3.1.A. SR 02-21-1994
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ITEM 3.1.A.
MEMORANDUM
TO:
MAYOR & CITY COUNCIL
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FROM:
LORI JOHNSON, FINANCE DIRECTOR
DATE: FEBRUARY 18, 1994
SUBJECT: SEWER RATE INCREASE
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At the January 8, 1994, City Council meeting, the City Council was
presented with information regarding the Wastewater Treatment Plant
expansion and the amount of revenues needed to fund that expansion. In
conjunction with the expansion, the City Council talked about sewer rates.
As you may recall, the sewer rates structure changed in 1989. At that time,
the rate per thousand gallons was not increased; the last rate per gallon
increase was in 1986. However, in 1989 there were rate structure changes
such as setting minimum and flat unit fees for apartment units and houses
when it was not possible to base the sewer rate on the January, February and
March meter readings. The 1994 proposed increase would not change the
current billing structure, but would increase the per gallon and minimum
charges.
There are two components to the sewer user charge. Part is to pay for the
ongoing operating expenses associated with running the plant. The second
part is to cover expansion and replacement expenses. Certainly our
operating expenses have increased since 1989, and as you are very well
aware, additional revenues are needed to help fund the upcoming plant
expansion. Additional revenues may also mean that the expansion could be
accelerated.
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Attached is a list of several rate increase options ranging from an initial
increase of four percent or five percent with increases in the subsequent
years of either one and one-half or two and one-half percent. Based on four
percent growth in the number of customers, you can see what each of these
rate increases would generate in revenues. The revenue estimates are based
on current information and best guesses for future growth. If growth exceeds
projections, of course these revenue estimates would be low, and if for some
reason growth is not at the four percent level, then these revenues would be
overstated. As we have already discussed, any increase in the rates means
that there is additional revenue to pledge towards debt service of the bonds
needed for plant expansion.
P.O. Box 490 · 13065 Orono Parkway · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425
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RECOMMENDATION
Staff is recommending that the Council approve a rate increase effective
April 1, 1994, and also that increases for 1995 and 1996 be approved at this
time. The 1995 and 1996 increases will ensure that operating expense
increases are reflected in the rates. The attached resolution will approve
sewer rate increases effective April 1, 1994, January 1, 1995, and January 1,
1996.
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RESOLUTION 94 -
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A RESOLUTION FOR THE CITY OF ELK RIVER
A RESOLUTION SETTING THE SANITARY SEWER USER FEES
FOR 1994, 1995 AND 1996
WHEREAS, the costs for providing sanitary sewer services are to be
funded through a user charge; and,
WHEREAS, the user charge is to cover ongoing operating expenses and
future replacement and expansion expenses; and,
WHEREAS, the current user fees are not adequate to cover both
operating and expansion and replacement fees.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Elk
River that sanitary sewer user fees be set as follows:
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Explanation
4/1/94
1/1/95
1/1/96
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Charge per 1,000 gallons
Minimum Charge
Apartment Unit Charge
House Unit Flat Charge
Minimum Sr. Citizen Charge
$
$
$
Passed and adopted by the City Council of the City of Elk River this 21 st
day of February, 1994.
Henry A. Duitsman, Mayor
ATTEST:
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Patrick D. Klaers, City Administrator
SEWER RATES
e 1-Apr-94 1-Jan-95 1-Jan-96
CURRENT 5% INC 1.5% INC 1.5% INC
Per 1000 gal 2.55 2.68 2.72 2.76
Minimum Charge 5.95 6.25 6.34 6.44
Apartment Unit Charge 10.20 10.71 10.87 11.03
House Unit Flat Charge 13.60 14.28 14.49 14.71
Minimum Senior Citizen 0 0.00 0.00 0.00
Yearlv Revenue 469,400 487,003 494,308 501,722
Yearly Revenue inc. 4%
growth factor 506,500 534,661 564,388
1-Apr-94 1-Jan-95 1-Jan-96
CURRENT 5%INC 2.5% INC 2.5% INC
Per 1000 gal 2.55 2.68 2.75 2.82
Minimum Charge 5.95 6.25 6.41 6.57
Apartmant Unit Charge 10.20 10.71 10.98 11.25
Houaa Unit Flat Charge 13.60 14.28 14.64 15.01
Minimum Senior Citizen 0 0.00 0.00 0.00
Yearlv Revenue 469,400 487,003 499,178 511,657
Yearly Revenue inc. 4%
growth factor 506,500 539,929 575,564
l-Apr-94 l-Jan-95 l-Jan-96
CURRENT 4% INC 1.5% INC 1.5% INC
Per 1000 gal 2.55 2.65 2.69 2.73
Minimum Charge 5.95 6.19 6.28 6.37
Apartment Unit Charga 10.20 10.61 10.77 10.93
House Unit Flat Charge 13.60 14.14 14.35 14.57
Minimum Senior Citizen 0 0.00 0.00 0.00
e Yearly Revenue 469,400 483,482 490,734 498,095
Yearly Revenue inc. 4%
growth factor 502,822 530,779 560,290
l-Apr-94 l-Jan-95 l-Jan-96
CURRENT 4%INC 2.5% INC 2.5% INC
Per 1 000 gal 2.55 2.65 2.72 2.79
Minimum Charge 5.95 6.19 6.34 6.50
Apartment Unit Charge 10.20 10.61 10.88 11.15
House Unit Flat Charge 13.60 14.14 14.49 14.85
Minimum Senior Citizen 0 0.00 0.00 0.00
Yearly Revenue 469,400 483,482 495,569 507,958
Yearly Revenue inc. 4%
growth factor 502,822 536,008 571,385
No..~M~@;M~$ti
Yearly Revenue inc. 4%
growth lector 469,400 488,176 507,703 528,011
AMOUNT AVAILABLE FOR DEBT SERVICE.
1994 1995 1996
OPTION 1 196,750 225,973 255,516
OPTION 2 196,750 231,241 266,692
OPTION 3 193,072 222,091 251,418
OPTION 4 193,072 227,320 262,513
NO RATE INCREASE 173,850 194,256 214,190
* Based on assumptions from January 7, 1994, Wastewater Treatment Expansion
Estimates worksheet (4% annual growth in customers & 5% annual growth
e in operating expenses).
SEWER.XLS 2/18/949:35 AM
SEWER RATES
City of Elk River
January 1, 1989
Current MONTHLY Rates:
Rate per 1000 gallons
Flat Rate
Minimum Rate
Apartment Rate Per Unit
$ 2.55
13.60
5.95
10.20
Your monthly billing is calculated based on a monthly average of
the January, February, and March water readings.
Residential customers with no water readings for these months
will be billed $13.60 per month.
(over)
The flat rate applies to those connected to City Sewer but not
City Water.
Senior Citizens will be billed based on actual useages; there is
no minimum. You must apply for this special rate.
Industrial and Commercial users with higher than average strength
waste will be charged using a formula which is based on waste
strength.
All rates listed are in accordance with the Sewer Rate Study
adopted by the Elk River City Council December 12, 1988.
For more information call 441-7420 or 441-5136.
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