01-10-1994 Council Packet - Laserfiche WebLink

Home Browse Search

TO: mOM: DATE: SUBJECT: Mayor ml City CouiKil Ron Moone. City Administntor January 6, 1994 Ordinance Adjustii^ Water mi Sewer Rates for 1994 V'*y * Aftachments : A. Proposed 1994 Water and ScNk^r Rates B. 1994 Utility Rate Study Summary of Rates C. Ordinance retlectmg the Proposed Sewer and Water Rate Adjustments Back!J vUliTf Both the sewer and water funds experienced operating losses m 1992. Although otter revenues in the sewer fund offset the operating loss to enable an overall increase in rctaiiKd camiiit;;s, the water fund experienced a $39,000 decrease in retained earnings Based on this experience and on recommendations from tte City ’s A ikIuot and direction from the City Council, suff has completed a rate stmly for both water and sewer rates for 1994. Tte results of tte rate study and the staff proposal regarding rate increases are described in tte information to follow. Rate Studs Tte rate swdy identifies all expenditures and determines the level of revenues needed to match tte expenditures. Tte total revenues are then translated into rates. There are three alternative revenue or funding level? included in the rate study analysis. Each alternative covers all operating expenditures. Ite difference in the rate levels is in the amount of depreciation funded. Tte minimum operating rale covers only operating expenditures and no depreciation. The modified operating rate recovers a portion of tte depreciation. The full operating rale recovers the full depreciation on all mains and lines. The staff recommendation reflects the modified operating rate. The reasons for using the modified operating rate are as tollows: 1 Tte utility rales should include a moderate level of funding of depreciation because there will be periodic major maintenance/repair expenditures that are beyond the level of ongoing maintenance reflected in the operating budget. For example, there are currently several lift stations that will require major upgrades in the next few years. This expenditure is beyond the general maintenance amount included in the operating budget, but can be funded out of retained earnings because the rales have included an amount of dwpreciation that has been set aside for this purpose. The funding of depreciation enables rates to remain more stable from year-to-year. If a fund e.xperiences a major maintenance expenditure, this can be at least partially funded through reserves rather than requiring a significant rate increase for a one lime major expense.