeds <br />projections, of course these revenue estimates would be low, and if for some <br />reason growth is not at the four percent level, then these revenues would be <br />overstated. As we have already discussed, any increase in the rates means <br />that there is additional revenue to pledge towards debt service of the bonds <br />needed for plant expansion. <br /> <br />P.O. Box 490 · 13065 Orono Parkway · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425 <br />