03-10-2025 CC Agenda Packet - Laserfiche WebLink

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AGENDA ITEM Date: March 10, 2025 Title: Utility Rate Study Proposal Presenter: Maggie Jin, Finance Director Section: Finance Report Item: 20 Purpose: The purpose of this council item is to seek approval from Council to move forward with the proposed Utility Rate Study by Abdo. 2. Background: The City's enterprise operations are funded primarily by user fees and are operated as separate, stand-alone functions. In order to ensure utility rates, specifically water, sewer and stormwater, are adequately being charged to users within the City of Orono while maintaining current and future operating and capital needs and reserves, staff is recommending an external utility rate study be performed. The last external utility rate study was performed in 2009 by Ehlers and Associates. Internal studies completed by staff were performed in 2013 and in 2019. A new rate study will analyze the pricing structure to ensure current costs are reflected accurately and future needs are met. Scope: The proposed utility rate study will include the following key components: • Analysis of current rates and run scenarios to determine if other models or tier levels should be considered; • Evaluate the operational and infrastructure expenditures and assess revenue requirement to ensure adequate revenue is generated to cover both operational expenses and long-term infrastructure investments; • Review and discuss outcomes with city management and City council. 4. Options: While City staff possesses strong knowledge of the City's utilities and operations, partnering with an experienced external vendor has its key advantages. A consulting firm has expertise and specialized knowledge of current best practices, industry trends and regulatory changes to ensure an unbiased and an up-to-date analysis. Abdo has done numerous utility rate studies in other cities, with recent studies in Maple Plain, Belle Plaine, and Cologne, MN. An external vendor provides an impartial viewpoint, which can lend credibility to the findings and recommendations. Abdo has the resources and tools to conduct complex studies more quickly and efficiently and has advance modeling software that would be time consuming for internal staff to develop meanwhile ensuring accuracy. A third -parry vendor will help ensure transparency in the process. External consultants can offer innovative, forward -thinking solutions tailored to the City's specific needs. Their broader perspective can help staff anticipate future challenges and set a sustainable path for the utility's financial future. Staff has reached out to four vendors to obtain quotes and demonstrations. Staff has been in contact with Ehlers, Abdo, Waterworth and CLA. Ehlers gave an initial price range starting at 206