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Staff is recommending significant increases for next year. The reason for this is level of capital <br />expenditures over the near term. Higher increases next year, allow the City to meet funding goals <br />while keeping rates lower in future years. <br />Water Rates: <br />The Water Fund has the most significant funding issues. In 2019 the water rates were increased by <br />35%. The current analysis indicates that the 2020 rates will require an addition 35% increase in <br />2020. This would be followed with a 20% in 2021 and a 10% increase in 2022. In the years after <br />2022 the increases could be reduced to either an annual increase in the 1% to 2% range. <br />Staff is recommending a new rate category be instituted for our customers on Long Lake water. <br />Long Lake currently charges water using a tiered system that does not match Orono's. Long Lake's <br />structure is: usage from 0 — 8,000 gallons is tier one, >8,000 — 22,000 is tier 2, and over 22,000 is <br />tier 3. Our tier cutoffs are at 10,000 and 25,000 gallons. This will not have a significant impact on <br />revenue, but would match up the tiers which is already the case with customers served by Wayzata. <br />Another change that staff is recommending is that commercial and multifamily residential buildings <br />have their base fee calculated on the number of SAC units attributed to the building by the <br />Metropolitan Council. This change is seen as a fairness issue with a resident of an apartment <br />paying only a small percentage of the base fee while a resident in a single family home pays $50. <br />This change would increase revenue by $26,000. The water rate charts have been prepared with <br />this change. Staff is also considering reducing the tier structure for these properties and is <br />currently working on a revenue estimate. <br />Other options that are shown on the rate charts include moving the antenna revenue back to the <br />Water Fund. One scenario would be to phase this in starting in 2023 once the Pavement <br />Management Levy can provide sufficient funding. The other would be to move it starting in 2020, <br />this would have the greatest impact in next year's rates — decreasing the increase to 25% instead of <br />30%. <br />The greatest impact to rates moving forward would be if Minnetonka Beach enters into an <br />agreement to purchase water from Orono. The rate increases for the next two years would be <br />reduced to 20% and 16% repeatedly. Unless an agreement with Minnetonka Beach is reach by the <br />end of the year, staff would suggest approving rates with the assumption that Minnetonka Beach is <br />not purchasing water for 2020. A comparison chart is included so these changes can be easily <br />compared. <br />Stormwater <br />The Stormwater Fund also needs a significant rate increase, but the current fee is much lower than <br />the other utility fees so the impact on the customer will be less. Charts have been prepared <br />detailing a 60% increase in 2020 and a 40% increase in 2021. This would provide adequate <br />funding, but in 2025 the rate would be nearing $60 per quarter. If the council is willing, staff would <br />recommend a 95% increase in 2020 with a 7% increase in 2021. This would provide the needed <br />funding but would keep the 2025 rate at $55. The third stormwater chart is based on moving <br />$100,000 for culverts out of this fund and into the Street Department. <br />