12-15-2009 Council Work Session Minutes

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Orono City Council Committee of the Whole December 15,2009, 6:15 p.m. Orono City Council Chambers o Comply with state mandate to implement conservation rates by January 1, 2010; which also encourages people to use less water. • Intent for increase in tier rates is to have heavy water users pay higher costs. • Water revenue volatility should be considered—less water used; less revenue. o Wet-dry years impact use o Residential usage spikes in summer for irrigation use • Operating revenue is slightly below operating expenditures. • Ehlers is recommending adoption of the tier structure and proposed rate changes based on the following: o Current rate structure is quarterly based on fixed costs and metered use for 3 different areas. o Tiering could lower bills for residents. o Rate increases are proposed at 6-8% in 2011-2016; typical of other cities. 0 3 tiers are proposed. Most users fall in first two tiers with approximately 33%in each tier. Allocation of tiers is defensible and rational. • Average water use is 100 gallons per person per day with no irrigation. • Rates are intended to be revenue neutral to city. • Need to revisit rate study in a few years to review usage. • Commercial/multi-family properties: ■ DNR interpretation applies to commercial also. ■ 13 of 41 commercial users in Orono fall into 3�d tier. o January 1, 2010 is the deadline for compliance in the metro area. The city won't be approved for any new wells until in compliance. o Water meters are in process of being replaced. Older meters may not be capturing all the usage as the usage rates seem low. • Reserve recommendations: o Utility funds should have 6 months of operating expenditures 0 100%of next year's debt payment o Small portion of next year's capital cost o Percent of accumulated depreciation • Sewer Rates o Conservation rate structure only applies to water. o Current sewer rates are billed quarterly. o Ehler's recommendation is to maintain overall rate structure and increase rates by 4% annually. The city has been raising rates yearly by approximately 3%. o Met Council expenses are outside the city's control. Met Council has not been collecting all expected connection charges and SAC funds are depleting. To offset their expenses, they are ramping up other costs. • Stormsewer Rates o No change to rate structure is recommended. o Residential equivalent unit rate should increase 8%- 10%annually for several years. • Summary of recommendations from Utility Rate Study: o Adopt rate structure and level of increases as recommended o Consider special assessments o Adopt reserve policies o Update utility study periodically—cities often use outside consultant Page 3 of 4