07-26-1993 Council Packet - Laserfiche WebLink

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/ '> TO: FROM: DATE: Mayor and City Council Ron Moorse, City Administrator July 23, 1993 SUBJECT: Sewer and Water Rate Study Sewer Rates \ ^ 'S' ^ % V :sewer Kaces Sewer rates have not kept up with expenditure increas^^ (mainly MWCC rates) for several years. Until 1992 interest earnings enabled the sewer utility to operate without a loss. In 1992 the com±)ination of increased MWCC rates, reduced interest earnings, and a substantial unplanned sewer repair project caused the sewer fund to operate at a deficit. The major cause of the increase in expenditures is MWCC charges. These charges have increased from $139,487 in 1991, to $191,481 in 1992, to $259,548 in 1993. In addition tc the normal MWCC gallonage rate increases of approximately 5% per year, the overall MWCC cost increase is due to two major items. 1. An increase in flows as we have moved from a dry period to a wet period beginning in 1990. 2. The impact of the wet years was delayed and then magnified because of the MWCC's two year delay in reflecting the actual flows. This delay results in credits when estimated flows are higher than the actual flows, and results in debits when the estimated flows are lower than the actual flows. As we entered into 1990 we were receiving large credits from '88 and 89 due to the actual flows being significantly less than the estimates. As the actual flows increased, their impact on rates was tempered by these large credits; until- 1992 when the credits ran out and the full impact of increased flows was felt. The MWCC charges increased from $131,487 in 1991 to $195,492 in 1992. As we moved into 1991 and 1992, the MWCC flow estimates did not keep up with the increase in flows, which caused actual flows to be higher than estimated flows for these years. The result is that in 1993 the City will experience a double impact of the flow increase and a debit amount of $41,000. This will cause a further increase in charges from $195,000 to $259,000. This is a two year increase of $128,000 or *^8%. These MWCC charges will continue at this level through at least 1996 and possibly beyond if precipitation remains at its high level. In order to generate sufficient revenue to pay these higher MWCC charges, and also to fund depreciation to build up a fund for future system replacement, nd to continue a program of upgrading the city's sewer lift stations; we need to determine ways to increase revenues and reduce other expenses to match the level of expenditures with the level of revenues. Options for dealing with this gap between revenues and expenditures