5.1. ERMUSR 07-12-2011Elk 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.
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
ERMU Water Utilities Cash Reserves
July 2011 Projection Verofon 1
ERMU Water Utilities Cash Reserves
July 2011 Projection Version 1 versus Version 2
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
^Target Cash ^Verolonl(Ju1y 2011) ',~
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
^Target Cash ^ Version 1 (July 2011) ^ Venion 2 (slim Tier 3)
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