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Home My WebLink About9.A.2. Sanitary Sewer Enterprise Fund Discussion General Business 9. A. 2. SHAKOPEE TO: Mayor and City Council FROM: Bruce Loney, Public Works Director DATE: 07/21/2015 SUBJECT: Sanitary Sewer Enterprise Fund Discussion (C,E) Action Sought For Council to discuss the Sanitary Sewer Fund and the rates for 2016. Background As part of the budget process, staff prepares a sanitary sewer budget and reviews the utility rates for 2016. The review of the fund shows that our revenues are not keeping up with expenditures. Attached is a rate summary that shows the proposed adjustments for the next five years. The main cost of the sanitary sewer utility is the treatment charges from Metropolitan Council. These treatment charges are to increase by 5.4%, according to the Met Council with increases projected for future years. For now, a 3% increase has been included in future years and updated information on MCES rate increases may be available by the council meeting. In past years, the sewer rate has not been increased due to the balance in the fund and the flat rate was actually decreased from $7 to $5. Attached also for Council review is a table of other city residential rates in the surrounding area. Shakopee's rate as compared to other cities is lower after the proposed increase. Another sanitary sewer rate change that staff would like to discuss is the summer sewer cap. Currently, the cap is at 150% of a winter month. Most cities surveyed at less than 150% and staff is preparing a 115% cap to be more aligned with nearby cities. Recommendation Staff recommendation is to increase the sanitary sewer utility rate as per this memo. Budget Impact The rate changes affect the Sanitary Sewer Enterprise Fund. The effect to a residence using an average of 5,000 gallons per month would be an additional $22.20 per year. Relationship to Vision This supports Goals C and E: Maintain the City's strong financial health; and Deliver effective and efficient public services by a staff of well-trained, caring and professional employees. Requested Action For Council to discuss the Sanitary Sewer Fund and the rates for 2016. Attachments: RATE SUMMARY EXPENDITURE REPORT OTHER CITY COMPARISONS PROJECTED NET POSITION Rate Summary Flat Rate The Sanitary Sewer fund projection includes rate increases over the next several years. The flat rate is projected to increase by$1.00 in 2016 and$0.50 in the years 2017—2020. An alternative to having rate increases each year would be to implement a $2.00 flat increase in 2016. This would take the flat rate from$5.00 to$7.00—which is the rate in place many years ago. This alternative results in adding an additional$500,000 to the fund over a period of 5 years. Flow Rate The flow rate is also projected over the next several years. For 2016,the Metropolitan Council increased rates by 5.4%. As shown on the flow rate graph,the City is not collecting enough revenue through the flow rate to cover the treatment costs. The increases outlined below will assist in reducing this gap. Flow Cap Another consideration is to reduce the 50%flow cap to 15%. This cap has been in place so that the flow rate would not be so large during the summer months. In review of other cities nearby,many cities do not have a 50%flow cap and range from 0%to 15%. Staff has estimated the impact of changing to a lower cap and a 15%cap would be loss of approximate$50,000. Staff would recommend changing to a 15%cap to be more in line with other cities. Projected Rates 2015 2016 2017 2018 2019 2020 Flat Rate 5 6.00 6.5 7 73 8 Flow Rate 2.07 2.24 2.37 2.46 234 2.59 Flat Rate Increase 20.00% 8.33% 7.69% 7.14% 6.67% Flat Rate Dollar amount Increase 1.00 0.5 0.50 0.50 0.50 Flow Rate Increase 8.00% 6.00% 3.80% 3.25% 1.97% EXPENDITURE REPORT BY COMPANY EXPENDITURES BY CO,DIVISION,OBJECT December,Dec YTD2014 COMPANY:07100 DIVISION:71 (SANITARY SEWER) OBJECT:6000:6999 Object December Dec YTD Dec YTD Dec YTD Dec YTD Account Actual Actual Budget Variance Variance% 2014 2014 2014 2014 2014 07100 71-SANITARY SEWER 6002-WAGES (44,263.13) 179,916.01 207,760.00 (27.843.99) (13.40) 6005-OVERTIME-FT 0.00 3,276.96 6,000.00 (2,723.04) (45.38) 6015-WAGES-PART TIME/TEMP 0.00 988.50 6,050.00 (5,061.50) (83.66) 6017-OVERTIME-PART TIME/TEMP 0.00 0.00 500.00 (500.00) (100.00) WAGES (44,263.13) 184,181.47 220,310.00 (36,128.53) (16.40) 6122-PERA 1,586.56 13,298.37 15,000.00 (1,701.63) (11.34) 6124-FICA 1,488.07 14,038.36 16,170.00 (2,131.64) (13.18) 6135-HEALTH 0.00 26,629.97 27,520.00 (890.03) (3.23) 6139-POST EMPLOYMENT HEALTH PLAN 153.87 856.24 940.00 (83.76) (8.91) 6140-LIFE/LTO 0.00 499.14 950.00 (450.86) (47.46) 6145-DENTAL 0.00 1,178.02 1,530.00 (351.98) (23.01) 6170-WORKERS COMPENSATION 366.94 8,969.16 17,000.00 (8,030.84) (47.24) 6180-COMPENSATED ABSENCES (28,470.94) (28,470.94) 4,000.00 (32,470.94) (811.77) 6185-OPEB 3,883.00 3,883.00 0.00 3,883.00 BENEFITS (20,992.50) 40,881.32 83,110.00 (42,228.68) (50.81) SUBTOTAL WAGES AND BENEFITS (65,255 63) 225.062.79 303,420.00 (78357 21) (25.82) 6202-OPERATING SUPPLIES 5,236.76 19,058.50 24,800.00 (5,741.50) (23.15) 6210-OFFICE SUPPLIES 0.00 43.66 1,000.00 (956.34) (95.63) 6212-UNIFORMS/CLOTHING 629.49 5,028.59 5,000.00 28.59 0.57 6213-FOOD 0.00 118.48 300.00 (181.52) (60.51) 6215-MATERIALS 798.61 4,749.35 4,300.00 449.35 10.45 6222-MOTOR FUELS&LUBRICANTS 1,052.96 9,969.87 10,000.00 (30.13) (0.30) 6230-BUILDING MAINT SUPPLIES 0.00 345.49 345.49 6240-EQUIPMENT MAINTENANCE 232.52 1,135.34 5,000.00 (3,864.66) (77.29) SUPPUES 7,950.34 40,449.28 50,400.00 (9,950.72) (19.74) 6310-ATTORNEY 271.50 560.25 2,000.00 (1,439.75) (71.99) 6312-ENGINEERING CONSULTANTS (106,979.24) 397.90 2,500.00 (2,102.10) (84.08) 6312-ENGINEERING CONSULTANTS 147.00 13,337.75 40,000.00 (26,662.25) (66.86) 6315-BUILDING MAINT. 0.00 0.00 500.00 (500.00) (100.00) 6316-EQUIPMENT MAINTENANCE 1,940.69 7,784.31 45,000.00 (37,215.69) (82.70) 6318-FILING FEES (3,000.00) 0.00 0.00 6322-PAVEMENT PRESERVATION 2,940.00 2,940.00 0.00 2,940.00 6327-OTHER PROF SERVICES 84,258.46 115,611.09 190,000.00 (74,388.91) (39.15) PROFESSIONAL SERVICES (20,421.59) 140,631.30 280,000.00 (139,368.70) (49.77) 6332-POSTAGE (34.10) 0.00 100.00 (100.00) (100.00) 6334-TELEPHONE 189.26 2,061.62 3,500.00 (1,438.38) (41.10) 6336-PRINTING/PUBLISHING (252.09) 417.27 500.00 (82.73) (16.55) 6339-COMPUTER ACCESS 70.02 770.24 100.00 670.24 670.24 COMMUNICATIONS (26.91) 3,249.13 4,200.00 (950.87) (22.64) 6352-LIABILITY 32,664.96 32,664.96 27,000.00 5.664.96 20.98 6354-PROPERTY 0.00 0.00 4,000.00 (4,000.00) (100.00) 6356-AUTO 0.00 0.00 3,000.00 (3,000.00) (100.00) INSURANCE 32,664.96 32,664.96 34,000.00 (1,335.04) (3.93) 6362-ELECTRIC 3,994.34 27,239.31 26,000.00 1,239.31 4.77 Location: Documents\SHAKOPEE\Deets\Monthly Reports\Expenditure Summary-Monthly Report 7/16/2015 10:07:27 AM Page 1 of 2 EXPENDITURE REPORT BY COMPANY EXPENDITURES BY CO, DIVISION,OBJECT December,Dec YTD2014 COMPANY: 07100 DIVISION: 71 (SANITARY SEWER) OBJECT:6000:6999 Object December Dec YTD Dec YTD Dec YTD Dec YTD Account Actual Actual Budget Variance Variance% 2014 2014 2014 2014 2014 6364-WATER 110.48 165.04 1,000.00 (834.96) (83.50) 6366-SEWER 4,183.75 52,929.57 75,000.00 (22,070.43) (29.43) 6367-REFUSE 164.45 285.00 0.00 285.00 6369-CURRENT USE CHARGES 218,705.43 2,405,759.73 2,708,385.00 (302,625.27) (11.17) UTILITY SERVICES 227,158.45 2,486,378.65 2,810,385.00 (324,006.35) (11.53) 6410-SOFTWARE-ANNUAL FEES 0.00 400.00 10,000.00 (9,600.00) (96.00) 6415-SOFTWARE-ANNUAL FEES(IS FUND) 733.33 8,799.96 8,800.00 (0.04) 0.00 6430-BUILDING RENT(IS FUND) 2,583.33 30,999.96 31,000.00 (0.04) 0.00 RENTALS 3,316.66 40,199.92 49,800.00 (9,600.08) (19.28) 6472-CONFERENCE/SCHOOL/TRAINING 0.00 2,455.00 6,000.00 (3,545.00) (59.08) 6475-TRAVEL/SUBSISTENCE 0.00 0.00 500.00 (500.00) (100.00) 6480-DUES 0.00 434.00 400.00 34.00 8.50 6490-SUBSCRIPTIONS/PUBLICATIONS 0.00 57.20 200.00 (142.80) (71.40) DUES/TRAINING/TRAVEL 0.00 2,946.20 7,100.00 (4,153.80) (58.50) 6497 3,320.00 12,880.00 12,000.00 880.00 7.33 FLEET CHARGEBACK 3,320.00 12,880.00 12,000.00 880.00 7.33 EXPENSE CHARGED BACK 0.00 0.00 0.00 0.00 SUPPLIES AND SERVICES 253,961.91 2,759,399.44 3,247,885.00 (488,485.56) (15.04) 6502-DEPRECIATION EXPENSE 750,228.25 750,228.25 750,000.00 228.25 0.03 MISCELLANEOUS 750,228.25 750,228.25 750,000.00 228.25 0.03 SUBTOTAL OPERATING EXPENDITURES 1,004,190.16 3,509,627.69 3,997,885.00 (488,257.31) (12.21) 6740-EQUIPMENT 58,000.00 (58,000.00) (100.00) 6760-IMPROVEMENTS (1,150,752.30) 0.00 0.00 SUBTOTAL CAPITAL OUTLAY (1,150,752.30) 0.00 58,000.00 (58,000.00) (100.00) Total 71 -SANITARY SEWER (211,817.77) 3,734,690.48 4,359,305.00 (624,614.52) (14.33) Total 07100 (211,817.77) 3,734,690.48 4,359,305.00 (624,614.52) (14.33) Grand Total (211,817.77) 3,734,690.48 4,359,305.00 (624,614.52) (14.33) Location: Documents\SHAKOPEE\Depts\Monthly Reports\Expenditure Summary-Monthly Report 7/16/2015 10:07:27 AM Page 2 of 2 OTHER CITY SEWER RESIDENTIAL RATES 2015 CITY FLAT FEE/MONTH FEE/1000 GALLONS USED CHASKA $8.30 $3.61 CHANHASSEN $22.11(minimum up to 6,000 $4.30 after 6,000 gallons used gallons) SAVAGE $4.22 $3.74 WACONIA $10.60 $4.40(0-2000 gallons used) $4.90(2001—7000 gallons used) $5.45(7001 gallons or more) JORDAN $13.59 $6.60 PRIOR LAKE $4.15(under 25,000 gal) $4.18 $5.72 (over 25,000 gal) SHAKOPEE $5.00 $2.07 Sanitary Sewer Fund Projected Net Position 2016-2020 Capital Improvement Program City of Shakopee,Minnesota j015 estimated Lel jou DA 209 nig Net position as of January I(excluding capital assets) 14,208,583 Less:Restricted cask balance (1,777,923) Available net position as of January 1 12,430,660 10,140,228 7,453,222 5,309,823 3,118,825 376,149 Revenues: Monthly Flat Fee 705,780 846,936 917,514 988,092 1,058,670 625,000 flat rate Flow charges 2,028,939 2,191,255 2,322,730 2,415,639 2,488,108 2,512,989 per rate analysis City SAC 100,000 100,000 100,000 100,000 100,000 100,000 flat rate Trunk Charges - 50,000 50,000 50,000 50,000 Metro SAC 25,000 25,000 25,000 25,000 25,000 25,000 flat rate interest 150,000 101,402 74,532 53,098 31,188 - flat rate Total revenue 3,009,719 3,314,593 3,489,776 3,631,829 3,752,967 3,262,989 Expenses: Operation Expenses 580,000 591,600 603,432 615,501 627,811 640,367 estimate 2%increase each year Treatment Costs 2,912,421 3,069,692 3,161,782 3,256,636 3,354,335 3,454,965 estimate 5.4%increase for 2016,3%increase for 2017-2020 Capital Equipment 100,000 100,000 100,000 100,000 100,000 100,E Depreciation 757,730 765,308 772,961 780,690 788,497 796,382 estimate I%increase each year Transfer to General Fund 125,000 125,000 125,000 125,000 125,000 125,000 stable through years Projects: Hilidale Dnivel2 230,000 Service Replacement 750,000 750,000 750,000 750,000 750,000 - Trunk Sewer Extensions - 120,000 120,000 120,000 - - Cured-in-Place Pipe Project - - - - - - L-16 Improvements 75, 0 - - 0x75,000 - - CSAH 78 Sewer Extension 250,000 - - - - CSAH 18 Sewer Extension - - - - 750,E Total Expenses 5,300,151 6,001,599 5,633,175 5,822,827 6,495,643 5,116,714 Excess(Deficiency) (2,290,432) (2,687,006) (2,143,399) (2,190,998) (2,742,676) (1,853,725) Estimate,Net Position as of December 31 10,140,228 7,453,222 5,309,823 3,118,825 376,149 (1,477,576)