City Council Meeting Date: October 16, 2018
To: Mayor and City Council
City Administrator
From: David E. Bennett, Public Works Director/City Engineer
Justin Wagner, Utilities Manager
Brenda Angelstad, Finance Director
Title
Consider Motion Accepting Final Report for Water, Sanitary Sewer, Storm Water, and Garbage Rate Study.
Body
Action Requested:
The Northfield City Council considers a Motion Accepting Final Report for Water, Sanitary Sewer, Storm Water, and Garbage Rate Study.
Summary Report:
As part of the City’s long term planning for financial stability, the City worked with a financial advisory firm Springsted Inc. to conduct a rate study for the City’s Enterprise Funds (Water, Wastewater, Sanitary Sewer, Storm Water, and Garbage). This study provides for a 5-10 year outlook on rate recommendations. It is anticipated that these rate studies will be performed every four-five years to continually monitor and update these funds.
As a background, the rate study takes into account historical and projected operations costs, 10-year capital improvement plan, 10-year capital equipment plan, debt, reserves, and risks. In addition, the study looked at the administrative charge related to operations of the City behind the scenes such as payroll, finance, HR, and other functions that support these funds. In general, this administrative charge should be between 10-15% for these funds. The report has been updated to adjust the administrative charge to 12.5%.
The study is proposing the following modifications to the City’s Utility Rates:
Water Fund - 1% Increase through 2023 and 4% through 2028
Sanitary Sewer - 1.75% Increase through 2028
Storm Water - 5% Increase through 2028
Garbage - 0% through 2022 and 1% through 2028
Other recommendations in the report include adopting a Utility Fund Reserve Policy and a policy for Administrative Transfers on all utility funds for support services provided by the General Fund.
Alternative Options:
Staff supports the proposal for rate adjustment to continue with ongoing operations and capital replacement projects. If rates were not adopted at the proposed recommendation in the study, staff would need to move back capital improvement projects.
Financial Impacts:
N/A
Tentative Timelines:
Adopt Utility Rates October 16, 2018