Agenda Packets - City Council - Regular Meeting 9/8/2025

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Minutes City Council Work Session Monday, August 25, 2025, 4:00 PM City Council Chambers 12780 Kelley Parkway, Orono, MN 55356 ROLL CALL Council members present: Mayor Bob Tunheim, Alisa Benson, Jacqueline Ricks, Steve Persian, Jon Schwingler. Staff present: City Administrator Adam Edwards, Finance Director Maggie Jin, Accountant Anne Hentges, City Clerk Christine Lusian, Parks and Facilities Superintendent Joe Ruthenberg, Public Works Superintendent DJ Goman, and Abdo Financial Solutions CPA Justin Nilson. UTILITY RATE STUDY Nilson presented a utility rate plan designed to meet cashflow goals, with the study emphasizing data -driven recommendations to ensure adequate reserves and long-term stability. Water remains the most pressured utility, with declining revenues and reserves not projected to reach targets until 2032, driving a proposed 15% rate increase and acknowledgment of future treatment plant needs. The sewer and stormwater funds are more stable, with modest increases (3% for sewer and 10% initially for stormwater, followed by 5% annually) expected to maintain positive cash flow by 2030. Key challenges include Orono's low density, limited commercial base, and high fixed infrastructure costs, all of which constrain revenue growth. The average water customer uses about 4,000 gallons per month, resulting in a utility bill of roughly $141 that covers water, sewer, stormwater, and recycling. Because new homes are not required to connect to municipal water and only about 30% of residents use the system (most rely on private wells), the financial burden is carried by a relatively small group of users. Options beyond rate increases, such as connection fees, assessments, or levy support, were discussed and staff were directed to model alternatives to the 15% water rate increase. ENTERPRISE FUND BUDGET In the 2026 enterprise fund budget, challenges are driven by inflation, union negotiations, paid family medical leave requirements, health insurance, as well as rising information technology and facilities priorities. While cable fund revenues continue to decline and training and development costs rise with staff turnover, golf course green fees have remained stable. The Metropolitan Council wastewater fee increase (5.85%) may be split out for transparency. The next steps in the budget process include a September 8 work session on the general and internal service funds, followed by adoption of the preliminary budget and levy on September 22. ADJOURNMENT Work session ended at 5:51 p.m. ATTEST: CITY COUNCIL Christine Lusian, City Clerk Bob Tunheim, Mayor 4