B. Utility Rate Study0 6
CITY OF MEMORANDUM
CHMNSEN TO: Mayor and City Council
7700 Market Boulevard
FROM: Greg Sticha, Finance Director
PO Box 147
Chanhassen, MN 55317
lY
DATE: November 22, 2010
Administration
SUBJ: Utility Rate Study Discussion Follow -Up
Phone: 952.227.1100
various residents over tf e past couple of years, and a history of the city's rate and
Fax: 952.227.1110
connection charge increases for the past several years. Also included are copies of
Phone: 952.227.1120
BACKGROUND
Building Inspections
Water Usage Maps
Phone: 952.227.1180
At our November 8, 2010 work session, staff reviewed the rate study completed by
Fax: 952.227,1190
Ehler's and Associates. Jessica Cook reviewed the report in a PowerPoint
Engineering
presentation. The study showed all rates could remain flat for 2011 and still keep all
Phone: 952.227.1160
infrastructure projects in the long range CIP for each fund.
Fax: 952.227.1170
rates to meet the water quality needs and demand in the future.
Planning &
Attached is additional information to assist in making a decision on setting the
Finance
utility rates and connection fees for 2011. The attachments include the high user
Phone: 952.227.1140
map for years 2007 -2010, a copy of the WaterWise letters that were sent out to
Fax: 952.227.1110
various residents over tf e past couple of years, and a history of the city's rate and
Park & Recreation
connection charge increases for the past several years. Also included are copies of
Phone: 952.227.1120
the staff report and rate study executive summary from our last meeting.
Fax: 952.227.1110
Water Usage Maps
Public Works
To stay on schedule for future capital needs, staff is recommending we approve
Recreation Center
Option I for water rates in 2011 (which includes a fifth tier), and zero percent
2310 Coulter Boulevard
7
Phone: 52.22.1400
9
increases in all other utility rates and connections as discussed at the rate study
Fone:52.240
meeting on November 8th. This option gives the city council flexibility in adjusting
Rate & Connection Charge History
rates to meet the water quality needs and demand in the future.
Planning &
Natural Resources
ATTACHMENTS
Phone: 952.227,1130
Fax: 952.227.1110
1.
Staff report dated November 8, 2010
2.
Water Usage Maps
Public Works
1591 Park Road
3.
WaterWise Conservation Letters
Phone: 952.227.1300
4.
Rate & Connection Charge History
Fax: 952.227.1310
Senior Center
Phone: 952227.1125
Fax: 952.227,1110
Web Site
www.ci.chanhassen.mn.us
fAgregs\rate study\rate study follow-up 11- 22- 10.docx
Chanhassen is a Community for Life - Providing for Today and Planning for Tomorrow
0
CITY OF
CAANgASSEN
7700 Market Boulevard
PO Box 147
Chanhassen, MN 55317
Administration
Phone: 952.227.1100
Fax: 952.227.1110
Building Inspections
Phone: 952.227.1180
Fax: 952.227.1190
Engineering
Phone: 952.227.1160
Fax: 952.227.1170
Finance
Phone: 952.227.1140
Fax: 952.227.1110
Park & Recreation
Phone: 952.227.1120
Fax: 952.227.1110
Recreation Center
2310 Coulter Boulevard
Phone: 952.227.1400
Fax: 952.227.1404
Planning &
Natural Resources
Phone: 952.227.1130
Fax: 952.227.1110
Public Works
1591 Park Road
Phone: 952.227.1300
Fax: 952.227.1310
Senior Center
Phone: 952227.1125
Fax: 952.227.1110
Web Site
www.ci.chanhassen.mn.us
MEMORANDUM
TO: Mayor and City Council
FROM: Greg Sticha, Finance Director 6
DATE: November 8, 2010
SUBJ: Utility Rate Study
BACKGROUND
Ehler's & Associates, the city's financial advisors, annually studies the current
utility fees and future projects to determine if the rates are appropriate for planned
expansions, reconstruction, and maintenance of the water, sanitary sewer, and storm
water systems. This evening we will be discussing the rate study as well as
proposed changes to utility billing planned for 2011.
Changes in Utility Billing Beginning January 1, 2011
Staff is recommending a few administrative changes to utility billing beginning in
2011.
The first is to redistrict the entire city. Every property within the City of
Chanhassen receives a utility bill quarterly for water, sewer, and/or storm water
charges. While each resident only receives a bill once per quarter, the city processes
utility bills to 1/3 of the city each month — called billing cycles or districts. The City
of Chanhassen has grown over the past few years causing the number and location
of properties within these billing cycles to become disproportionate. To balance the
number of properties in each billing cycle, and generally be more efficient, staff has
reapportioned the billing cycles to balance each district with an equal number of
customers. The districts will now be geographically grouped together, which should
help reduce the time, gas, and ultimately money spent on reading meters each
month. If a property has been redistricted, they will receive a postcard outlining the
changes.
Secondly, due to the increase in the number of homes /properties now being rented
in the city, staff is proposing that all utility bills be sent to the property owner, and
the property owner will be responsible for making payment. In the past, as a
courtesy to the property owners, staff has billed the renter for the utility bill.
However, many of these properties are changing hands every few months, and in
many cases the new /old renters are not notifying the city of the change. Therefore it
is making collection of the utility bills very difficult, as well as costly to the city
because each time the renter changes, a utility department employee is sent out to
take a final read. We have also had payment collection issues with many of the
Chanhassen is a Community for Life - Providing for Today and Planning for Tomorrow
Utility Rate Study
November 8, 2010
Page 2 of 2
renters. In many cases renters do not live in the city very long, which makes it
difficult to contact them for payment. The property owners then become frustrated
with staff for not being able to collect the past due bill, and the property owner is
ultimately responsible for the outstanding balance on the account.
If the renter is currently receiving the billing, they will continue to do so until a new
renter occupies the property. At that point the city will begin sending the bill to the
property owner. In addition, staff will send an electronic bill via email to the renter
as a courtesy to the property owner, but the bill is the responsibility of the property
owner.
Thirdly, starting in 2011, the city will offer a monthly utility bill rather than a
quarterly bill. In order to qualify for this option, the customer must participate in
the Auto Pay (ACH) program and the actual bill will be sent electronically with no
paper bill mailed to the home. This option may be attractive to some customers who
prefer a monthly billing process versus quarterly. In addition, this will save the city
costs of printing, processing and mailing utility bills.
Rate study
Attached is the entire rate study as well as the executive summary prepared by
Ehler's & Associates. Jessica Cook from Ehler's will be here on Monday to review
the study with the council and answer any questions. Ms. Cook will present a brief
PowerPoint that highlights the key areas of the study.
There is one consistent theme in this year's rate study. Staff is well aware of the
difficult economic times, and therefore, has a goal of not increasing rates, hook-
ups /connection fees in 2011. Staff could accomplish this goal mostly with
temporary delays in capital projects. We will be reviewing these changes with the
city council on Monday.
There is no recommendation or action needed on this item at tonight's meeting. On
December 13 th , the city council will consider an amendment to the fee ordinance,
which will incorporate any changes discussed at tonight's meeting.
ATTACHMENTS
1. Rate Study Executive Summary
f: \gregs\rate study\2010 utility study memol 1- 08- 10.docx
Fin Planning
u
City of Chanhassen
Water, Sanitary Sewer, and Storm Water Rate Analysis
Executive Summary
November, 2010
Key Findings
The City of Chanhassen has requested Ehlers & Associates to update the utility rate analysis to review
rates for 2011 and beyond. We have completed the review and determined that:
1. There are no rate increases proposed for connection charges, platting fees, and area charges
for water, sanitary sewer, and storm water for 2011.
2. There are no rate increases proposed for sanitary sewer and storm water utility fees for 2011.
3. There are two options presented for water rates for 2011.
a. The first option is to add a fifth water usage tier with a higher rate per thousand
gallons that would apply to irrigation use. By adding a fifth tier, the City could have
a 0% rate increase in 2011 for the fixed charge and Tiers 1 -4.
b. The second option is to keep the existing rate structure and increase the fixed charge
and the usage rates by 3% in 2011.
EHLERS
LEADERS IN PUBLIC FINANCE
wwwehlers- inc.com
Minnesota phone 651. 697 -8500 3060 Centre Pointe Drive
Offices also in Wisconsin and Illinois fax 651- 697 -8555 Roseville, MN 5511 3 -11 22
toll free 800- 552 -1171
Water Utility Fund
The City's water infrastructure is the cost driver in the water fund. The following chart shows the annual
cost breakdown in 2011 and 2016 for operating and capital costs for the water system. The capital costs
and related debt service are expected to increase from about one -third of all costs in 2011 to almost half
five years later.
2011 Water Utility Costs
1 0
• operating costs
32%
• depreciation
33%
• capital and debt
35%
2016 Water Utility Costs
■ operating costs
27%
■ depreciation
26%
9 capital and debt
46%
The City is building a water system to serve its residents and businesses on the hottest, driest days of
summer that produce peak demand. The City has taken steps to reduce the peak demand, such as every-
other day watering, but in 2009 summer water demand was 2.67 times as high as winter water demand,
largely due to irrigation. To meet the increased demand for water, the City will need to invest in
additional infrastructure.
We have proposed two options for 2011 water rates for the City Council's consideration. Both options
will allow the City to meet the demand and pay for future capital costs.
Rate Option I — Add a Fifth Tier to the Residential and Irrigation Meters
The City of Chanhassen currently has four tiers in its water rate structure. The 2010 tiers are:
Tier 1: 0 -5,000 gallons
Tier 2: 5,001 to 25,000 gallons
Tier 3: 25,001 to 50,000 gallons
Tier 4: Over 50,000 gallons
Option I proposes the following tiers for 2011:
Tier 1: 0 -6,000 gallons
Tier 2: 6,001 to 24,000 gallons
Tier 3: 24,001 to 48,000 gallons
Tier 4: 48,001 to 99,000 gallons
Tier 5: Over 99,000 gallons (would not apply to commercial customers)
The changes in the first four tiers are necessary to allow residents to pay their bills monthly (the usage in
each tier must be divisible by three). The purpose of the fifth tier is to more directly allocate the capital
costs of the water system to the users who drive the demand for infrastructure. The fifth tier would only
apply to residential and irrigation meters and is designed to only affect those with water leaks or those
who irrigate daily or irrigate large tracts of land.
The graph in Exhibit A (see page 12 of this report) shows the water usage patterns for single family
residents in the City of Chanhassen in the fourth quarter of 2009. The black lines represent the five
proposed usage tiers. The majority of residential customers would not have any rate increase under
Option I because they use less than 99,000 gallons per quarter.
Adding a fifth tier would allow the City to have a 0% rate increase for the first four tiers in 2011.
The proposed water rates under Option I are shown in the following chart.
Quarterly Water Usage Fees Per 1,000 Gallons - Option I
We have also projected the rate increases that will be necessary in future years. We are anticipating the
need to increase usage rates on Tiers 1 -4 by 2% in 2012 and 2013 and 3% per year thereafter. Rates for
Tier 5 are projected to increase 3% annually beginning in 2012.
In addition to the usage charges above, the City of Chanhassen collects a fixed quarterly charge of $5.00.
Under Option I this fixed charge would increase a penny to $5.01 in 2011 to accommodate monthly
billing. Beginning in 2012, the fixed charge would increase at the same percentage as Tier 1 -4: 2% per
year in 2012 and 2013, and 3% per year thereafter.
Rate Option II - 3% Rate Increase on All Four Tiers
A second option for water rates is to maintain the existing rate structure. To generate sufficient revenue
for the water system, and the same amount of revenue as Option 1, the City will need to increase rates on
the four existing tiers and the fixed meter charge by 3% annually beginning in 2011. The proposed rates
for Option II are in the chart below.
2009 2010 2011 2012 2013
2014
% Rate Increase
0.0%
2.0%
2.0%
3.0%
Tier 1
$1.90
$1.00
$1.00
$1.02
$1.04
$1.07
0 -6,000 gallons
% Rate Increase
0.0%
2.0%
2.0%
3.0%
Tier 2
$2.37
$2.00
$2.00
$2.04
$2.08
$2.14
6,001- 24,000 gallons
% Rate Increase
0.0%
2.0%
2.0%
Tier 3
$2.75
$2.49
$2.49
$2.54
$2.59
$2.67
24,001 to 48,000 gallons
% Rate Increase
0.0%
2.0%
2.0%
3.0%
Tier 4
$2.75
$2.89
$2.89
$2.95
$3.01
$3.10
48,000 - 99,000 gallons
% Rate Increase
3.0%
3.0%
3.0%
Tier 5
For Irrigation & Residential ONLY
$3.61
$3.72
$3.83
$3.94
Over 99,000 gallons
We have also projected the rate increases that will be necessary in future years. We are anticipating the
need to increase usage rates on Tiers 1 -4 by 2% in 2012 and 2013 and 3% per year thereafter. Rates for
Tier 5 are projected to increase 3% annually beginning in 2012.
In addition to the usage charges above, the City of Chanhassen collects a fixed quarterly charge of $5.00.
Under Option I this fixed charge would increase a penny to $5.01 in 2011 to accommodate monthly
billing. Beginning in 2012, the fixed charge would increase at the same percentage as Tier 1 -4: 2% per
year in 2012 and 2013, and 3% per year thereafter.
Rate Option II - 3% Rate Increase on All Four Tiers
A second option for water rates is to maintain the existing rate structure. To generate sufficient revenue
for the water system, and the same amount of revenue as Option 1, the City will need to increase rates on
the four existing tiers and the fixed meter charge by 3% annually beginning in 2011. The proposed rates
for Option II are in the chart below.
Ouarterly Water Usage Fees Per 1.000 Gallons - Ontion II
Under Option II the fixed quarterly charge would also increase 3% to 5.15 in 2011.
Impact on Customers: Option I vs. Option II
In general, the first rate option - no increases to the first four tiers and adding a fifth tier for residential
and irrigation meters - will benefit most homeowners, commercial businesses that use water for their
operations, and the residents of multifamily properties. Option I will be more costly for very high
volume residential customers and customers with separate irrigation meters. The following charts provide
sample bills for water users under the two rate options.
Residential Customers
Actual
2010
Option I
2011
Option II
2011
Low Water User
$22.00
$21.01
2009 2010 2011 2012 2013
2014
% Rate Increase
3.0%
3.0%
3.0%
3.0%
Tier 1
$1.90
$1.00
$1.03
$1.06
$1.09
$1.13
0 -6,000 gallons
255,000 gallons /quarter
% Rate Increase
3.0%
3.0%
3.0%
3.0%
Tier 2
$2.37
$2.00
$2.06
$2.12
$2.19
$2.25
6,001- 24,000 gallons
% Rate Increase
3.0%
3.0%
3.0%
3.0%
Tier 3
$2.75
$2.49
$2.56
$2.64
$2.72
$2.80
24,001 to 48,000 gallons
% Rate Increase
3.0%
3.0%
3.0%
3.0%
Tier 4
$2.75
$2.89
$2.98
$3.07
$3.16
$3.25
Over 48,000 gallons
Under Option II the fixed quarterly charge would also increase 3% to 5.15 in 2011.
Impact on Customers: Option I vs. Option II
In general, the first rate option - no increases to the first four tiers and adding a fifth tier for residential
and irrigation meters - will benefit most homeowners, commercial businesses that use water for their
operations, and the residents of multifamily properties. Option I will be more costly for very high
volume residential customers and customers with separate irrigation meters. The following charts provide
sample bills for water users under the two rate options.
Residential Customers
Actual
2010
Option I
2011
Option II
2011
Low Water User
$22.00
$21.01
$21.63
11,000 gallons /quarter
Average Water User
$52.49
$51.99
$53.54
26,000 gallons /quarter
High Water user
$704.70
$817.32
$726.14
255,000 gallons /quarter
4
Commercial Customers
(rounded to nearest $)
Actual
2010
Option I
2011
Option II
2011
Low Water User
5823
$823
$843
296,000 gallons /quarter
Medium Water User
$3,979
$3,979
$4,099
1,388,000 gallons /quarter
High Water user
$22,625
$22,625
$23,304
7,840,000 gallons /quarter
In 2011, under both rate options, the total water bill for low water users is expected to drop due to a
change in the usage tiers. For example, in 2011 the first tier will provide 6,000 gallons of water for $6.00
while in 2010, $7.00 purchased 6,000 gallons.
Water Capital Improvements
The capital improvement plans for the water funds are attached in Exhibit C (see page 14 of this report).
The timing of the following planned capital improvements has been changed:
• Water treatment plant #2 has been postponed two years to 2018.
• Painting of the Arboretum water tower was moved up three years from 2018 to 2015, and the cost
was decreased 40 %.
• Painting the Lake Lucy Water Storage Stand and Pipes was moved up two years from 2015 to 2013.
Water Connection Fees
We are recommending that water connection and platting fees increase 0% in 2011, 6% annually in 2012
and 2013, and 7% annually thereafter. Connection fees are an important source of revenue needed to
expand the water system and pay for the second treatment plant.
Target Cash Reserves — Water Funds
The proposed rates impose the lowest increases possible that will still leave the City's water system in
good financial health. The projected cash balances for the water funds are shown in following graphs.
5
Water Operating Fund Ending Cash Balance
to,0oo,000
9,000.000
8,000.000
7,000.000
6,000.000
5,000.000
4,000.000
3,000.000
2,000.000
1,000.000
0
A c 5 b '' c
■Total Target Reserves (6
mos. operating expense
plus 15% depreciation)
■ Ending Cash Balance
The cash balance in the operating fund has dropped below the target reserve amount because growth has
slowed in the City of Chanhassen. Growth is projected to slowly increase to 170 residential units per year
in 2015 and beyond. At that time, the cash in the water operating fund begins to grow and is expected to
reach the target reserve level by 2020.
The water connection fund will maintain adequate cash to pay for expansion of the water system.
Water Trunk Fund Cash Balances
5,000,000
Water Treatment Plant #2
debt payments begin in 2019
4,000,000
3,000,000
2,000,000
1,000,000
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
M
Sanitary Sewer Fund
The City of Chanhassen is part of the Metropolitan Council Environmental Services (MCES) regional
treatment system. The single biggest expense in the operation of the sewer system is the MCES
disposal charges. The City does not control the annual fees established by MCES, and those fees have
increased significantly in the last three years. The average annual increase since 2009 has been 8.5 %.
Year
VICES Total Cost
% Increase
2011
$1,520,004.15
10.98%
2010
$1,369,620.14
4.83%
2009
$1,306,563.80
9.59%
In 2009 and 2010, the City increased the sewer rate 5% per year. No rate increase is proposed for
2011. The City has been able to raise rates more slowly than MCES by postponing capital
improvements and using cash in the sewer operating fund. However, beginning in 2012, the City will
need to begin increasing rates. Currently we are projecting 6% annual increases in 2012 and 2013, and
5% annual increases thereafter.
In 2011, sewer customers will actually see their sewer bills decrease as a result of making the sewer
rates compatible with monthly billing. Currently, the fixed quarterly fee of $19.45 includes up to
5,000 gallons of sewer discharge. Beginning in 2011, the same $19.45 will include 6,000 gallons.
Customers' bills will decrease $3.78 per quarter in 2011.
Sanitary Sewer Capital Improvements
The capital improvement plans for the sanitary sewer funds are attached in Exhibit C (see page 14 of this
report). The timing of the following planned capital improvements has been changed:
• LB -5 Trunk Lift Station and Forcemain is scheduled for 2013.
• The Lyman Boulevard Improvements have been postponed one year from 2013 to 2014.
Sanitary Sewer Connection Fees
We are recommending that sanitary sewer connection and platting fees increase 0% in 2011 and 4% in
2012 and annually thereafter. Connection and platting fees are an important source of revenue needed to
expand the sanitary sewer system.
7
Target Cash Reserves — Sanitary Sewer Funds
Adequate cash reserves are needed to accommodate cash flow needs, fund emergency repairs, and
save for larger future capital projects. The recommended rates keep the fee increases as low as
possible and still leave the City's sewer system in adequate financial health. The projected cash
balances for the sanitary sewer funds are shown in the following graphs. The target cash reserve equals
9 months of operating expenses. The target reserve is lower for sanitary sewer than water because
replacement costs are expected to be less for the sanitary sewer system than the water system.
The cash balance in the operating fund has dropped below the target reserve amount because growth
has slowed and the MCES costs have increased an average of 8.5% since 2009. The above graph
shows the need to implement annual rate increases beginning in 2012. Growth is anticipated to slowly
increase to 170 residential units per year in 2015. At that time, the cash in the sewer operating fund
begins to grow and is expected to reach the target reserve level by 2017.
The sewer connection fund is also expected to have adequate cash to pay for the capital costs of
expanding Chanhassen's sanitary sewer system.
0
Sewer Operating Fund Ending Cash Balance
2,000.000
1,800.000
— —
1,800,000
- -
1,400,000
■ I argef
1,200,000
R-- (9
mos. operatino
1,000,000
expense)
800,000
. _
•Ending Gash
600,000
Balance
400,000
200,000
0
The cash balance in the operating fund has dropped below the target reserve amount because growth
has slowed and the MCES costs have increased an average of 8.5% since 2009. The above graph
shows the need to implement annual rate increases beginning in 2012. Growth is anticipated to slowly
increase to 170 residential units per year in 2015. At that time, the cash in the sewer operating fund
begins to grow and is expected to reach the target reserve level by 2017.
The sewer connection fund is also expected to have adequate cash to pay for the capital costs of
expanding Chanhassen's sanitary sewer system.
0
Storm Water Fund
There is a 0% rate increase proposed for storm water. The following chart shows the proposed rates for
storm water for 2011 through 2015.
The residential quarterly storm water fee remains below the metro area average of approximately $11.00
per quarter.
Surface Water Utility Fees for Single Family Residential
(Before Credits for On-Site Ponding and Outlets)
The projected cash balances will be adequate to meet on -going storm water expenditures, which include
pond maintenance, street reconstruction projects, implementing the surface water management plan, and
acquiring land for future storm water retention. We also expect capital needs will grow as the state
develops more regulatory requirements relating to storm water run -off and contaminated storm water
ponds. The planned capital improvements are shown in Exhibit C (see page 14 of this report).
Storm Water Fund Ending Cash Balance
4,600,000
4,000,000
3,500,000
3,000,000
2,500,000 ■ Target
2,000,000 Cash
1,500,000 Balance
1,000,000
500,000
0 ib
2007 2008 2009 2010 2C11 2012 2013 2014 2015 2016 2J17 2018
9
2010
2011
2012
2013
2014
2015
Quarterly Fee -Single Family
$
8.77 $
8.76 $
9.02 $
9.29 $
9.76 $
10.25
Annual Increase in fixed storm water charge
0.0%
2.0%
3.0%
3.0%
3.0%
Area Charges - Single Family Residential
Water Quality Fee
Fee per acre
2,540
2,540
2,667
2,800
2,940
3,087
Annual increase
0%
5%
5%
5%
5%
Water Quantity Fee
Fee per acre
$
3,640 $
3,640 $
3,822 $
4,013 $
4,214 $
4,424
Annual increase
0%
5%
5%
5%
5%
Total Area Charges Per Acre - Single Family
$
6,180 $
6,180 $
6,489 $
6,813 $
7,154 $
7,512
Annual increase - Before Credits 1
0.0%
5.0%
5.0%
5.0%
5.0%
The projected cash balances will be adequate to meet on -going storm water expenditures, which include
pond maintenance, street reconstruction projects, implementing the surface water management plan, and
acquiring land for future storm water retention. We also expect capital needs will grow as the state
develops more regulatory requirements relating to storm water run -off and contaminated storm water
ponds. The planned capital improvements are shown in Exhibit C (see page 14 of this report).
Storm Water Fund Ending Cash Balance
4,600,000
4,000,000
3,500,000
3,000,000
2,500,000 ■ Target
2,000,000 Cash
1,500,000 Balance
1,000,000
500,000
0 ib
2007 2008 2009 2010 2C11 2012 2013 2014 2015 2016 2J17 2018
9
Putting It All Together: The Utility Bill
The chart below shows a sample utility bill for three residential customers who use varying amounts of
water.
Proiected 2011 Water and Sewer Bills
Cash Balances and Financing Capital Improvements
The proposed rates will provide sufficient revenue to pay routine operating expenses, pay for capital
improvements to upgrade and expand the system, and provide prudent cash balances. Adequate cash
balances allow the City to:
• Weather changing circumstances without rapidly increasing rates;
• Use cash to pay for many capital improvements and reduce the frequency of borrowing; and
• Maintain its AAA bond rating from Standard and Poor's.
The study assumes that the City will finance utility improvements if they exceed more than $1 million
and there is not sufficient cash available. No financing is expected for storm water improvements or
utility improvements made in connection with street replacement projects. In practice, the City staff will
continue to use the rate study's financing plan as a guide and, in consultation with its independent
financial advisor, consider when and how much debt to incur in any given year.
10
Actual
2011 Proposed
3% Rate
Fifth Tier Added Increase
2010
OPTION I OPTION II
Average Quarterly Residential Bill
26,000 gallons water and 26,000 gallons sewer.
Water
52.49
51.99 53.54
Sewer
98.83
95.05 95.05
Storm
8.77
8.76 8.76
Total
160.09
155.80 157.35
Increase /(Decrease) from 2010
-2.7% -1.7%
Sample Bill for Lower Water User
11,000 gallons water and 8,000 gallons sewer
Water
22.00
21.01 21.63
Sewer
30.79
27.01 27.01
Storm
8.77
8.76 8.76
Total
61.56
56.78 57.40
Increase /(Decrease) from 2010
-2.0% -1.0%
Sample Bill for Higher Water User
255,000 gallons water and 26,000 gallons sewer
Water
704.70
817.32 726.14
Sewer
98.83
95.05 95.05
Storm
8.77
8.76 8.76
Total
812.30
921.13 829.95
Increase /(Decrease) from 2010 1
1
13.4% 2.2%
Cash Balances and Financing Capital Improvements
The proposed rates will provide sufficient revenue to pay routine operating expenses, pay for capital
improvements to upgrade and expand the system, and provide prudent cash balances. Adequate cash
balances allow the City to:
• Weather changing circumstances without rapidly increasing rates;
• Use cash to pay for many capital improvements and reduce the frequency of borrowing; and
• Maintain its AAA bond rating from Standard and Poor's.
The study assumes that the City will finance utility improvements if they exceed more than $1 million
and there is not sufficient cash available. No financing is expected for storm water improvements or
utility improvements made in connection with street replacement projects. In practice, the City staff will
continue to use the rate study's financing plan as a guide and, in consultation with its independent
financial advisor, consider when and how much debt to incur in any given year.
10
Summary
The economic and real estate crisis continues to affect the City of Chanhassen. The City is facing
reduced utility revenues from connection fees and area charges, and slower revenue growth than
previously anticipated from user fees. Furthermore, the City's ability to pass along cost increases to its
customers is constrained.
The City staff and Ehlers are recommending a multi - pronged approach to manage the financial squeeze
on the utility funds:
1. Postpone capital improvements when feasible.
2. Use cash balances in the utility operating funds.
3. Proposed no increases to rates for the storm water and sanitary sewer utilities in 2011.
4. Consider two rate options for the water utility that minimize rate increases.
a. Option I — add a fifth tier to the water rate structure for residential and irrigation meters
that would apply to peak summer water use. Keep all other tiers and the fixed charge at a
0% rate increase.
b. Option II — maintain four rate tiers and increase all water utility fees by 3% in 2011.
The City's utility funds continue to be well managed, and the City's utility rates are competitive in the
region. A chart comparing Chanhassen's proposed 2011 rates to other communities' 2010 rates show
that, even with a proposed increase for water, Chanhassen maintains relatively affordable utility rates (see
Exhibit B on page 13).
11
Exhibit A — Graph of Residential Water Usage (4 Quarter)
12
Exhibit B — Rate Comparison with Other Communities
The graph below compares the proposed 2011 utility rates with the 2010 utility rates for five other metro
communities. It shows that the City of Chanhassen continues to offer relatively affordable utility rates to
its residents and businesses.
The graph assumes a quarterly usage of 27,000 gallons of water and 15,000 gallons of sanitary sewer.
Total 2010 Water, Sewer, and Storm Water Charges per Quarter for
Residential Users
80.00
60.00
40.00 —
$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
City of Edina
City of Minnetonka City of Shakopee
❑Water ❑Sewer ❑Storm Water
13
City of St. Louis
Park
City of Burnsville City of
Chanhassen
Exhibit C — Capital Improvement Plans
Water Operating Fund
Water Trunk Fund
Sanitary Sewer Operating Fund
Sanitary Sewer Trunk Fund
Storm Water Fund
14
City of Chanhassen, Minnesota
Water Operating Fund
Capital Improvements Paid By User Rates
WATER OPERATING
2010
2011
2012
2013
2014
2015..
- 2010
2017
f ,
Sewer Bobcat Snow
Accessories /E ui ment
Q- 031062,116
$ 42,500
$ 47,500
$ 32,500
$ 17,000
$ 25,000
$ 25,000
Public Works Facility
Improvements
MB -003
Excavator /skid loader
EQ 097,097,101
$ 74,000
Software upgrades
EQ 108
$ 2,573
Vector sewer/jetting truck
EQ 110
$ 100,000
Downtown Transit Station Site
Imp.
ST -021
W. 76th Street Tower Painting
W -015
$ 110,000
Lake Lucy Water Storage Stand
Pie Painting
W -041
$ 550,000
Melody Hill Water Tower
Painting
W -040
Repainting Arboretum Water
Tower
$ 600,000
Water Treatment Phase II
W -037
$
$ 11,000,000
Watennain Replacement with
street projects
W -024
$ 700,000
$ 700,000
$ 700,000
$ 700,000
$ 700,000
Well 4Improvement
W -025
Well Rehabilitation
W -032
$ 45,000
$ 45,000
$ 45,000
$ 45,000
$ 50,000
$ 50,000
$ 50,000
$ 50,000
$ 50,000
$ 50,000
$ 50,000
Standby Generator for Wells
Total
1
$ 45,000
$ 274,073
$ 792,500
$ 627,500
$ 767,000
$ 150,000
$ 1,375,000
$ 50,000
$ 11,750,000
$ 75,000
$ 750,000
Inflated Cost Beginning in 2012 4%
$ 45,000
$ 274,073
792,500
652,600
829,587
$ 168,730
1 1,608,556
$ 60,833
$ 14,867,498
$ 98,695
$ 1,026,427
City of Chanhassen, Minnesota
Water Trunk Fund
Capital Improvements Paid By Hook -Up Fees
WATER TRUNK FUND
Project
2010
2011
2012
- 2013
2014
2015.
2016
_201T
2018
— 2019
2020
Lyman Blvd.
Improvements
ST -003
$ 400,000
Arboretum Watermain
W -020
$ 220,000
Loop (Lyman - Bluff
Creek Blvd. ) (12"
Well 4Improvement
Pressure Reducing
Stations
W -027
$ 65,000
$ 65,000
$ 75,000
$ 200,000
Raw Water Collection
System
W -030
$ 500,000
750,000 gal Elevated
Storage Tank High one
W -042
$ 1,900,000
TH 101/2010 MUSA
Trunk Watermain
ST 028
$ 300,000
Water Treatment Phase II
costs in opera in CIP
Improvements (50% of
total costs
Well 14Improvements
W -043
$ 750,000
Well
W -048
$ 1,400,000
Well 16
$ 1,200,000
Well 17
$ 1,200,000
1 Million gal Elevated
Storage Tank Low Zone
W -046
$ 2,600,000
2015 MUSA Area Trunk
Watermain 12 " -16"
$ 110,000
$ 110,000
$ 110,000
$ 110,000
High zone service p mp
W 050
$ 120,000
Total
$ 750,000 1
$ 185,000
$ 1,965,000
$ 2,175,000
$ 2,600,000
$ 220,000
$ 1,810,000
$ 110,000
$ 1,510,000
$ 110,000
$
Inflated Cost Beginning
in 2012 4%
$ 750,000 1
$ 185,000
$ 1.965.000
$ 2,262 000
$ 2,812,160
$ 747
$ 2,117,444
$ 133,832
$ 1,910,632
$ 144,752
$
N: \Minnsota \Chanhassen \Financial Planning \Utility Rate Study\2010\2010 Update 1029 11/1/2010
City of Chanhassen, Minnesota
Sewer Operating Fund
Capital Improvements Paid By User Rates
SEWER OPERATING
2010
' 2011
2012
2013
2014
2015
2016
2017
' 201$
2049,
t4s ,` - x2020
Inflow and Infilltration
$ 100,000
EQ -031 /
Light Duty Trucks/Equipment EQ -062
$ 42,500
$ 27,500
$ 32,500
$ 17,000
$ 30,000
$ 55,000
$ 30,000
EQ
Excavator /skid loader 097,097,101
$ 54,000
$ 17,000
Software upgrades EQ 108
$ 2,573
Vactor sewerljetting truck EQ 110
$ 325,000
Public Works Facility
Improvements MB -003
Sewer Replacement SS -014
$ 300,000
$ 300,000
$ 300,000
$ 300,000
$ 300,000
Lift Station Maintenance SS -017
$ 260,000
$ 90,000
$ 50,000
$ 65,000
$ 40,000
$ 40,000
$ 40,000
$ 40,000
$ 40,000
$ 40,000
$ 100,000
Lift Station #3 Standby
Generator
Downtown Transit Station Site
Imp. ST -021
Total 1
$ 360,000
$ 189,0731$
377,5001
$ 97,500
$ 374,0001$
365,0001$
340,0001$
70,0001$
395,000
$ 40,000
$ 430,000
Inflated Cost Beginning in 2012 4%
360,000
189,073F
377,500
101,400
404,518
410,575
397,752
85,166
499,801
52,6377
588,485
City of Chanhassen, Minnesota
Sewer Trunk Fund
Capital Improvements Paid By Hook -Up Fees
SEWER TRUNK FUND
Project ..
20.10
2011
2012-
4013
2014
2015
2016.
2017';
2078
x2018
W
Inflow and Infilltration
SS -012
$ 100,000
$ 200,000
$ 75,000
$ 75,000
$ 75,000
$ 75,000
$ 75,000
$ 75,000
$ 75,000
$ 75,000
$ 75,000
Public Works Facili
Dell Rd /77th Stret
Forcemain Replacement
SS -018
5 Trunk Lift Station and
Forcemain
SS -020
$ 1,900,000
Sub - District LB -1 Trunk
$ 600,000
Sub - District LB -1 Trunk
Lift Station
$ 1,200,000
Lyman Blvd
Improvements
ST -003
$ 150,000
Total
$ 100,000
$ 200,000
$ 75,000
$ 1,975,000
$ 225,000
$ 75,000
$ 75,000
$ 75,000
$ 1,875,000
$ 75,000
$ 75,000
Inflated Cost Beginning
In 2012 4 "/0
$ 100,000
$ 200,000
$ 75,000
it 2,054,000
I $ 243,360
$ 84,365
$ 87,739
$ 91,249
$ 2,372,473
$ 98,695
$ 102,643
N: \Minnsota \Chanhassen \Financial Planning \Utility Rate Study\2010\2010 Update 1029 11/1/2010
City of Chanhassen Storm Water 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Capital Improvements
Transit Station Area Improvements
City Hall North Parking tot 140 < ' 1 `
Lyman Boulevard improvements 5
2005 MUSA Storm Water Mgmnt J+ 4s >
Street Improvement Projects " 400,000 400,000 400,000
Equipment (Leaf Vac, Excavator, Vactor) 30,000 T: 50;000
Software upgrades 1,285 " ��
Bluff Greek Mgmnf Plan Implementation 92,500 67,500 45,000 35,000 45,000 50;000. 50,000 50,000: �50,000a .
Lake Minnewashta Outlet 30,000 egg
Landings Court Storm Water Pond Imp 70,000
Lake Susan Shoreline Restoration Imp �
West Lotus Lake Drainage Improvements
Property Acquisition 75,000 75,000 75,000 75,000, 75;000 75,000 75,000 75,000 75,000 75;000
Stomiwater.Pond Improvements 25,000 25,000, 25,000 25,000 40,000 25,000 25,000 25,000 26000 40f000'
Cimmaron HOA Stormwater Mgmt Project
LID and Mitigation Maintenance
LID,Implementation Project 10,000 10,000 10000 10,000 1,0;000 10,000 10,000 1b,00
Kerper:Pond'Water Quality Landscaping
WeU 13 Park %,g�Lot 60000
Cranes Vineyard Creek 35,000 r , , ,
TH 101 Inlet
roe
J
TH5 Tran Alignmeht SWMP 20,000
z�$
Bi ifV Creek Dr9ve.Drain6g61mprovement 80:000
-+ 3, _.a...sc ...,r �xr�rr�� s•»,e.n. v$ �+GaS �.:� �`
Total Capital'Improvements = today's costs 253 785 577,500 430;000 625 000 '" - 230`000- : ;' StiO 000 1,0000 0
0 .., . 0 O 0,
Inflation Rate on Capital Improvements 0 /0 3 /o ' 5 ./0 5 /o, 5 /o
�•
Inflated Capital'Improvements 253 785 5 474 075 723 516 279;566 74f113 281f �r 7 ,.
Prepared by Ehlers Associates 11/1/2010
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June 1, 2009
Dear,
Welcome to the 2009 WaterWise Conservation Program! You've made a smart choice
to save and the City appreciates your participation. The WaterWise project started last
year in response to the City's water shortage during the summer of 2007. At that time,
the municipal water supply for the City was strained due to the high demand for
irrigation. The following summer, in 2008, the city began its WaterWise program to
assist residents with their conservation strategies.
The City is continuing its efforts to promote conservation of the municipal water supply
through a more efficient use of water. The WaterWise Conservation Program aims to
help you make smart decisions about your water use. According to the Minnesota
Department of Natural Resources (DNR), the gallons per capita daily (GPCD or the
average amount used by each person each day) of water consumption for Chanhassen
was 91.3 gallons. For the entire seven - county metropolitan area, the average GPCD is
75 gallons. For a family of four this would average a total of 109,500 gallons for a year.
For comparison, a review of water consumption records indicates that an average of
170,000 gallons a year have been used at your property for the last 5 years or however
long you've been in your house. If you're under average, there are probably still areas
of consumption that can be improved. If you're over the average, then hopefully this
program will help you learn new techniques for conserving water.
The WaterWise Conservation Program is a tool you can use to reduce your water
consumption in ways that work for you. Enclosed is a Starter Pack to help you begin
thinking about conservation. In the Pack you will find:
• Water Conservation Brochure
• Toilet leak kits
• Waterosity and Water Festival class information from the MN Landscape
Arboretum
• City of Chanhassen trail map
• WaterWise totebag
• Water conservation magnet
The conservation program will run from the week of June 1 st thru August 30 Each
week you'll receive the WaterWise Weekly, an email with information about a particular
topic. For example, the WaterWise Weekly for June 1 st will explain how the right
landscaping can reduce irrigation needs. Each month there will be a prize drawing and
every participant is automatically included in the drawing. June's prize will be an annual
park pass to Carver County Parks, July's prize will be a rainbarrel, and August's prize will
be a low -flow showerhead. Even though this program isn't a contest, the participant
who lowers their water use the most over the summer will receive a Grand Prize which
includes two tickets to the Chanhassen Dinner Theaters and a 20 -punch pass to the
Chanhassen Recreation Center.
The City of Chanhassen appreciates your interest in this program and looks forward to
working with you to help conserve our water supply.
June 1, 2010
Dear,
Welcome to the 2010 WaterWise Conservation Program! You've made a smart choice
to save and the City appreciates your participation. The WaterWise project is designed
to assist residents with their water conservation strategies. The City promotes water
conservation during the summer months because overall water use tri igs during that
time. Ensuring that there is enough water at all times is a critical issue. The city
continuously analyzes its supplies in order to meet the needs of the population, but
residents can also do their part to use their water efficiently, thereby ensuring a
measured supply of water at all times, for all residents.
The WaterWise Conservation Program aims to help you make smart decisions about
your water use. According to the Minnesota Department of Natural Resources (DNR),
the gallons per capita daily (GPCD or the average amount used by each person each day)
of water consumption for Chanhassen is 91.3 gallons. For the entire seven - county
metropolitan area, the average GPCD is 75 gallons. For a family of four this would
average a total of 109,500 gallons for a year. For comparison, a review of water
consumption records indicates that an average of gallons a year have been used at your
property for the last 5 years or less. If you're under average, there are probably still
areas of consumption that can be improved. If you're over the average, then hopefully
this program will help you learn new techniques for conserving water.
The WaterWise Conservation Program is a tool you can use to reduce your water
consumption in ways that work for you. Enclosed is a Starter Pack to help you begin
thinking about conservation. In the Pack you will find:
• Water Conservation Brochure
• Toilet leak kits
• City of Chanhassen Rec Center brochure
• WaterWise totebag
• Water conservation magnet
• Carver County Parks brochure.
The conservation program will run from the week of June 7 th thru August 30 Each
week you'll receive the WaterWise Weekly, an email with information about a particular
topic. For example, the WaterWise Weekly for June 7 th will explain why conservation is
important, locally and globally. Each month there will be a prize drawing and every
participant is automatically included in the drawing. June's prize will be an annual park
pass to Carver County Parks, July's prize will be a low -flow showerhead, and August's
prize will be a backyard composter. Even though this program isn't a contest,
participants who lower their water use the most over the summer or continue to have
low usage will receive a reward at the end of the program.
The City of Chanhassen appreciates your interest in this program and looks forward to
working with you to help conserve our water supply.
April 7, 2010
Each summer the City of Chanhassen experiences a significant surge in water use during
the summer months. For the past couple of years, the City of Chanhassen has offered a
residential education program for water conservation in an effort to engage the
community in water conservation measures. This year, the city would like to extend the
offer to homeowner associations (HOA). The WaterWise program can offer your group
information on conservation strategies and resources for implementing those strategies.
To give you an idea of general water use in the city, consider that the average number of
gallons pumped per person in the winter is 80.7 per person per day. In the summer, the
average is 225.6 gallons per person per day. Outdoor watering is the primary reason for
this increase. HOAs are in the unique position of being responsible for irrigating large
landscape areas and can reap the largest cost- and time - savings benefits from
employing conservation strategies. For your association, the amount of money being
spent on maintenance is probably significant. Reducing that cost by being more
efficient in your water use could free up resources for other important items. Managing
your irrigation wisely affects not only your utility bill, but can also make a difference in
your mowing costs and related issues, such as wet spots in the lawn and water stains
and damage on buildings. By participating in the WaterWise program, your association
can find the best ways to maximize its resources and improve its landscape
management.
The WaterWise Conservation Program is a tool your HOA can use to reduce water
consumption in ways that work for your association. The WaterWise program offers a
weekly email program for residents and a free irrigation system audit. The email
program will run from the week of June 7th thru August 23 Each week you'll receive
the WaterWise Weekly, an email with information about a particular topic. For
example, the WaterWise Weekly for June 7th will explain why conservation is important,
locally and globally. The irrigation system audit is a thorough examination of each
component of your system. The audit will test for proper water pressure, review the
zones, cycles and schedules of the control panel and run the system to evaluate zone
efficiency and find any broken parts. A city employee, WaterSense certified by the U.S.
Environmental Protection Agency, will conduct the audit. To schedule your free
irrigation audit, contact Carol at Chanhassen Public Works. She can be reached at 952-
227 -1300 between the hours of 7:30 am and 3:30 pm. To sign up for the WaterWise
weekly, contact Jill Sinclair at Isinclair @ci.chanhassen.mn.us Please feel free to forward
the WaterWise information to your HOA members.
The City of Chanhassen looks forward to working with you on conservation strategies
and resources that will help you save money in the future.
Jill Sinclair
Environmental Resource Specialist
June 16, 2008
«First_Name» ((Last Name»
«Address_1»
((City)), «State» ((Zip))
Re: Irrigation Audit — PW424
PID No. «PID»
((First — Name)) ((Last Name »:
During the summer of 2007, the municipal water supply for the City of Chanhassen was severely
taxed due to high irrigation demand. This demand caused a significant drop in the water table of one
of the aquifers the City uses for water supply. The water table drop was so significant that two wells
were made inoperable. To date this aquifer has not rebounded and these same two wells are still
unable to pump water. Over the winter months, the City has been working on replacing these wells.
To pay for the new well improvements, the City has increased the water rates. The new water rates
are as follows: 5,000- 25,000 gallons - $1.81 per 1,000 gallons; 25,000- 50,000 gallons - $2.26 per
1,000 gallons; Over 50,000 gallons - $2.62 per 1,000 gallons.
The City is currently undertaking efforts to promote conservation of the municipal water supply
through more efficient use of water. According to the Minnesota Department of Natural Resources
(DNR), the gallons per capita daily (GPCD) water consumption for Chanhassen was 91.3 gallons. For
the entire seven - county metropolitan area, the average GPCD is 75 gallons.
For peak irrigation time, the average Chanhassen resident would be expected to use just under 9,000
gallons of water and a typical family of four would use a little less than 36,000 gallons. A review of
water consumption records indicates that «Cons »,000 gallons of water were used at your property
between June 1 and September 30 of 2007. It is estimated that as much as 50% of all water used for
residential irrigation is wasted as a result of evaporation and overwatering.
The City of Chanhassen is offering a limited amount of free irrigation audits from a Certified
Irrigation Auditor and EPA WaterSenseTm Partner. This audit will evaluate your irrigation system for,
among other things, leaks in the system, proper head alignment, proper system pressure, appropriate
timing and duration for each zone, and other water saving possibilities. The City of Chanhassen
would like to encourage you to take advantage of this free service to help your City conserve its
limited groundwater supply and to help you save money while still maintaining a healthy and
beautiful lawn.
To take advantage of this free service, please contact me at 952.227.1168. The City of Chanhassen
appreciates your interest in the program and looks forward to working with you to help conserve our
water supply.
Sincerely,
CITY OF CHANHASSEN
Terry Jeffrey
Water Resources Coordinator
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History of Percent Increase in Water Rates and Connection Charges
Year
Rates
Connection Charges
1991
0%
1992
0%
1993
4%-5%
1994
0%
1995
0%
1996
0%
1997
10%-13%
1998
0%
1999
0%
2000
0%
2001
0%
2%
2002
0%
5%
2003
0%
4%
2004
9%-18%
50%
2005
5%-6%
5%
2006
6%-7%
38%
2007
8%
10%
2008
5%
7%
2009
5%
6%
2010
5%
6%