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Home My WebLink AboutReport on Water and Sewer Rate Stduy Nov 1997A Id NNE50 MR C NY Report on Water and Sewer Rate Study Oak Park Heights, Minnesota November 1997 File No. 55138 Bonestroo Rosene Anderlik & Associates Engineers & Architects 1 1 i 1 1 1 REPORT ON SEWER AND WATER RATE STUDY FOR OAK PARK HEIGHTS, MINNESOTA 1998 David Schaff Mayor David Beaudet Council Member Janet Robert Council Member Mark Swenson Council Member Jerry Turnquist Council Member Judy Holst Acting Administrator Mark Vierling Attorney Bonestroo, Rosene, Anderlik & Associates, Inc. Engineers & Architects St. Paul, Minnesota Honorable Mayor and City Council ' City of Oak Park Heights 14168 — 57` Street North Oak Park Heights, MN 55082 ' Re: 1998 Sewer & Water Rate Study Our File No. 55138 Dear Mayor and Council: f Transmitted herewith is our review and study of the sewer and water user rate system for the City of Oak Park Heights for 1998. It appears that sufficient revenue will be generated with the existing sewer user rates to cover the Metropolitan billing for conveyance and sewage treatment ' and to operate the local system. However, a small rate increase will be required to fund the operation of the waterworks system for the next budget year. ' Alternative rate schedules have been developed to generate adequate revenues if the City were to reduce the minimum usage from 15,000 gallons to 10,000 gallons per quarter. We would be happy to meet with the Council, Staff, and other interested parties to review and discuss the contents of this report as may be required. Respectfully submitted, I BONESTROO, ROSENE, ANDERLIK & ASSOCIATES, INC. Joseph C. Anderlik, P.E. ' Attachment r 1 1 I hereby certify that this plan, specification, or report was prepared by me or under my direct supervision and that I am a duly Registered Professional Engineer under the laws of the State of Minnesota. Josh CiiAnderlik Date: November 17, 1997 Registration No. 6971 2335 West Highway 36 • St. Paul, MN 55113 • 612 - 636 -4600 • Fax: 612 -636 -1311 Bonestroo Principals Honestroo. Rosen. Anderlik and Associate,. Inc is an Af ormative Achnn - Equal Opportunity Employer Otto G. Pomustroo. PE • Joseph C Anderlik PE • Malvin L SOrvald PE - Rosen Robert Richard E Ti PE • Glenn R. Coal. °L. • Robert G. Scbumcht. PE, • Jeny A. 9ourdaR PE . W Rosen.. PE and Susan M Ebrdln, CPA., Semar Can,ultanp Anderlik & Associate Pnnnpals Howartl A Sanford. PE Keith A Gordan. PE Robert R Pfrfferle. PE Richard W Eo PE . Clevid CL LOSd PE . Robed C , ALA . Mark A. Hanson. PE Associates Michael L Rautmann PC Ted KJ9eld, P PE ttennetM1 P Anderson. PE Mark R Rolls. PE. Sidney P Williamson, PE, LS • Robert E Kotsmlth t Offices: St Paul. Rochester Wdlmar and St Cloud, MN • Milwaukee, WI Engineers & Architects November 17, 1997 Honorable Mayor and City Council ' City of Oak Park Heights 14168 — 57` Street North Oak Park Heights, MN 55082 ' Re: 1998 Sewer & Water Rate Study Our File No. 55138 Dear Mayor and Council: f Transmitted herewith is our review and study of the sewer and water user rate system for the City of Oak Park Heights for 1998. It appears that sufficient revenue will be generated with the existing sewer user rates to cover the Metropolitan billing for conveyance and sewage treatment ' and to operate the local system. However, a small rate increase will be required to fund the operation of the waterworks system for the next budget year. ' Alternative rate schedules have been developed to generate adequate revenues if the City were to reduce the minimum usage from 15,000 gallons to 10,000 gallons per quarter. We would be happy to meet with the Council, Staff, and other interested parties to review and discuss the contents of this report as may be required. Respectfully submitted, I BONESTROO, ROSENE, ANDERLIK & ASSOCIATES, INC. Joseph C. Anderlik, P.E. ' Attachment r 1 1 I hereby certify that this plan, specification, or report was prepared by me or under my direct supervision and that I am a duly Registered Professional Engineer under the laws of the State of Minnesota. Josh CiiAnderlik Date: November 17, 1997 Registration No. 6971 2335 West Highway 36 • St. Paul, MN 55113 • 612 - 636 -4600 • Fax: 612 -636 -1311 Table of Contents Letter of Transmittal .... .......... I ......... ............................... ....... Tableof Contents ...................................................... ............................... 2 Introduction............................................................... ............................... 3 Sewer User Charges ..................................................... ............................... 4 General..................................................... ............................... 4 SystemFlow Estimates ................................... ............................... 4 Sewer Department Expenditures ....................... ............................... 6 SewerRates ............................................ ............................... 12 WaterUser Charges ................................................. ............................... 14 General................................................. ............................... 14 Water Usage Estimates ............................... ............................... 14 Water Department Expenditures .................... ............................... 15 WaterRates ............................................ ............................... 16 Conclusions and Recommendations ................................. ............................... 18 Appendix A — Renewal and Replacement Schedule Oak Park Heights Sewer & Water Rate Study 2 I ' Introduction II The City of Oak Park Heights regularly reviews the water and sewer rate schedule to assure receipt of adequate funding for operation of the enterprise systems. Periodically, a formal study is performed to officially record the status of these systems. This report represents the results of i a study undertaken to review the costs to operate and maintain the sewer and water systems in the City of Oak Park Heights. The purpose of the study is to determine the user rates required to e adequately and equitably finance the proposed 1998 operating budgets of the Utility Department. This report contains an analysis of the past and projected flows, usages, and system connections as well as a review of costs and projected expenditures for operation and maintenance and a schedule of renewal and replacement fund requirements. r In summary, this report contains a review of the past and present schedules and practices relating ' to water and sewer user charges in the City and recommendations for rates which will produce the required revenues in a fair and equitable manner. I 1 I I IP r 11 ' Oak Park Heights Sewer & Water Rate Study 3 Sewer User Charges General The City of Oak Park Heights regularly reviews, adopts, and/or modifies its sewer user rate schedule to assure that sufficient revenue is being generated for the payment of all expenditures associated with the operation and maintenance of the sewage collection system and treatment facilities. This review is also undertaken to verify that all classification of sewer users are charged for service in a manner which is fair and equitable as defined in State and Federal regulations. The following sections of this report will describe the system usage, financial obligations, and budgeted expenditures as well as a suggested rate schedule to provide adequate revenues to operate and maintain the system in 1998. System Flow Estimates Utility use rates can be established by equating the amount of service or project sold to the estimated expenditures anticipated by the utility. In the case of a sanitary sewer system, the use or service can be measured by sewage flow with projections for future use being dependent upon growth by number and type of connection to the system. The Metropolitan Council Environmental Services (MCES) maintains flow - measuring devices which are supposed to totalize all flows from the entire City. As noted in the past, the recorded flows were very erratic, but between 1985 and 1993 there has been some fluctuation, but generally the flow has been proportional to the number of connections and estimated population served. In July of 1994, the MCES replaced the metering equipment for the Oak Park Heights meter. "The result was a 16% increase in Oak Park Heights's flow" Obviously, the meter did not increase flows, but MCES is implying that the old metering equipment was not accurate, as the City has been suggesting for years, and now the new equipment is accurate. Since the installation of the new meter equipment, wide fluctuations in recorded flows have again occurred, which has resulted in wild differences in estimated flows and recorded flows and resulting costs. A new billing system is being initiated by MCES where cities will be billed based on metered flows with a two quarter lag rather than estimated flows with a two-year la in Oak Park Heights Sewer & Water Rate Study 4 adjustment. This procedure will not increase the accuracy of the metering but will make the fluctuations less apparent. Because of the inability of MCES to accurately measure, estimate, and/or calculate wastewater flows, the flows estimated by the City based on number of connections, water sales, population, and similar data will be used for the sewer rate computations. For informational purposes, population estimates, metered sewage flows and estimates, and flow per capita data are shown in the following tabulation. Estimated MCES Flows * OPH Flows ** Year Population MGY GPCPD MGY GPCPD 1980 2,591 101 107 83 88 1981 2,680 92 94 88 90 1982 2,770 104 103 93 92 1983 2,860 101 97 100 96 1984 2,950 133 123 108 100 1985 3,040 121 109 115 104 1986 3,130 122 107 119 104 1987 3,220 129 110 123 105 1988 3,310 134 111 128 106 1989 3,400 141 114 133 107 1990 3,486 138 108 138 108 1991 3,540 148 115 142 110 1 1992 3,595 143 109 147 112 1993 3,650 144 108 152 114 ' 1994 3,710 167 123 156 115 1995 3,776 184 133 160 116 1 1996 3,840 164 117 164 117 1997 3,900 194 142 168 118 1998 3,960 -- -- 172 119 * All MCES flows are recorded except for 1997, which is estimated. * *All OPHflows are estimated based on land use. ' Oak Park Heights Sewer do Water Rate Study 5 While the total sewage flow from the City is being metered with questionable accuracy, means are not available for measuring sewage flows from individual connections. Therefore, some assumptions and estimates must be used to apportion flows and resulting costs to the various types of users on the system. Water meters exist at each connection which measures the water purchased, but does not provide information on the quantity discharged to the sewer. Generally, almost all water purchased enters the sewer system with the exception of that water used for lawn irrigation. Lawn sprinkling is primarily confined to single family, townhouse, and similar land uses. Where large institutional facilities or other uses have high irrigation demands, separate meters are becoming common so that sewer billing is limited to the non - sprinkler water usage only. Based on the above continents, sewage flows from residential connections are assumed to be equal to the quarterly water usage experienced during the winter months when no lawn sprinkling occurs. However, it is recommended that each quarterly water meter reading be used for sewage discharge billing for all commercial, industrial, and institutional connections. Sewer Department Expenditures In addition to estimating the volume of sewage flow, the other basic factor required in establishing user rates is the amount of expenditures anticipated or revenue required. Expenditures can be generally classified in the following categories: a. Metropolitan Council Environmental Services billing b. Local operation and maintenance c. Administration, accounting, and billing d. System renewal and replacement e. Local debt service paid from revenue i Oak Park Heights Sewer & Water Rate Study 6 All of the expense items listed are related to capacity and flows with the exception of the ' administration, accounting, and billing costs, which are proportional to the number of connections only. The invoice received from the Metropolitan Council Environmental Services is based on flow or gallons processed and is broken into two parts. The first part is the cost for conveyance, treatment, and other costs associated with operation and maintenance of the Metropolitan Sewer System and is based on estimated annual flow. The second part is the credit given for facilities purchased from the City and for debt service on outstanding bonds for facilities acquired. It ' should be noted that all significant credits will have been given with the 1998 billing which will, in effect, automatically increase the annual billing to Oak Park Heights by about $10,000.00 for all future years. A breakdown of the estimated 1998 Sewer Service Charges from the Metropolitan Council Environmental Services is tabulated below. The costs for the previous three (3) years are also shown for informational purposes. Use Charges 1995 Sewer Service Cost $238,545 Final Cost Allocation - 33,461 TOTAL CHARGES $205.084 1996 $225,421 +15,264 $240,685 1997 $255,708 1998 $236,792 +18,424 $221,474 $255,216 Credits given on the statement of sewer service charges are listed below. Credits 1995 1996 1997 1998 Current Value $39 $39 $39 $39 Debt Payment 12,051 11,548 11,046 10,251 TOTAL CREDITS $12,090 $11,587 $11,085 $10,290 The total net payment to the MCES to be obtained from revenue is the combination of the two previous tables and is summarized as follows. Net Charges 1995 Total Charges $205,084 Less Credits 12,090 NET METRO CHARGE $192,994 19% $240,685 11,587 $229,098 $210,389 1997 $221,474 11,085 1998 $255,216 10.290 ' Oak Park Heights Sewer & Water Rate Study 7 The estimated 1998 MCES charge of $244,926 represents a 16.4 percent increase from the 1997 billing. The cost for treatment and conveyance decreased by 7.4 percent with the increase being the difference in the final cost allocation from previous years. With over 20 years of history and experience in operating and billing for the Metropolitan system, one would expect that MCES should have minimiz this erratic variation in billing. However, these large differences still occur which is suspected to related directly to MCES's demonstrated inability to accurately meter and/or "compute" sewage flows in the City of Oak Park Heights. Without regard to other cost increases which may occur, an additional $10,000.00 billing increase will be automatically realized in 1999 as a result of the ending of credits, as noted earlier. A tabulation of actual charges imposed by the Metropolitan Waste Control Commission, the Metropolitan Council Wastewater Services and now the Metropolitan Council Environmental Services over the past years to the City of Oak Park Heights without regard to credits or prior years adjustments is shown in a table which follows. We have also included a table which shows the service costs, billings, and debt credits contained in the previous years Metropolitan billings. Oak Park Heights Sewer & Water Rate Study 8 Oak Park Heights, Minnesota MCWS Charges Note: Costs through 1996 are actual base on flow recordings by MCWS. The 1997 numbers are estimated by MOWS. The 1998 costs are based on City flow estimates and the MCWS proposed charge per 1000 gallons. ' Uak Park Heights Sewer & Water Rate Study 9 Cost/1000 Cost/1000 Rate Charge Year Flow Charge Gal Change Change Change 1973 44 9,071 0.2062 - - - -- - - - -- - - - -- 1974 52 11,971 0.2302 +2.40ir +11.64% +31.97% 1975 79 20,264 0.2565 +2.63 +11.42 +69.27 1976 77 25,129 0.3263 +6.98 +27.21 +24.00 1977 70 23,187 0.3312 +0.49 +1.05 -7.73 1978 78 28,368 0.3637 +3.25 +9.80 +22.35 1979 112 46,942 0.4191 +5.12 +15.23 +65.48 1980 101 50,875 0.5037 +8.46 +20.19 +8.53 1981 92 50,340 0.5472 +4.35 +8.64 -1.08 1982 104 63,642 0.6119 +6.47 +11.77 +26.42 1983 101 59,473 0.5888 -2.31 -3.92 -6.56 1984 133 83,815 0.6302 +4.14 +7.03 +40.93 1985 121 84,210 0.6960 +6.58 +10.40 +0.47 1986 122 87,291 0.7155 +1.95 +2.80 +3.66 1987 129 112,822 0.8746 +15.91 +22.24 +29.25 1988 134 122,066 0.9109 +3.63 +4.15 +8.19 1989 141 131,337 0.9315 +2.06 +2.26 +7.59 1990 138 144,735 1.0488 +11.73 +12.59 +10.20 1991 148 157,269 1.0626 +1.38 +1.32 +8.66 1992 143 156,924 1.0974 +3.48 +3.25 -0.02 1993 144 165,927 1.1523 +5.49 +5.00 +5.74 1994 167 209,210 1.2528 +10.05 +8.72 +26.09 1995 184 238,545 1.2964 +4.36 +3.48 +14.02 1996 164 225,421 1.3745 +7.81 +6.02 -5.50 1997 194* 255,708 1.3181 -5.64 -4.10 +13.44 1998 172 ** 236,792 1.3767 +5.86 +4.45 -7.40 Note: Costs through 1996 are actual base on flow recordings by MCWS. The 1997 numbers are estimated by MOWS. The 1998 costs are based on City flow estimates and the MCWS proposed charge per 1000 gallons. ' Uak Park Heights Sewer & Water Rate Study 9 I 1 I Oak Park Heights, Minnesota MCWS Billing 1 1 h I l I J 1 I Year 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Billing $ -8,555 521 9,789 15,781 18,544 22,339 30,136 22,533 41,936 62,676 38,525 59,894 47,131 66,366 96,551 92,705 119,936 150,951 150,664 141,095 149,611 185,268 192,994 229,098 278,857 244,926 I 1 Service Cost $9,071 11,971 20,264 25,129 23,187 28,368 46,942 50,875 50,340 63,642 59,473 83,815 84,210 87,291 112,822 122,066 131,337 144,735 157,269 156,924 165,927 209,210 238,545 225,421 255,708 236,792 Cost Minus Debt Credits $ -2,738 258 6,641 11,698 9,949 15,323 34,090 34,198 34,048 47,736 43,969 68,712 69,509 72,992 98,421 108,570 116,235 130,135 143,171 143,328 157,833 196,618 226,455 213,834 244,623 226,502 Oak Park Heights Sewer & Water Rate Study 10 I 1 I 1 1 1 LJ I i f] I Local operation and maintenance costs are incorporated into the rate structure and have been taken directly from the City Budget or from actual expenditure when available. System renewal and replacement costs have been derived as described in Appendix A of this report. Combining all of the data described above results in the total estimated expenditures for the Sewer Department in 1998. A summary of those expenditures as well as a tabulation of previous years' expenditures is shown below: SEWER DEPARTMENT EXPENDITURES Item 1994 1995 1996 1997 1998 Operating Expenditures Actual Actual Actual Budget Budget MCES Billing $170,004 $158,760 $247,522 $278,857 $244,926 Operation & Maintenance 71,530 60,347 59,144 72,400 71,655 Debt Service 718 12 - - - -- - - - -- - - -- Renewal & Replacement 17,611 17,919 25,347 26,582 27,818 TOTALS $259,863 $237,038 $332,013 $377,839 $344,399 1998 SEWER DEPARTMENT EXPENDITURES Estimates MCES Billing $244,926 Operation & Maintenance 60,907 Renewal & Replacement 27,818 Operating Expenditures $333,651 Administration & Billing 10,748 TOTAL EXPENDITURES $344,399 It should be noted that separate accounting is not available for administration and billing. The amount shown above is equal to 15 percent of the local costs which is typically representative of small suburban utility operations. ' Oak Park Heights Sewer & Water Rate Study 11 J I I rl lJ [J 1 I 11 Sewer Rates Sewer user rates can be computed by simply dividing the various operating costs by the estimated flow. In addition to operating rate, revenue for administration, billing and accounting can be determined by dividing the estimated administrative costs by the number of connections. Because the debt service credits will be eliminated after 1998 and because billing will be on a quarterly basis instead of annual estimates, it is recommended that the estimated MCES Net Sewer Service Cost be used to calculate the MCES charge. The resulting computations are as follows: MCES Charge $244,926 = 172,000,000 gal $1.42/1000 gal Local Cost $88,715 = 172,000,000 gal 0.52/1000 gal Operating Rate $1.94/1000 gal Administration Rate $10,748 1081 accounts $2.50 /quarter At the present time, the minimum charge is based on the discharge of 15,000 gallons per quarter per account. Using the rates established above, the minimum charge is shown in the following computation. I MCES Charge 15,000 gal @ $1.42/1000 gal $21.30 /quarter Local Charge 15,000 gal @ $0.52/1000 gal $7.80 /quarter Administration $2.50 /quarter Minimum Charge $31.60 /quarter 11 I I The rate established in the previous computation is almost exactly the same as that currently in effect and using present practices, no rate increase is required. However, a recent study has shown that an average 40 percent of the Oak Park Heights customers use less water than the 15,000 gallons per quarter minimum and about 20 percent use less than 10,000 gallons per quarter. To more accurately reflect actual usage, the City may want to consider computing the minimum charge on the basis of 10,000 gallons of usage per quarter. This would initially reduce the revenue which would otherwise have been produced. The actual Oak Park Heights Sewer & Water Rate Study 12 impact on revenue cannot be accurately computed but it is estimated that the operating revenue ' could be reduced by as much as 20 percent. Assuming that there is a need for a 20 percent increase in the operating rate, the minimum billing for 10,000 gallons of usage would be as shown below MCES Charge 10,000 gal @ $1.70/1000 gal $17.00 /quarter ' Local Charge 10,000 gal @ $0.62/1000 gal $6.20 /quarter Administration $2.50 /quarter Minimum Charge $25.70 /quarter ' The rate shown above represents an 18.4 percent decrease from the current minimum charge, no change for the user of 12,500 gallons and an 18.4% increase for users of 15,000 gallons and up ' to a 20% increase for the larger users. ' The existing rate, which could be continued, and the alternative rate schedule for sewer service is shown below. In all cases, it is assumed that the billing to single family, townhouse, condominium and other similar residential units will be based on the winter quarter water meter reading. All other land uses such as apartments, institutions and commercial and industrial ' facilities will be billed quarterly based on actual meter readings. I SANITARY SEWER RATE SCHEDULE ' Existing Sewer Rate Minimum Charge $31.50 /qtr for up to 15,000 gal. ' $1.95/1000 gal. for usage over 15,000 gal. ' Alternative Sewer Rate Minimum Charge $26.50 /qtr for up to 10,000 gal. ' $2.30/1000 gal. for usage over 10,000 gal. Oak Park Heights Sewer & Water Rate Study 13 Water User Charges General iJ 1 1 P I r— LJ 1 It is necessary to periodically study the water user rates to determine if adequate revenue is being produced to operate the water supply and distribution system and to meet other financial obligations for capital improvements and for renewal and replacement. The study contained in the following sections of this report reviews projected water sales as well as budgeted expenditures and other financial obligations. Using this information, rates are computed which will produce sufficient revenue to operate and maintain the waterworks system for the coming year. Water Usage Estimates Each dwelling and structure connected to the City waterworks system is equipped with a water meter to measure water usage. Each well supply is also equipped with a water meter to measure water produced. These two sources are then used to verify and estimate water consumption. It is very difficult to predict water usage with any accuracy for a given year because usage will vary tremendously dependent upon climatic conditions during the summer growing season. On average, records indicate that normal water consumption in the City of Oak Park Heights is equal to about 130 gallons per capita per day. This is substantially higher than other similar municipalities because of the large institutional users in the City. Based on past records, it is projected that water usage in 1998 will be approximately 181 million gallons with about 203 million gallons to be pumped. ' Oak Park Heights Sewer & Water Rate Study 14 I I Water Department Expenditures To determine a water use rate schedule, it is necessary to estimate the amount of expenditures anticipated or revenue required. Expenditures can be generally classified in the following I categories: 1 1 I 1 a. Operation and maintenance b. Reserve for capital improvements C. Administration, accounting and billing d. System renewal and replacement e. Debt service to be paid from revenue All of the expense items listed are related to capacity and usage except for administration, accounting and billing which are proportional to number of connections. Operation and maintenance costs are to be included in the rate calculation and are taken directly from the City Budget. The City has issued bonds in the past to finance waterworks improvements with a portion of the debt service being paid from revenue. However, more recently, the improvements made to the system have been made through bonding with repayment through a system of area charges and connection charges and a capital reserve account funded from water revenue. ' The other cost which is made a part of expenditures in the water rate computation is an allowance for major repairs and for future replacement of facilities and testing services for State ' mandated water quality testing. The derivation of the renewal and replacement schedule is shown in Appendix A. 1 1 1 Combining all of the data described above results in the total estimated expenditures for the Water Department in 1998. A summary of those expenditures as well as previous years' expenditures is shown in the following tabulation. ' Oak Park Heights Sewer & Water Rate Study 15 I i I 11 CS I 1998 Budget $115,775 26,521 50,000 ,746 As with the Sewer Department, it was assumed that administration, meter reading, billing and accounting represents 15 percent of the operation and maintenance cost. Water Rates The estimated unit cost to produce and supply water in the City of Oak Park Heights can be determined by dividing the estimated operating expenditures by the assumed flow. In addition to the operating rate, revenue for administration, billing and accounting can be computed by dividing the estimated administrative costs by the number of connections. The resulting computations are as follows: Operating Rate - $ 180,381 + 181,000,000 gal.= $1.00 /1000 gal. Admin. Rate - $ 17,365 = 1,046 accounts = $ 4.20 /quarter Oak Park Heights Sewer & Water Rate Study 16 WATER DEPARTMENT EXPENDITURES Item 1994 1995 1996 1997 Actual Actual Operation & Maintenance $98,129 $87,369 Actual Budget $109,762 $112,575 Debt Service 718 12 - - - -- - - - -- Renewal & Replacement 14,423 14,555 22,024 24,272 Capitol Reserves 45,000 50,000 50,000 50,000 Testing Services 5,250 5,300 5,350 5,400 ' TOTALS $163,340 $157,236 $187,136 $192,247 1998 WATER DEPARTMENT EXPENDITURES Operation & Maintenance $98,410 Renewal & Replacement 26,521 ' Capitol Reserves 50,000 Testing Services 5,450 ' Operating Expenditures $180,381 Administration & Billing 17,365 TOTAL EXPENDITURES $197,746 i I 11 CS I 1998 Budget $115,775 26,521 50,000 ,746 As with the Sewer Department, it was assumed that administration, meter reading, billing and accounting represents 15 percent of the operation and maintenance cost. Water Rates The estimated unit cost to produce and supply water in the City of Oak Park Heights can be determined by dividing the estimated operating expenditures by the assumed flow. In addition to the operating rate, revenue for administration, billing and accounting can be computed by dividing the estimated administrative costs by the number of connections. The resulting computations are as follows: Operating Rate - $ 180,381 + 181,000,000 gal.= $1.00 /1000 gal. Admin. Rate - $ 17,365 = 1,046 accounts = $ 4.20 /quarter Oak Park Heights Sewer & Water Rate Study 16 ' Using the minimum quarterly flow of 15,000 gallons per connection results in the user rate schedule shown below: I 11 11 1 Operating Charge - 15,000 gal. @ 1.00 /1000 gal. $15.00 /qtr. Administration 4.20 /atr. Minimum Charge $19.20 /qtr. 5.3 percent increase in the operating rate. The rate computation shown above represents a 4.9 percent increase in the minimum charge and If the City chooses to reduce the minimum billing to 10,000 gallons per quarter, the alternative rates would be computed in a manner similar to that shown for the sewer rates, except that the water testing charge would be added as a fixed fee of $1.30 per quarter to the minimum charge. The minimum billing for 10,000 gallons of usage would be as shown below: Operating Charge 10,000 gal. @ 1.06/1000 gal. $10.60 /qtr Testing 1.30 /qtr Administration 4.20 /qtr Minimum Charge $16.10 /qtr The rate shown above represents a 12 percent decrease from the current minimum charge, no 15,000 gallons and greater per quarter. change for the user of 12,000 gallons and approximately a 15 percent increase for users of The recommended waterworks rates and the alternative rate schedule are as follows: WATERWORKS RATE SCHEDULE Recommended Water Rate Minimum Charge $19.20 /qtr for up to 15,000 gal. 1 1 $1.00 /1000 gal. for usage over 15,000 gal. Alternative Water Rate Minimum Charge $16.10 /qtr for up to 10,000 gal. $1.06/1000 gal. for usage over 10,000 gal. ' Oak Park Heights Sewer & Water Rate Study 17 I 11 1 1 1 1 1 Conclusions and Recommendations City of Oak Park Heights will generate sufficient revenue to pay for the cost being incurred. Based on the studies reported on herein, it is concluded that the current sewer user rate in the A modest rate increase is required to generate adequate revenue for the operation of the Waterworks Department. This is the first increase required for systems operation for several years in the Water Department. It is recommended that the following sewer and water user rates be adopted to operate the Utility Departments of the City of Oak Park Heights in 1998: Rate Schedule Sewer Rates Minimum Charge Water Rates Minimum Charge $31.50 /qtr. for up to 15,000 gal. $1.95/1000 gal. for usage over 15,000 gal. $19.20 /qtr. for up to 15,000 gal. $1.00 /1000 gal. for usage over 15,000 gal. If the City elects to reduce the minimum usage to 10,000 gallons per quarter, the following alternative rates will generate sufficient revenue to fund the systems. Altemative Rate Schedule Sewer Rates Minimum Charge $25.60 /qtr. for up to 10,000 gal. $2.30/1000 gal. for usage over 10,000 gal. Water Rates Minimum Charge $16.10 /qtr. for up to 10,000 gal. $1.06/1000 gal. for usage over 10,000 gal. Oak Park Heights Sewer & Water Rate Study 18 I I 1 1 I 1 1 1 Appendix A Renewal And Replacement Schedule As a part of the study on sewer and water rates for the City, it was deemed advisable to include in the rate structure an allowance for future replacement of facilities. Therefore, an analysis was made of the existing utilities to determine replacement costs to serve as a basis for computing a schedule for major repair and renewal. The original cost of each project was determined from contract payments and was broken down to the various type of facility. Service costs were not included in the analysis because the maintenance or replacement of these items are the individual property owner's responsibility. A ten percent factor was added to the original costs for engineering and administrative fees which will be required for the design and construction of replaced facilities. The original costs were then converted to replacement costs by applying a "trend factor" which is the ratio of current construction costs to construction costs for the year when the facility was built. Environmental Protection Agency and Engineering New Record cost indices were utilized to determine the "trend factor ". The renewal and replacement amounts were then computed by amortizing the replacement cost over the assumed life of the facility with an average rate of interest of six percent. The assumed life of the various components of the utility system used in this computation are as follows: 1. Water and Sewer Mains 80 years 2. Building and Wells 40 years 3. Lift Stations and Pumping Equipment 20 years Current values of the systems were also computed based on a straight line relationship utilizing the assumed life of each component. The current value figures are included for informational purposes and may be of some value in analyzing insurance needs and other possible uses. Based on the above procedures, a summary of the cost information obtained is tabulated below: ' Oak Park Heights Sewer & Water Rate Study 19 Oak Park Heights, Minnesota Renewal & Replacement Summary Sanitary Sewer Svstem Item Sanitary Sewer Lift Stations TOTAL SEWAGE WORKS 1997 Original Replacement Cost Cost $2,079,105 $4,992,336 155,591 329,989 Current Renewal & Value Replacement $3,671,387 $15,537 116,069 $12,281 $2,234,696 $5,322,825 $3,787,456 $27,818 Waterworks System 1997 Item Water Main & PRS Wells Pumps Pumphouses Elevated Tanks TOTAL WATERWORKS Original Replacement Cost Cost $1,614,782 $3,554,279 56,971 233,939 20,596 81,583 108,170 406,206 750,860 1,264,378 Current Renewal & Value Replacement $2,677,255 $11,061 81,661 3,102 16,316 3,036 191,518 5,387 1,038,152 3,935 TOTAL SYSTEMS $2,551,379 $5,540,385 $4,786,075 $10,863,210 $4,004,902 $26,521 $7,792,358 $54,339 Oak Park Heights Sewer & Water Rate Study 20 I 1 11 1 I 1 11 Sanitary Sewer ' Oak Park Heights Sewer & Water Rate Study 21 Ori i� nal Trend Replacement Condition Current Year Cost Factor Cost Factor Value 1967 $466,815 5.139 $2,398,962 .6313 $1,514,465 1968 70,354 4.829 339,739 .6438 218,724 1969 18,761 4.627 86,807 .6563 56,972 1971 9,494 3.687 35,004 .6813 23,848 1972 13,895 3.403 47,285 .6938 32,806 1973 62,405 3.244 202,442 .7063 142,985 1975 17,552 2.735 48,005 .7313 35,106 1976 24,531 2.461 60,371 .7438 44,904 1977 40,935 2.258 92,431 .7563 69,906 1978 75,458 2.129 160,650 .7688 123,508 1979 61,578 1.925 118,538 .7813 92,613 1981 10,273 1.668, 17,135 .8063 13,816 1982 57,455 1.556 89,400 .8188 73,201 1983 9,288 1.410 13,096 .8313 10,887 1986 8,952 1.251 11,199 .8688 9,730 1987 133,351 1.317 175,623 .8813 154,777 1989 21,171 1.235 26,146 .9063 23,696 1990 78,449 1.211 95,002 .9188 87,288 1991 171,210 1.192 204,082 .9313 190,062 1992 68,884 1.154 79,492 .9438 75,025 1993 213,386 1.106 236,005 .9563 225,692 1994 10,546 1.073 11,316 .9688 10,963 1995 169,045 1.058 178,850 .9813 175,505 1996 55,240 1.017 56,179 .9938 55,831 1997 20 1.000 209,077 1.0000 2 09,077 TOTALS $2,079,105 $4,992,836 $3,671,387 ' Oak Park Heights Sewer & Water Rate Study 21 I 1 Water Mains 1 1 1 11 E 1 [] Year 1964 1967 1968 1969 1971 1972 1973 1975 1976 1977 1978 1979 1981 1982 1983 1986 1987 1989 1990 1991 1992 1993 1994 1995 1996 1997 TOTALS Original Cost $15,444 238,607 31,494 20,016 7,095 14,160 68,740 31,687 48,455 36,522 63,257 60,676 3,993 81,917 6,490 12,166 116,721 9,425 56,244 150,156 35,334 127,627 15,113 129,457 73,559 154,220 $1,608,575 $3,529,395 Condition Factor .5938 .6313 .6438 .6563 .6813 .6938 .7063 .7313 .7438 .7563 .7688 .7813 .8063 .8188 .8313 .8688 .8813 .9063 .9188 .9313 .9438 .9563 .9688 .9813 .9938 1.0000 Current Value $51,191 774,101 97,912 60,783 17,822 33,432 157,500 63,377 88,696 62,370 103,537 91,257 5,370 104,367 7,607 1.3,223 135,475 10,549 62,581 166,690 38,484 134,987 15,710 134,404 74,346 154,220 $2,659,991 Trend Replacement Factor Cost 5.582 $86,208 5.139 1,226,201 4.829 152,085 4.627 92,614 3.687 26,159 3.403 43,186 3.244 222,993 2.735 86,664 2.461 119,248 2.258 82,467 2.129 134,674 1.925 116,801 1.668 6,660 1.556 127,463 1.410 9,151 1.251 15,220 1.317 153,722 1.235 11,640 1.211 68,111 1.192 178,986 1.154 40,775 1.106 141,155 1.073 16,216 1.058 136,966 1.017 74,810 1.000 154,220 ' Oak Park Heights Sewer & Water Rate Study 22 [l 1 Lift Stations 1 1 ' Supply & Storage 1 1 1 1 1 1 1 Original Trend Replacement Condition Current Year Cost Factor Cost Factor Value 1967 $14,300 5.817 $83,183 .2000 $16,637 1973 28,157 3.813 107,363 .2000 21,473 1987 49,335 1.285 63,395 .4500 28,528 1991 63,799 1.192 76,0 .6500 49,431 TOTALS $155,591 5.817 $329,989 .5000 $116,069 ' Supply & Storage 1 1 1 1 1 1 1 ' Oak Park Heights Sewer & Water Rate Study 23 Original Trend Replacement Condition Current Year Cost Factor Cost Factor Value 1967-Well #1 $17,449 5.817 $101,501 .2500 $25,375 1974 -Well #2 39,522 3.351 132,438 .4250 56,286 1967-Pump #1 7,198 5.817 41,871 .2000 8.374 1975 -Pump #2 13,398 2.964 39,712 .2000 7,942 1967 -PH #1 30,000 5.817 174,510 .5000 87,255 1975-PH #2 78,170 2.964 231,696 .4500 104,263 1967 -Tank #1 79,860 5.817 464,546 .6313 293,268 1991 -Tank #2 671,000 1.192 799,832 .9313 744,884 1972 - P.R.S. 6,207 4.009 24,884 .6938 17,264 TOTALS $942,804 $1,710,990 $1,344,911 ' Oak Park Heights Sewer & Water Rate Study 23 I 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 i 1