Memorandum 15-139 Water and Sewer Rate Recommendations for 2015

Memorandum 15-139

TO:                       Honorable Mayor Wythe and City Council

THROUGH:       Katie Koester, City Manager 

FROM:                 John Li, Finance Director

DATE:                  August 10, 2015

SUBJECT:         Water and Sewer Rate Recommendations for 2015 (2)

At the July 27th Council meeting, Council reviewed Memorandum 15-118, Water and Sewer Rate Recommendations for 2015. Even though projected revenue did not match projected expenses, Memo 15-118 argued for no change to water sewer rates based on the limited time frame the rates had been in effect, 1 year. Council directed staff to return with a recommendation that ensured the city was recovering actual expenses.

After the completion of the year 2014 Annual Audit, the City evaluated the impact of the Commodity-Based Water and Sewer Rate Model that took effect on January 1, 2014 by comparing the actual revenues and the actual expenditures for each of the Water and Sewer divisions of the Utility Fund.

Water Division

The Water Division recorded an effective operating expense of $2,019,975 (net of PERS relief and other none operating costs). The total water operating revenue (user fees collected) is $2,063,030, which includes the General Fund transfer for costs of water hydrants’ maintenance. The $43,055 revenue over expense would translate a 3% decrease in water rate, if level of consumption remains at the 2014 level.

Sewer Division

The Sewer Division recorded an effective operating expense of $1,761,276 (net of PERS relief and other none operating costs). The total sewer operating revenue (user fees collected) is $1,671,810. The revenue is under the expense by $89,466, which would translate a 6.5% increase in sewer rate, if level of consumption remains at the 2014 level.

Recommendation

Place a resolution on the August 24th agenda that leaves the water rate the same and increases the sewer rate by 6.5% with an effective date of January 1, 2016.