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Home My WebLink AboutReport on Water and Sewer Rate Study Dec 1995 File No 4412911 I I I I Report on Water And Sewer Rate Study Oak Park Heights, Minnesota December, 1995 File No. 55129 Bonestroo Rosene Anderlik & Associates Engineers & Architects St. Paul • Milwaukee Honorable Mayor and City Council City of Oak Park Heights 14168 - 57th Street North Oak Park Heights, Minnesota 55082 Re: 1996 Sewer & Water Rate Study Our File No. 55129 Dear Mayor and Council: Transmitted herewith is our review and study of the sewer and water user rate system for the City of Oak Park Heights for 1996. The sanitary sewer system will require an increase in rates primarily to pay for the increased billing which the City has received from the Metropolitan Council Wastewater Services for conveyance and sewage treatment. It appears that sufficient revenue will be generated from the existing water user rates to operate the waterworks system for the next budget year so no water rate increase will be required. 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, BONESTROO, ROSENE, ANDERLIK & ASSOCIATES, INC. ev Joseph C. Anderlik, P.E. JCA:kf I hereby certify that this report was prepared by me or under my direct supervision and that I am a duly Registered Professional Engineer under the laws of the Stat"f Minnesota_ Joseph C. Anderlik, P.E. Date: December 6. 1995 Reg. No. 6971 2335 West Highway 36 ■ St. Paul, MN 55113 ■ 612 - 636 -4600 Bonestroo. Rosene, Anderlik and Associates. Inc. is an Affirmative Action /Equal Opportunity Employer Bones t roo fj Ott. G. Bonestroo, P.E. Howard A. Sanford, P.E. Michael C. Lynch, P.E. Brian K. Gage. P E. Robert W. Rosene, P.E.' Keith A. Gordon.. P.E. James R. Maland. P.E. F. Todd Foster. PE. Rosene Joseph C. Andedik, P.E. Robert R. Pfefferle, P.E. Jerry D. Pertzlch, P.E. Keith R. Yapp. PE. Marvin L Sorvala, P.E. Richard W. Foster, P.E. Scott J. Arganek. P.E. Douglas J. Benoit, P.E. Richard E. Turner, PE. David O. Loskota. P.E. Kenneth P Anderson. P.E Shawn D Gustafson. P.E. Anderlik & Robert l Associates Thomas E. Noyes, P.E. Robert G. Schunichl. P.E. Jerry A. Bourdon. .EA Mark A. Hanson, P.E. M A. Selp, P.E. Gary W. Morlen, P.E. Kent Wagner. P.E. Paul G. Hewer, P.E Susan M. Eberlin. C.P.A.• Michael T. Rautmann, P.E. Paul J. Gannon, A.LA. John P. Gorder, P.E. Eng ineers &Architects Senior consultant Ted K. Field, P.E. Daniel J. Edgerton, P.E. Dan D. Boyum. PE. 9 Thomas R. Anderson, A.I.A. A. Rick Schmidt, P.E. Jeffrey J. Ehleringer. P.E. James R. Rosenmerkel, P.E. Dale A. Grove, P.E. Joseph R. Rhein, P.E. Donald C. Burgardt. P.E. Philip J. Caswell, P.E. Lee M. Mann, P.E- Thomas A. Syfko. P.E. Mark D. Wallis, P.E. Charles A. Erickson Frederic J. Stenborg, P.E. Mlles B. Jensen. P.E. Leo M. Pawelsky Ismael Martinez, P.E. L. Phillip Gravel, PE. Harlan M. Olson Michael P. Rau. P.E. Karen L Wiemeri. PE. Agnes M. Ping December 6, 1995 Thomas W. Peterson, P.E. Gary D. Kristohtz, P.C. James F Engelhardt Honorable Mayor and City Council City of Oak Park Heights 14168 - 57th Street North Oak Park Heights, Minnesota 55082 Re: 1996 Sewer & Water Rate Study Our File No. 55129 Dear Mayor and Council: Transmitted herewith is our review and study of the sewer and water user rate system for the City of Oak Park Heights for 1996. The sanitary sewer system will require an increase in rates primarily to pay for the increased billing which the City has received from the Metropolitan Council Wastewater Services for conveyance and sewage treatment. It appears that sufficient revenue will be generated from the existing water user rates to operate the waterworks system for the next budget year so no water rate increase will be required. 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, BONESTROO, ROSENE, ANDERLIK & ASSOCIATES, INC. ev Joseph C. Anderlik, P.E. JCA:kf I hereby certify that this report was prepared by me or under my direct supervision and that I am a duly Registered Professional Engineer under the laws of the Stat"f Minnesota_ Joseph C. Anderlik, P.E. Date: December 6. 1995 Reg. No. 6971 2335 West Highway 36 ■ St. Paul, MN 55113 ■ 612 - 636 -4600 Table of Contents 1 Letter of Transmittal .......................... ............................... I Table of Contents ............................. ..............................2 Introduction................................. ..............................3 Sewer User Charges ........................... ..............................4 General................................. ..............................4 System Flow Estimates ..................... ............................... 4 Sewer Department Expenditures .............. ............................... 6 SewerRates .............................. .............................13 Water User Charges ........................... .............................15 General................................. .............................15 Water Usage Estimates .................... ............................... 15 Water Department Expenditures ............. ............................... 15 Water Rates .............................. .............................17 Conclusions and Recommendations .............. ............................... 19 Appendix A - Renewal and Replacement Schedule Oak Park Heights Sewer & Water Rate Study 2 T . 11 - - -- Table of Contents Letter of Transmittal .......................... ............................... 1 Table of Contents ............................. ..............................2 Introduction................................. ..............................3 Sewer User Charges ........................... ..............................4 General................................. ..............................4 System Flow Estimates ..................... ............................... 4 Sewer Department Expenditures .............. ............................... 6 SewerRates .............................. .............................13 Water User Charges ........................... .............................15 r General ................................. .............................15 Water Usage Estimates ...................... .............................15 Water Department Expenditures ............. ............................... 15 WaterRates .............................. .............................17 Conclusions and Recommendations .............. ............................... 19 Appendix A - Renewal and Replacement Schedule I Oak Park Heights Sewer & Water Rate Study 2 Introduction 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 perforated to officially record the status of these systems. This report represents the results of 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 adequately and equitably fmance the proposed 1996 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. 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 Oak Park Heights Sewer & Water Rate Study 3 Sewer User Charges General The City of Oak Park Heights annually 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 1996. System Flow Estimates Utility use rates can be established by equating the amount of service or product 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 Wastewater Services (MCWS) 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 and since 1985 there have been some fluctuation, but generally the flow has been proportional to the number of connections and estimated population served. In July of 1994, the MCWS replaced the metering equipment for the Oak Park Heights meter. "The result was a 20% increase in Oak Park Heights flow ". Obviously, the meter did not increase flows, but MCWS 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. The City should continue to monitor the MCWS flow data to verify its accuracy or lack thereof. At the present time, with the flow data now claimed to be accurate, has resulted in a 1994 underpayment of over $15,000.00, which has been added to the 1996 billing. I Oak Park Heights Sewer & Water Rate Study 4 1I Because of the still questionable ability of MCWS to accurately measure, estimate and/or calculate ' wastewater flows, the flows estimated by the City based on number of connection, water sales, population and similar data will be used for the rate computations. ' For informational purposes, population estimates, sewage metered flows and estimates and flow per capita data are shown in the following tabulation. Oak Park Heights Sewer & Water Rate Study 5 a MCWS Flows * OPH Flows ** E Year Estimated Population MGY Gal. /Capital Day MGY Gal. /Capital Da 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 3,530 148 115 142 110 1992 3,580 143 109 147 112 1993 3,630 144 109 152 115 1994 3,670 167 125 158 118 1995 3,720 1 180 133 164 121 1996 3,770 185 134 170 123 * All MGWS flows are recorded except for 1995 and 1996 which are estimated ** All OPH flows are estimated based on land use Oak Park Heights Sewer & Water Rate Study 5 a 11 1 Because of the still questionable ability of MCWS to accurately measure, estimate and/or calculate 1 wastewater flows, the flows estimated by the City based on number of connection, water sales, population and similar data will be used for the rate computations. For informational purposes, population estimates, sewage metered flows and estimates and flow per capita data are shown in the following tabulation. I Oak Park Heights Sewer & Water Rate Study 5 MCWS Flows * OPH Flows ** Year Estimated Population MGY Gal. /Capital Dav MGY Gal. /Capital Da 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 3,530 148 115 142 110 1992 3,580 143 109 147 112 1993 3,630 144 109 152 115 1994 3,670 167 125 158 118 1995 3,720 1 180 133 164 121 1996 3,770 185 134 170 123 * All MGWS flows are recorded except for 1995 and 1996 which are estimated ** All OPH flows are estimated based on land use I Oak Park Heights Sewer & Water Rate Study 5 The Oak Park Heights estimated flows and connections will be used for the rate computation which adds a bit of conservatism to the calculation. 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 comments, sewage flows from residential connections is assumed to be equal to the quarterly water usage experienced during the winter months when no lawn sprinkling occurs. It is further assumed that sewage discharge is equal to water usage for all commercial, industrial and institutional connections unless irrigation water is specifically metered. 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: All of the expense items lists 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. ' Oak Park Heights Sewer & Water Rate Study 6 a. Metropolitan Council Wastewater Services billing b. Local operation and maintenance c. Administration, accounting and billing d. System renewal and replacement e. Local debt service paid from revenue All of the expense items lists 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. ' Oak Park Heights Sewer & Water Rate Study 6 The invoice received from the Metropolitan Council Wastewater Services is based on flow or gallonage 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. Some of the credits received are to pay for available excess capacity in the system for undeveloped land. Because the City now has in place a system of area and connection charges to finance facilities in developing areas, it is recommended that the current users receive the full credit allowed in the MCWS billing. A breakdown of the 1996 Sewer Service Charges from the Metropolitan Council Wastewater Services is tabulated below. The costs for the previous three (3) years are also shown for informational purposes. Use Charges 1993 1994 1995 1996 Sewer Service Cost $199,383 $209,210 $204,312 $243,845 Final Cost Allocation -3,222 - 11,350 -33,461 +15,264 Total Charges $196,161 $197,860 $170,851 $259,109 Credits given on the statements of sewer service charges are listed below: Credits 1993 1994 1995 1996 Current Value $39 $39 $39 $39 Debt Payment 13,055 12,553 12,051 11,548 Total Credits $13,094 $12,592 $12,090 $11,637 The total net payment to the Metropolitan Council Wastewater Services to be obtained from revenue is the combination of the two previous tables and summarized as follows: I Oak Park Heights Sewer & Water Rate Study 7 I The invoice received from the Metropolitan Council Wastewater Services is based on flow or ' gallonage 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. Some of the credits received are to pay for available excess capacity in the system for undeveloped land. Because the City now has in place a system of area and connection charges to finance facilities in developing areas, it is recommended that the current users receive the full credit allowed in the MCWS billing. A breakdown of the 1996 Sewer Service Charges from the Metropolitan Council Wastewater Services is tabulated below. The costs for the previous three (3) years are also shown for informational purposes. Use Charges 1993 1994 1995 1996 Sewer Service Cost $199,383 $209,210 $204,312 $243,845 Final Cost Allocation -3,222 - 11,350 -33,461 + 15,264 Total Charges $196,161 $197,860 $170,851 $259,109 Credits given on the statements of sewer service charges are listed below: Credits 1993 1994 1995 1996 Current Value $39 $39 $39 $39 Debt Payment 13,055 12,553 12,051 11,548 Total Credits $13,094 $12,592 $12,090 $11,637 The total net payment to the Metropolitan Council Wastewater Services to be obtained from revenue is the combination of the two previous tables and summarized as follows: ' Oak Park Heights Sewer & Water Rate Study 7 Net Charges 1993 1994 1995 1996 Total Charges $196,161 $197,860 $170,850 $259,109 Less Credits 13,094 12,592 12,090 11,637 Net Metro Charge $183,067 $185,268 $158,760 $247,472 The 1996 MCWS charge of $247,472 represents a 55.9 percent increase from the 1995 billing. The cost for treatment and conveyance increased by 19.4 percent with the balance of 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 MCWS should have minimized this erratic variation in billing. However, these large differences still occur which is suspected to relate directly to MCWS's demonstrated inability to accurately meter and /or "compute" sewage flows in the City of Oak Park Heights. It is also interesting to note that in 1994, the MCWS underspent its budget by $6.5 million and received an additional $1.0 million in unanticipated revenue. This $7.5 million savings is claimed to be intentional by the following statement: "As budget and merger activities become more defined, spending was constrained to allow MCWS more leeway to balance competing needs ". This $7.5 million savings could be returned to the Cities in the form of a credit on the 1996 billing, but instead is being used to "finance capital budget projects, prepay a loan, set up an allowance for obsolete inventory, assist in re- engineering an essential activity and buy out some of the older workers' compensation policies ", which in part is claimed will provide stability in billings to communities. It should also be noted that the current value and debt payment credits will be ending in the near future. The credits re mainin g for Oak Park Heights are shown below: Item 1997 1998 1999 2000 Current Value $39 $39 $39 $30 Debt Payment 11,046 10,251 -0- - 0 - Tota, Credits $11,085 $10,290 $39 $30 ' Oak Park Heights Sewer & Water Rate Study 8 Cl 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. 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. I I 1 11 I I I I I I Oak Park Heights Sewer & Water Rate Study 9 I I 1 I 1 h lJ 1 p I I U I I OAK PARK HEIGHTS, MINNESOTA MCWS CHARGES Year Flow Charge Cost/ 1000 al. Cost/1000 Change Rate Change Charge Chan *e 1973 44 $ 9,071.21 $ 0.2062 - -- 1974 52 11,971.22 0.2302 +2.40o +11.64% +31.97% 1975 79 20,263.97 0.2565 +2.63o +11,42% +69.27% 1976 77 25,128.51 0.3263 +6.98¢ +27.21% +24.00% 1977 70 23,186.78 0.3312 +0.490 +1.05 % - 7.73% 1978 78 28,368.12 0.3637 +3.250 +9.80% +22.35% 1979 112 46,942.16 0.4191 +5.120 +15.23% +65.48% 1980 101 50,874.54 0.5037 +8.46o +20.19% +8.53% 1981 92 50,339.89 0.5472 + 4.350 +8.64% -1.08%1 1982 104 63,641.77 0.6119 +6.47¢ +11.77% +26.42% 1983 101 59,473.37 0.5888 -2.310 -3.92% -6.555 1984 133 83,814.63 0.6302 +4.140 +7.03% +40.93% 1985 121 84,210.22 0.6960 +6.580 +10.40% +0.47% 1986 122 87,291.37 0.7155 +1.950 +2.80% +3.66% 1987 129 112,821.76 0.8746 +15.910 +2124% +29.25% 1988 134 122,066.48 0.9109 +3.630 +4.15% +8.19% 1989 141 131,336.55 0.9315 +2.060 + 126% +7.59 % 1990 138 144,734.86 1.0488 +11.730 +12.59% +10.20% 1991 148 157,269.00 1.0626 + 1.380 + 1.32% +8.66% 1992 143 156,924.00 1_0974 +3.48o +3.25% -0.02% 1993 144 165,927.00 1.1523 +5.490 +5.00% +5.74% 1994 167 209,210.00 1.2528 +10.050 +9.72% +26.09% 1995 160 204,312.00 1.2770 +2.420 + 1.93% -2.40% 1996 185 243,845.00 1.3181 j +4.110 +3.22% +19.35% Note: Costs through 1994 are actual, with the last two years being estimated by MCWS I Oak Park Heights Sewer & Water Rate Study 10 A 1 [1 1 1 I 1 1 1 I J i L� 1 1 1 1 OAK PARK HEIGHTS, MINNESOTA MCWS BILLING Year Billing Service Cost Cost Minus Debt Credits 1973 $-8,554.83 $ 9,071.21 $-2,737-79 1974 521.21 11,971.22 258.22 1975 9,789.23 20,263.97 6,640.97 1976 15,780.80 25,128.51 11,697.51 1977 18,543.77 23,186.78 9,948.78 1978 22,338.76 28,368.12 15,323.12 1979 30,135.97 46,942.16 34,090.16 1980 22,533.22 50,874.54 34,197.54 1981 41,935.62 50,339.89 34,047.89 1982 62,676.35 63,641.77 47,735.77 1983 38,525.27 59,473.37 43,969.37 1984 59,894.50 83,814.63 68,711.63 1985 47,130.89 84,210.22 69,509.22 1986 66,366.07 87 ,291.37 72,992.37 1987 96,550.94 112,821.76 98,420.76 1988 92,704.66 122,066.48 108,570.48 1989 119,936.45 131,336.55 116,234.55 1990 150,950.72 144,734.86 130,134.86 1991 150,664.00 157,269.(X) 143,171.00 1992 141,095.00 156,924.00 143,328.00 1993 149,611.00 165,927.00 157,833.00 1994 185,268.00 209,210.00 196,618.00 1995 158,760.00 204,312.00 192,222.00 1996 247,522.00 243,845.00 232,258.00 Note: Costs through 1994 are actual, with the last two years being estimated by MCWS Oak Park Heights Sewer & Water Rate Study 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 1996. A summary of those expenditures as well as a tabulation of previous years' expenditures is shown below: SEWER DEPARTMENT EXPENDITURES Item 1992 Actual 1993 Actual 1994 Actual 1995 Budget 1996 Budget Metro Waste Services $152,445 $207,084 $170,004 $158,760 $247,522 Operation & Maintenance 49,781 54,802 71,530 64,150 68,125 Debt Service 2,430 1,580 718 -- -- Renewal & Replacement 16,319 16,903 17,611 17,919 25,347 Totals $220,975 $280,369 $259,863 $240,829 $340,994 1989 SEWER DEPARTMENT EXPENDITURE Actual MCWS Billing $247,522 Operation and Maintenance 57,906 Renewal and Replacement 25,347 Operating Expenditures $330,775 Administration and Billing 10,219 Total Expenditures $340,994 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 12 I 1 Sewer Rates Sewer user rates can be computed by simply dividing the various operating costs by the estimated flow. In addition to the operating rate, revenue for administration, billing and accounting can be ' determined by dividing the estimated administrative costs by the number of connections. The resulting computations are as follows: MCWS Charge $247,522 _ 170,000,000 gal. $1.46/1000 gal. Local Cost Operating Rate Administration Rate $83,253 _ 170,000,000 gal. $10,219 _ 1,135 accounts 0.49/1000 gal. $1.95/1000 gal. $2.25 /quarter To assure a positive cash flow situation, the minimum charge based on a discharge of 15,000 gallons per quarter should be continued. Using the rates established above, the minimum charge is computed as shown below: MCWS Charge Local Charge Administration Minimum Charge 15,000 gal. @ 1.46/1000 gal. 15,000 gat. @ 0.49/10(X) gal. $21.90 /quarter 7.35 /quarter 2.25 /quarter $31.50 /quarter The rate shown above represents a 16.0 percent rate increase for the average residential customer who uses 22,00 gallons of water per quarter or a 18.9 percent increase for the minimum water user. The increases required are almost exclusively the result of the significant increase in billing from the Metropolitan Council Wastewater Services. It should also be noted that the last sewer user rate increase was applied in 1993 which makes the current MCWS increase a little more bearable. Oak Park Heights Sewer & Water Rate Study 13 I The existing and recommended rate schedule for sewer service is shown below. In all cases, it is assumed that the billing to single family, townhouse, condominium and 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. Sanitary Sewer Rate Schedule Existing Sewer Rate Minimum Charge - $26.50 /qtr. for up to 15,000 gal. - $1.76/1000 gal. for usage over 15,000 gal. Recommended Sewer Rate 1 Minimum Charge - $31.50 /qtr. for up to 15,000 gal. $1.95/1000 gal. for usage over 15,000 gal. Oak Park Heights Sewer & Water Rate Study 14 I 1 Water User Charges �1 General 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 1996 will be approximately 180 million gallons with about 196 million gallons to be pumped. 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 categories: Oak Park Heights Sewer & Water Rate Study 15 i� ' 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. Combining all of the data described above results in the total estimated expenditures for the Water Department in 1996. A summary of those expenditures as well as previous years' expenditures is shown in the following tabulation. WATER DEPARTMENT EXPENDITURES Item 1992 Actual ' a. Operation and maintenance b. Reserve for capital improvements 1995 Budget C. Administration, accounting and billing Operation & Maintenance d. System renewal and replacement $79,771 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. Combining all of the data described above results in the total estimated expenditures for the Water Department in 1996. A summary of those expenditures as well as previous years' expenditures is shown in the following tabulation. WATER DEPARTMENT EXPENDITURES Item 1992 Actual 1993 Actual 1994 Actual 1995 Budget 1996 I Bud .-et Operation & Maintenance $77,032 $79,771 $98,128 $96,600 $101,675 Debt Service 2,430 1,580 718 -0- - 0 - Renewal & Replacement 13,346 13,798 14,243 14,555 22,024 Capital Reserves 35,000 40,000 45,000 50,000 50,000 Testing Services -0 - 5 5,250 5,500 5,750 Totals $127,808 $140,149 $163,339 $166,655 $179,449 ' Oak Park Heights Sewer & Water Rate Study 16 n i 1 1 1 LE 1996 WATER DEPARTMENT EXPENDITURES Operation and Maintenance $ 86,425 Renewal and Replacement 22,024 Capital Reserve 50,000 Testing Services 5,750 Operating Expenditures $164,199 Administration and Billing 15,250 Total Expenditures $179,449 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 - $164,199 _ 180,000,000 gal. = $0.91/1000 gal. Admin. Rate - $15,250 =1,080 accounts = $3.50 /quarter Using the minimum quarterly flow of 15,000 gallons per connection results in the user rate schedule shown below: Operating Charge - 15,000 gal. @ 0.91 /1000 gal. $13.65 /qtr. ' Administration 3.50 /au Minimum Charge $17.15 /qtr. Using the rate schedule derived above and/or the existing rate schedule, the revenue which would be generated is as follows: Oak Park Heights Sewer & Water Rate Study 17 Study Rates Minimum Charge 1080 corn. x $17.15 /qtr. x 4 qtr. $74,088 Volume Charge 115,200,000 gal. @ 0.91/1000 gal. 104,832 Total Estimated Revenue $178,920 Existing Rates Minimum Charge 1080 cone. x $16.30 /qtr. x 4 qtr. $70,416 Volume Charge 115,200,000 gal. @ 0.95/1000 gal. 109.440 Total Estimated Revenue $179,856 In addition to the minim operating charge, a $2.00 per quarter charge to pay for the State mandated water conservation and wellhead protection planning process was initiated last year which must be continued for three more years. It is interesting to note that the water rate was increased $1.30 per quarter in 1993 to fund a mandated testing program and a $2.00 per quarter rate increase was initiated to pay for the wellhead protection program. No other increases have been required which indicates the continued efficient operation of the local system by the City of Oak Park Heights. Because the revenue generation is adequate with the existing rates, it is recommended that the existing rate schedule be continued as restated below: Waterworks Rate Schedule Existing & Recommended Water Rate Minimum Charge $18.30 /qtr for up to 15,000 gal. $0.95/1000 gal. for usage over 15,000 gal. ' Oak Park Heights Sewer & Water Rate Study 18 Conclusions and Recommendations Based on the studies reported on herein, it is concluded that the current sewer user rate in the City of Oak Park Heights will have to be increased significantly to generate sufficient revenue to pay for the cost being billed to the City for conveyance and treatment by the Metropolitan Council Wastewater Services. Adequate revenue will be generated for operation of the Waterworks Department using the current water user rates. The only rate increases which have occurred for several years in the Water Department have been for State mandated programs. This static condition is a result of the expanded usage of the systems and local cost containment. 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 1996: Rate Schedule Sewer Rates Minimum Charge $31.50 /qtr. for up to 15,000 gal. i $1.95/1000 gal. for usage over 15,000 gal.� 1 � Cc ry Water Rates Minimum Charge $1830 /qtr. for up to 15,000 gal. $0.95/1000 gal. for usage over 15,000 gal. tP.b*0 wiR AcZlV� ��C 1 ' Oak Park Heights Sewer & Water Rate Study 19 I I 1 Appendix A Renewal and Replacement Schedule I I I I I Ij I I I I j 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 prgject 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: 1 Oak Park Heights Sewer & Water Rate Study A -1 SANITARY SEWER SYSTEM 1996 Item Original Cost Replacement Cost Current Value Renewal & Replacement Sanitary Sewer $1,808,006 $4,436,691 $3,307,591 $13,806 Lift Stations 155,591 310,103 122,179 11,541 Total Sewage Works $1,963,597 $4,746,794 $3,429,770 $25,347 WATERWORKS SYSTEM 1996 Item Original Cost Replacement Cost Current Value Renewal & Replacement Water Main & PRS $1,370,652 $3,108,085 $2,367,166 $9,672 Wells 56,971 219,831 82,233 2,915 Pumps 20,596 76,657 15,332 2,853 Pumphouses 78,170 217,703 103,409 2,887 Elevated Tanks 750,860 1,188,035 1,005,164 3,697 Total Waterworks $2,277,249 $4,810,311 $3,568,304 $22,024 Combined Totals $4,240,846 $9,557,105 $6,998,074 $47,371 The following worksheets show a breakdown of each of the project years for informational purposes. Oak Park Heights Sewer & Water Rate Study A -2 RENEWAL & REPLACEMENT SCHEDULE OAK PARK HEIGHTS. MINNESOTA Sanitary Sewer Year Original Cost Trend Factor Replacement Cost Condition Factor Current Value 1967 $466,815 4.827 $2,253,316 .6563 $1,478,851 1968 70,354 4.536 319,126 .6688 213,431 1969 18,761 4.346 81,535 .6813 55,550 1971 9,494 3.464 32,887 .7063 23,228 1972 13,895 3.916 44,408 .7188 31,921 1973 62,405 3.047 190,148 .7313 139,055 1975 17,552 2.569 45,091 .7563 34,102 1976 24,531 2.312 56,516 .7683 43,603 1977 40,935 2.121 86,823 .7813 67,835 1978 75,458 2.000 150,916 .7938 119,797 1979 61,578 1.808 111,333 .8063 89,768 1981 10,273 1.567 16,098 .8313 13,382 1982 57,455 1.461 83,942 .8438 70,830 1983 9,288 1.324 12,297 .8563 10,530 1986 8,952 1.175 10,519 .8938 9,402 1987 133,351 1.237 164,955 .9063 151,148 1989 21,171 1.160 24,558 .9313 22,871 1990 78,449 1.137 89,187 .9438 84,184 1991 171,210 1.120 191,755 .9563 183,375 1992 68,884 1.079 74,326 .9688 72,009 1993 213,386 1.045 222,988 .9813 218,818 1994 10,546 1.015 10,704 .9938 10,638 1995 163,263 1.000 163,263 1.000 163,263 Totals $1,808,1106 $4,436,691 $3,307,591 ' Oak Park Heights Sewer & Water Rate Study A -3 I 1 I I� J I 1 1 [1 1 1 1 1 1 Water Mains Year Original Cost Trend Factor Replacement Cost Condition Factor Current Value 1964 $15,444 5.243 $80,973 .6188 $ 50,106 1967 238,607 4.825 1,151,279 .6563 755,584 1968 31,494 4.536 142,857 .6688 95,543 1969 20,016 4.346 86.990 .6813 59,266 1971 7,095 3.464 24,577 .7063 32,530 1972 14,160 3.196 45,255 .7188 32,530 1973 68,741 3.047 209,454 .7313 153,174 1975 31,687 2.569 81,404 .7563 61,566 1976 48,455 2.312 112,028 .7688 86,127 1977 36,522 2.121 77,463 .7813 60,522 1978 63,257 2.000 126,514 .7938 100,427 1979 60,676 1.808 109,702 .8063 88,453 1981 3,993 1.567 6,257 .8313 5,201 1982 81,917 1.461 119,681 .8438 100,987 1983 6,490 1.324 8,593 .8563 7,358 1986 12,166 1.175 14,295 .8938 12,777 1987 116,721 1.237 144,384 .9063 130,855 1989 9,425 1.160 10,933 .9313 10,182 1990 56,244 1.137 63,949 .9438 60,355 1991 150,156 1.120 168,175 .9563 160,825 1992 35,334 1.079 38,125 .9688 36,936 1993 127,627 1.045 133,370 .9813 130,876 1994 15,113 1.015 15,340 1 9938 15,245 1995 113,105 1.000 113,105 1.000 113,105 Totals $1,364,445 $3,084,703 $2,345,359 1 Oak Park Heights Sewer & Water Rate Study A -4 I 1 1 1 1 1 1 11 I 1 I 1 1 Lift Stations Year Original Cost Trend Factor Replacement Cost Condition Factor Current Value 1967 $14,300 5.466 $78,164279 .2000 $15,633 1973 23,157 3.583 100,887 2.000 20,177 1987 49,335 1.208 59,597 .5500 32,778 1991 63,799 1.120 71,455 .7500 53,591 Totals $155,591 $310,103 $122,179 Supply & Storage 1967-Well #1 $17,449 5.466 $95,376 .2750 $26,228 1974 -Well #2 39,522 3.149 124,455 .4500 56,005 1967- Pump # 1 7,198 5.466 39,344 .2000 7,869 1975 -Pump #2 13,398 2.785 37,313 .2000 7,463 1975 -PH #2 78,170 2.785 217,703 .4750 103,409 1967- Tank #1 79,860 5.406 436,515 .6563 286,485 1991- Tank #2 671,000 1.120 751,520 .9563 718,679 1972 -PRS 6,207 3.767 23,382 .7188 16,807 Totals $912,804 $1,725,608 $1,222,945 Oak Park Heights Sewer & Water Rate Study FEW