5. City Code Amendment Concerning Fees0
CITY OF
CHANBASSEN
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
7901 Park Place
Phone: 952.227.1300
Fax: 952.227.1310
Senior Center
Phone: 952.227.1125
MEMORANDUM
TO: Todd Gerhardt, City Manager
FROM: Greg Sticha, Finance Director ��'I
DATE: December 10, 2012
SUBJ: Adoption of Ordinance, Chapter 4, Chanhassen City Code
License, Permit and Administrative Fees for 2013
PROPOSED MOTION
"The Chanhassen City Council adopts the attached ordinance amending
Chapter 4 of the Chanhassen City Code."
City Council approval requires a simple majority vote.
BACKGROUND
The city attorney's office recommends that the fees be adopted by ordinance. These
rates will be effective January 1, 2013. Ehlers and Associates has prepared a Utility
Rate Analysis to review rates for 2013 and beyond. The summary of the study is
attached.
DISCUSSION
Surface Water Management Plan (Section 4 -30 (c) 3.)
The City's Surface Water Management Plan (SWMP) was adopted in February 1994.
The SWMP recommended the City establish surface water connection fees as a
means of financing city -wide improvements recommended in the SWMP.
Connection fees are charged to subdivisions prior to final plat approval to recoup the
costs of the installation and maintenance of public storm water infrastructure.
The connection charges were derived from estimating the costs of all the pipes and
ponds proposed in the SWMP. The total cost has been apportioned so developments
are charged according to the number of acres developed and the land use. The fee per
acre varies by land use as a result of the amount of impervious surface allowed within
that land use category
Fax: 952.227.1110 At that time, the rates were calculated using market values of land in the City of
Web site Chanhassen and the construction cost index. In the SWMP, it was noted that, "the
www.ci.chanhassen.mn.us rates should be increased annually in line with the construction price index," but, until
2002, the fees had not been updated since adoption. For 2011, the fees were left the
Chanhassen is a Community for Life - Providing forTodayand Planning forTomorrow
Todd Gerhardt
December 10, 2012
Chapter 4, 2013 Fees
Page 12
same as the previous year to accommodate the downturn in the economy. In 2012, Ehlers &
Associates, the City's financial advisors, recommended the fees be increased by five percent.
For 2013, the utility rate analysis recommends a six percent increase to the water quality and
quantity fees.
Water Quality
Land Use
2006
2007
2008
2009
2010
2011
2012
Proposed
2013
Single - Family Residential
$1,600
$1,900
$2,360
$2,360
$2,540
$2,540
$2,670
$2,830
Duplex
$1,800
$2,200
$2,640
$2,640
$2,850
$2,850
$2,990
$3,170
Townhome
$3,100
$3,700
$4,440
$4,440
$4,790
$4,790
$5,030
$5,330
School /Church
$3,100
$3,700
$4,440
$4,440
$4,790
1 $4,790
$5,030
$5,330
Apartment/multi-family
$3,400
$4,100
$4,920
$4,920
$5,310
$5,310
$5,580
$5,910
Industrial
$9,500
$11,400
$13,680
$13,680
$14,770
$14,770
$15,510
$16,440
Commercial
$12,100
114,500
$17,400
$17,400=
$18,790
$18,790
$19,730
$20,910
Water Quantity
Land Use
2006
2007
2008
2009
2010
2011
2012
Proposed
2013
Ingle- Family /Low
$2,900
$3,100
$3,410
$3,410
$3,640
$3,640
$3,820
$4,050
D ensity
Medium Density
$4,400
$4,700
$4,700
$4,700
$5,020
$5,020
$5,270
$5,590
High Density
$6,400
$6,800
$7,280
$7,280
$7,780
$7,780
$8,170
$8,660
Commercial/Industrial/
Business
$6,400
$6,800
$6,820
$6,820
$7,290
$7,290
$7,650
$8,110
Parks /Open Space
$1,700
1 $1,800
$1,930
$1,930
$2,060
$2,060
$2,160
$2,290
Sewer and Water Fees (Section 4 -30 (c) 5.)
For 2013, the Ehlers and Associates analysis recommends a six percent increase to the water
hook -up and connection fees and a three percent increase to the sewer hook -up and connection
fees. Hook -up fees are also known as area trunk fees.
A lateral connection charge replaces a missed assessment. When the City installs a pipe next to a
property, some owners choose not to connect. In some instances, the City may not have assessed
the property owner for their portion of the pipe. When those properties eventually connect, the
lateral connection charge approximately covers the cost of the omitted assessment. These
charges are only levied in rare instances. Trunk hook -up charges, on the other hand, are for core
utility infrastructure such as wells, lift stations, and trunk main oversizing. Every new lot in the
City that hooks up to the utility system pays a trunk hook -up charge.
Hook -up fees paid at the time of final residential subdivision approval increase from $632.00 to
$651.00 /unit (sewer) and $1,715.00 to $1,818.00 /unit (water). The remainder of the sewer and
Todd Gerhardt
December 10, 2012
Chapter 4, 2013 Fees
Page 13
water hook -up fee is collected with the building permit at the rate in effect at that time. The total
sanitary hook -up fee is increasing from $2,107 to $2,170 and the total water hook -up fee is
increasing from $5,717 to $6,060. Parcels within the Lake Ann Sewer District will also be
subject to the Lake Ann Trunk sewer fees in addition to the sewer trunk hook -up fees. The Lake
Ann Interceptor hook -up fee is increasing from $1,803 to $1,857 and the sub -trunk fee is
increasing from $1,891 to $1,948. Commercial, industrial and institutional developments pay the
total hook -up fee at the time of building permit. Trunk hook -up fees are based on the number of
sanitary access charge (SAC) units assigned by Metropolitan Council for office or
industrial /commercial buildings.
Lateral connection charges are charges for utility infrastructure which has been constructed by
the City but was not assessed to or paid for a property. Sewer lateral connection charges increase
from $7,054.00 to $7,266.00 and water lateral connection charges increase from $7056.00 to
$7,479.00
Sewer Access Charge
The Metropolitan Council amends their Sewer Access Charge (SAC) fee annually. For 2013, the
SAC fee has been raised from $2,365.00 to $2,435.00. Rather than having to amend our
ordinance annually to incorporate the Metropolitan Council's revised fee, the City in 2011
amended the language to reference that the fee is established by the Metropolitan Council. The
total SAC fee for 2013 is $2,510.00 per unit, which includes a $75.00 City surcharge.
Utility Rates (Section 4 -45)
In 2007, the City experienced significant water usage events that lead the City to add tiers to our
water rates and adopt the tiered rate structure in 2008. In 2011, the City added a fifth tier for
household and irrigation use that is more than 99,000 gallons per quarter. For 2013, the Ehlers
and Associates analysis recommends a two percent increase to the water utility rates for Tiers 1 -
4 and the bulk rate, and a three percent increase for Tier 5. In 2013, multi - family properties will
pay a uniform rate of $2.08 per 1,000 gallons due to state law changes. The utility rate analysis
also recommends a three percent increase to the sewer utility rates.
2008
2009
2010
2011
2012
Proposed 2013
Water Hook -up
$4,799
$5,087
$5,393
$5,393
$5,717
$6,060
Sewer Hook -up
$1,769
$1,893
$2,026
$2,026
$2,107
$2,170
Water Connection
$5,924
$6,280
$6,657
$6,657
$7,056
$7,479
Sewer Connection
$5,924
$6,339
$6,783
$6,783
$7,054
$7,266
Lake Ann
Interceptor
$1,514
$1,620
$1,734
$1,734
$1,803
$1,857
Sub -trunk
$1,587
$1,699
$1,818
$1,818
$1,891
$1,948
Sewer Access Charge
The Metropolitan Council amends their Sewer Access Charge (SAC) fee annually. For 2013, the
SAC fee has been raised from $2,365.00 to $2,435.00. Rather than having to amend our
ordinance annually to incorporate the Metropolitan Council's revised fee, the City in 2011
amended the language to reference that the fee is established by the Metropolitan Council. The
total SAC fee for 2013 is $2,510.00 per unit, which includes a $75.00 City surcharge.
Utility Rates (Section 4 -45)
In 2007, the City experienced significant water usage events that lead the City to add tiers to our
water rates and adopt the tiered rate structure in 2008. In 2011, the City added a fifth tier for
household and irrigation use that is more than 99,000 gallons per quarter. For 2013, the Ehlers
and Associates analysis recommends a two percent increase to the water utility rates for Tiers 1 -
4 and the bulk rate, and a three percent increase for Tier 5. In 2013, multi - family properties will
pay a uniform rate of $2.08 per 1,000 gallons due to state law changes. The utility rate analysis
also recommends a three percent increase to the sewer utility rates.
Todd Gerhardt
December 10, 2012
Chapter 4, 2013 Fees
Page 14
Listed below is the 2008, 2009, 2010, 2011, 2012 and proposed 2013 water consumption rate
structure along with the sewer rate structure:
Water
2008
2009
2010
2011
2012
2013
Fixed Charge (minimum per quarter)
N/A
N/A
5.00
5.01
5.13
7.50
0 - 5,000 Gallons
1.81
1.90
1.00
-
-
-
0 - 6,000 Gallons
-
-
-
1.00
1.02
1.04
5,001 - 25,000 Gallons
1.81
1.90
2.00
-
-
-
6,001- 24,000 Gallons
-
-
-
2.00
2.04
2.08
25,001- 50,000 Gallons
2.26
2.37
2.49
-
-
-
24,001- 48,000 Gallons
-
-
-
2.49
2.54
2.59
50,001+ Gallons
2.62
2.75
2.89
-
-
-
48,001 - 99,000 Gallons
-
-
-
2.89
2.95
3.01
99,001+ Gallons (Irrigation and
Residential Only)
-
_
_
3.61
3.72
3.83
Multi- Family
-
-
-
-
-
2,08
Bulk sales to contractors, landscapers,
etc. at City fill stations or other
designated locations
-
4.75
5.00
5.00
5.10
5.20
Sewer
2008
2009
2010
2011
2012
2013
Minimum Charge (includes up to 5,000
gallons)
17.50
18.50
19.45
-
-
-
Minimum Charge (includes up to 6,000
gallons)
-
-
-
19.47
20.04
20.64
Residential - amounts over 5,000
3.43
3.60
3.78
-
-
-
gallons (based on winter quarter usage)
Residential - amounts over 6,000
gallons (based on winter quarter usage)
-
_
-
3.78
3.89
4.01
Commerical - amounts over 5,000
gallons (based on actual quarterly
3.43
3.60
3.78
-
-
-
usage)
Commerical - amounts over 6,000
gallons (based on actual quarterly
-
-
-
3.78
3.89
4.01
usage)
Todd Gerhardt
December 10, 2012
Chapter 4, 2013 Fees
Page 15
Surface Water Management Fees (Section 4 -50)
The utility factor for each land use is not changing. The rates are increasing three percent for
2013. The rates for tax parcels classified 1, 2 or 3 shall increase from $9.03 to $9.30. The rates
for tax parcels classified 4 through 8 shall increase from $17.63 to $18.16.
RECOMMENDATION
Staff recommends that City Council adopt the attached ordinance amending Chapter 4 of the
Chanhassen City Code revising the fees for 2013.
ATTACHMENTS
1. Ordinance Amending Chapter 4, Chanhassen City Code (2013).
2. October 2012 Utility Rate Analysis, City of Chanhassen, Minnesota, prepared by Ehlers and
Associates.
3. Memo from Jason M. Willett, Metropolitan Council, to Finance Officials, Building and
Inspections Departments dated August 7, 2012.
gAplan \city code\2012 \cc memo ch 4 fees 2013.doc
CITY OF CHANHASSEN
CARVER AND HENNEPIN COUNTIES, MINNESOTA
ORDINANCE NO.
AN ORDINANCE AMENDING CHAPTER 4
CHANHASSEN CITY CODE,
LICENSE, PERMIT AND ADMINISTRATIVE FEES
THE CITY COUNCIL OF THE CITY OF CHANHASSEN, MINNESOTA ORDAINS:
Section 1 . Section 4 -30 (c) 3 of the City Code, City of Chanhassen, Minnesota, is hereby
amended to read as follows:
Surface Water Management Fees (SWMP) - Water Quality and Water Quantity
Develo mp ent�Type
Water Quality
Water- Quantity
Single - Family
Duplex
School /Church
Townhome
Apartment /High Density
Medium Density
Industrial
Commercial
Parks /Open Space
$00 2,830.00 /Acre
$2,990.00 3,170.00 /Acre
$5 5,330.00 /Acre
$5,030.00 5,330.00 /Acre
$5,580.00 5,910.00 /Acre
based on development type
$ 1 5 , 510.00 16,440.00/Acre
$ 19n X0.00 20,910.00 /Acre
based on development type
$ 300 4,050.00 /Acre
based on land use designation
based on land use designation
based on land use designation
$8 8,660.00 /Acre
$ 5,`'x .00 5,590.00 /Acre
$7,650.00 8,110.00 /Acre
$7,650.00 8,110.00 /Acre
$2,160.00 2,290.00 /Acre
Fees are based on the developable land. Undeveloped areas (wetlands), public parks, and
existing development are exempt from the fees.
Section 2. Section 4 -30 (c) 5 of the City Code, City of Chanhassen, Minnesota, is hereby
amended to read as follows:
5. Sewer and water fees.
Residential development:
Shall pay a portion of the sewer and water hook -up fees (area trunk fees) at the time of final
subdivision approval: $ 632.00 651.00 /unit (sewer) and $ 1,715.00 1,818.00/unit (water). The
remainder of the sewer and water hook -up fees shall be collected with the building permit at the
rate in effect at that time.
Parcels previously assessed trunk hook -up fees are exempt. Residential trunk hook -up fees are
based per unit.
Sanitary
$1,475.001,519.00 /unit, or $ 2 ,i�00 2,170.00 /unit if a portion of the sewer hook -up
sewer
fee was not paid at the time of final subdivision approval —(Lake Ann Interceptor -
SAC
$44,883:001,857.00 /unit and subtrunk $1,001,948.00 /unit)*
Water
$4,002.00 4,242.00 /unit, or $ 5 , 717.00 6,060.00 if a portion of the water hook -up fee
was not paid at the time of final subdivision approval
SAC
As established by the Metropolitan Council and $75.00 city SAC surcharge
*Parcels within the Lake Ann Sewer District will be subject to the Lake Ann Trunk sewer fees in addition to the sewer trunk hook -up fees.
Commercial, industrial and institutional development:
Sewer and water trunk hook -up fees (area trunk fees). Fee is paid at the time of building permit.
Parcels previously assessed trunk hook -up fees are exempt. Trunk hook -up fees are based on the
number of sanitary access charge (SAC) units assigned by Metropolitan Council for office or
industrial /commercial buildings.
Sanitary
sewer
$2,107.00 2,170.00 /unit —(Lake Ann Interceptor - $1, -803. 001,857.00 /unit and
subtrunk $4-, �. 01,948.00 /unit)* '
Water
$ 500 6,060.00 /unit
SAC
As established by the Metropolitan Council and $75.00 city SAC surcharge
*Parcels within the Lake Ann Sewer District will be subject to the Lake Ann Trunk sewer fees in addition to the sewer trunk hook -up fees.
All development:
Lateral connection charges: If the lot or tract of land, or portion thereof, to be served by a lateral
connection that has not been assessed for the cost of construction, then the applicant shall pay the
following lateral connection:
Sewer lateral connection charge $7,054.00 7,266.00
Water lateral connection charge $7,056..00 7,479.00
Section 3 . Section 4 -45 of the City Code, City of Chanhassen, Minnesota, is hereby amended to
read as follows:
Utility rates are established for each 1,000 gallons of usage:
Water:
Fixed Charge (minimum water charge per quarter)
0 to 6,000 gallons per quarter
6,001 to 24,000 gallons per quarter
24,001 to 48,000 gallons per quarter
48,001 to 99,000 gallons per quarter
99,001+ gallons per quarter (Irrigation and Residential Only)
Multi- family properties — uniform water rate
$544 7.50 per quarter
$4, 021.04 per 1,000 gallons
$2:84 2.08 per 1,000 gallons
$2-.�54 2.59 per 1,000 gallons
$2:9-5 3.01 per 1,000 gallons
$3—.72 3.83 per 1,000 gallons
$2.08 per 1,000 gallons
FA
Bulk sales to contractors, landscapers, etc. at
City fill stations or other designated locations
Sewage:
Residential based on winter quarter usage
Commercial based on actual quarterly usage
Minimum sewage charge per quarter
(for amounts up to 6,000 gallons per quarter)
$.8 5.20 per 1,000 gallons
$349 4.01 per 1,000 gallons
$3.14.01 per 1,000 gallons
$20.04 20.64
Section 4 . Section 4 -50 of the City Code, City of Chanhassen, Minnesota, is hereby amended to
read as follows:
Surface Water Management Fees.
Classification
Land Use
Utility Factor
1
Single - family and Rural residential
Not Applicable
2
Agricultural
Not Applicable
3
Undeveloped
Not Applicable
4
Medium density residential
2.22
5
High density residential, Industrial, Office, Institutions
(churches, schools, government buildings, hospitals)
3.30
6
Business /Commercial
4.23
7
Parks, cemeteries, golf courses, arboretum
0.46
8
Parking lots as a principal use
6.14
The surface water management fee for each tax parcel classified 1, 2 and 3 shall be $ 9-:03 9.30.
The surface water management fee for each tax parcel classified 4 through 8 shall be calculated
as follows: $318.16 multiplied by the utility factor multiplied by the acreage of the parcel.
Section 5. This ordinance shall be effective January 1, 2013 after its passage and publication.
PASSED AND ADOPTED this 10"' day of December, 2012, by the City Council of the
City of Chanhassen, Minnesota
Todd Gerhardt, City Manager
Thomas A. Furlong, Mayor
(Published in the Chanhassen Villager on
g: \plan \city code\2012 \amendment ordinance chapter 4 fees 2013.doc
October, 2012
Utility Rate Analysis
City of Chanhassen, Minnesota
Prepared By:
City Staff
And
Ehlers
EHLERS Minnesota phone 651-697-8500 3060 Centre Pointe Drive
LEADERS IN PUBLIC FINANCE Offices also in Wisconsin and 115nots lay. 651-697-8555 Roseville, MN 5511 3 -11 22.
toll free 800-562-1171
CITY OF
CHANHASSEN
Financial Planning
Introduction
The City of Chanhassen has requested Ehlers to update the utility rate analysis to review rates for 2013
and beyond.
It is helpful to remind ourselves of the history of rate changes for the water, sanitary sewer, and storm
water utilities, so decisions about 2013 rates can be made in context with prior policy decisions. Ehlers
has undertaken the annual rate study since 2003. The initial water rate study was completed in
anticipation of financing and constructing the water treatment plant. The study has been updated each
year to account for changes in capital costs and development patterns, and to ensure the financial goals for
the utility systems can be achieved. These goals include:
1. Affordable and reasonable rates
2. Fully funding operations
3. Funding capital improvements
4. Using debt prudently
5. Maintaining adequate cash balances
Prior rate studies called for stable rate increases of 5% per year for water and sewer and 4% for storm
water. These proposed rate increases would have enabled the City to pay cash for replacing water and
sewer mains under road improvement projects, and limit the use of debt for expansion of the utility
infrastructure.
In 2010, the Council responded to the stressed economic times by adopting no rate increases to any of the
utilities or hook -up charges for 2011. In addition, the Council gave direction to staff to reduce rate
increases in the near future. This was accomplished by using cash balances.
The water rate recommendations this year are consistent with or lower than last year's rate study.
Key Findings
Ehlers has completed the update to the rate study and determined that:
1. Proposed usage rates for 2013 are consistent with or, in some cases, less than the prior year's rate
study. The proposed annual user rate increases for 2013 are:
• Water (Tiers 1 -4) — 2%
• Water (Tier 5) — 3%
• Sanitary Sewer —3%
• Storm Water — 3%
2. The fixed portion of the water charge is proposed to increase from $5.13 to $7.50 per quarter,
which is less than other KFS comparison cities. A chart comparing the charges is shown on page
6.
7
3. Multifamily properties will pay a uniform water rate of $2.08 per thousand gallons beginning in
2013. This change is in response to a new state law, and is revenue neutral for the City assuming
no change in usage amounts for this category of users.
4. The proposed annual connection and platting fee increases for 2013 and beyond are:
• Water Hook -Up— 6%
• Sanitary Sewer Hook -Up — 3 %. This compares to the 4% annual increases recommended
for 2013 in the prior study.
• Storm Water Quality — 6% (before credit is applied)
• Storm Water Quantity — 6%
5. The City has relied on its cash balances to accomplish:
• 0% rate increase in 2011
• 2% rate increase in 2012 (vs. the 5% recommended in prior rate studies)
• Replacement of two wells that unexpectedly failed in 2008
• Increasing capital costs for surface water management due to state regulatory
requirements
6. Modest rate increases are needed in 2013. Rate increases less than the 2% and 3% increases
recommended for 2013 will weaken the cash positions of the utility funds and may attract
questions from Standard and Poor's. The City currently benefits from the AAA rating it has
earned from Standard and Poor's. Recently, the rating agencies have been paying more attention
to enterprise fund activities for cities. Two larger suburbs with Aaa ratings from Moody's,
Burnsville and Apple Valley, were placed on negative watch, at least one of which was related to
concerns over liquidity and negative trends in an enterprise fund.
7. The City's utility rates remain competitive with comparable KFS cities. Please see Exhibit A for
a graph of quarterly rates of comparable communities.
Methodology
The City accounts for both operations and expansion of each utility in one fund. For each utility, we have
split these functions into an "Operating Fund" and a "Trunk Fund" for the purposes of this study. The
Operating Fund includes all operating revenues (user rates and charges) and the costs to operate,
maintain, and replace the system. It also includes a portion of major capital investments as the systems
grow. The Trunk Fund receives the hook -up charges and spends them on expansion of the system,
including wells and water storage facilities. The cashflow projection for each fund is in Exhibit B.
Growth
How quickly the City grows will impact the utility fees collected, hook -up revenues, and area charges.
The City has estimated the number of new residential and commercial properties that will be constructed,
as shown in the following chart.
3
Growth Assumptions
Year
Number of Residential
Units
Number of WAC Units —
Commercial Property
2012
100
13
2013
100
13
2014
110
14
2015
130
14
2016 and beyond
170
15
Water System
The City is building a water system to serve its residents and businesses on the hottest, driest days of
summer that drive peak demand. The City has taken steps to reduce this peak demand, such as every -
other day watering, but summer water consumption continues to be 2.5 times as high as winter water use,
largely due to irrigation. To meet the increased demand for water, the City will need to invest in
additional infrastructure, in particular, a well and elevated storage tank, scheduled for 2018.
The following chart shows the annual cost breakdown in 2012 and 2019 for operating and capital costs
for the water system. Operating costs make up one -third of the total costs. The capital costs and related
debt service are expected to increase slowly over the next five years. This is a trend that has been
illustrated in past studies, and results from expanding the system. Similar to most public utilities, the City
is not fully funding depreciation and has maintained a goal of funding 15% of depreciation.
Capital
Deb
329E
Capital
Deb
379E
n ..i
s
iation
96
Water Capital Improvements and Bonding
The capital improvement plans for the water operating and trunk funds are attached in Exhibit B, which
begins on page 13 of this report. Major capital improvements include:
• Radio read replacement in 2012
• Painting the Lake Lucy Water Storage Stand and Pipes
• Highway 101 Trunk Watermain (MUSA Extension) in 2013
• $700,000 every other year for replacing water main under street reconstruction projects
• Well #15 in 2015
4
2012 Water Utility Costs
2019 Water Utility Costs
• Painting of the Arboretum water tower in 2018
• Elevated Storage Tank and Well #16 in 2018
The rate study anticipates the need to bond for the improvements listed above, except for the
improvements planned for 2018. However, the need to issue bonds is dependent upon many factors, and
the City should annually review whether it has sufficient cash to pay for capital improvements prior to
issuing debt.
Water Rates
For single family residential, irrigation, and commercial customers, the proposed water rates will increase
2% in 2013 for the first four tiers, and 3% for the fifth tier. The proposed water rates, shown in the chart
below, are necessary to meet future operating, capital and debt costs. Please note that Tier 5 does not
apply to commercial properties.
Proposed Water Rates
Single Family, Commercial, and Irrigation Accounts
Actual Proposed
2012 2013 2014 2015 2016
Rate Increase 2.00% 2.00% 3.00% 3.00% 3.00%
er1 $1.02 $1.04 $1.07 $1.10 $1.14
6,000 gallons
% Rate Increase
2.00%
2.00%
3.00%
3.00%
3.00%
Tier 2
$2.04
$2.08
$2.14
$2.21
$2.27
6,001- 24,000 gallons
% Rate Increase
2.00%
2.00%
3.00%
3.00%
3.00%
Tier 3
$2.54
$2.59
$2.67
$2.75
$2.83
24,001- 48,000 gallons
% Rate Increase
2.00%
2.00%
3.00%
3.00%
3.00%
Tier 4
$2.95
$3.01
$3.10
$3.19
$3.29
48,001- 99,000 gallons
% Rate Increase
3.00%
3.00%
3.00%
3.00%
3.00%
Tier 5
$3.72
$3.83
$3.94
$4.06
$4.18
Over 99,000 qallons
Beginning in 2014 rates will need to increase 3% annually for all tiers. These rate increases are consistent
with the findings from the prior year's report. Depending on actual water usage patterns over the next
year, the City may need to consider a rate increase higher than 3% in 2014 in order to maintain the
financial health of the water utility.
In addition to the usage charges above, the City of Chanhassen collects a fixed quarterly charge of $5.13.
We are recommending this fixed charge increase to $7.50 in 2013, and by 3% per year thereafter. The
increase in the fixed charge is intended to bring the rate structure closer to the average fixed charge used
by the City of Chanhassen's comparable KFS cities.
5
The following table shows the fixed charge, calculated on a monthly basis, for those comparison KFS
cities that have a fixed charge. The average charge is $4.37 per month. This compares to the
recommended amount for the City of Chanhassen, which is $2.50 per month, or $7.50 per quarter.
Monthly Fixed Charge for KFS Cities
Elk River
$7.50
Savage
$7.32
Stillwater
$5.83
Farmington
$4.00
Andover
$3.96
Rosemount
$3.50
Lino Lakes
$3.33
Chaska
$2.35
Cottage Grove
$1.50
Average (Monthly) $4.37
Multi - Family Water Rates
A recent change in state law impacts the way multi- family properties may be charged for water. The law,
which was passed to reduce regulatory burdens on utilities, states that, "If a conservation rate is applied to
multifamily dwellings, the rate structure must consider each residential unit as an individual user." The
City of Chanhassen's current rate structure is a "conservation rate "; however, the City is not applying it to
each individual unit in multi -unit building with one water meter.
For ease of administration, we recommend that the City use a uniform rate of $2.08 per thousand gallons
for multi - family property. Moving from the current application of the tiered rate structure to a uniform
rate is revenue neutral — that is, it will generate the same amount of water revenue from multifamily
properties.
Target Cash Reserves for the Water Operating Fund
The cash balance of a fund is a measure of financial health. Cash balances allow the City to respond to
unexpected events without imposing sudden rate increases. The proposed rates implement the lowest
increases possible while keeping the City's water system in reasonable financial health.
The cash reserve target for the Water Operating Fund is equal to six months' worth of operating costs plus
15% of accumulated depreciation. The following graph shows the projected cash balances as measured
against target cash reserves.
6
Water Fund Operating Ending Cash Balance
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
-Total Target Reserves
(6 mos. operathg
expense plus 15%
depreciation)
■ Ending Cash Balance
It is anticipated that the City will need to bond for all major capital projects, including replacement of
water mains under street improvement projects.
Water Connection Fees
Connection fees are an important source of revenue needed to expand the water system and pay for the
second treatment plant. We are recommending that water connection and platting fees increase 6% in
2013 and annually thereafter. This recommendation is less than the prior year's report. The following
graph shows the anticipated cash balance in the trunk portion of the fund.
7
Sanitary Sewer System
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 charge. The City does not control the annual fees established by MCES, and those fees
increased significantly prior to 2012. In 2013 the MCES disposal charges for the City of Chanhassen
will decline, in part because of the City's actions to reduce inflow and infiltration into the sanitary
sewer system. Lower MCES disposal charges allow the Council to better modulate future rate
increases to its customers. The prior year's report anticipated a 3% sewer rate increase in 2013,
followed by 6% annual rate increases beginning in 2014. This year's study projects 3% annual rate
increases in 2013 and beyond.
Quarterly Sewer Rates
% Rate Increase I 3.00% 3.00% 3.00% 3.00% 3.00%
Fixed Fee $20.04 $20.64 $21.26 $21.90 $22.56
% Rate Increase 3.00% 3.00% 3.00% 3.00% 3.00%
Usage Fee 1 $3.89 $4.01 $4.13 $4.25 $4.38
The fixed quarterly fee of $20.04, which includes up to 6,000 gallons of sewer discharge, is also
projected to increase 3% to $20.64.
Sanitary Sewer Capital Improvements
The capital improvement plans for the sanitary sewer funds are attached in Exhibit B, which begins on
page 13 of this report. Major capital improvements include:
• Radio read replacements in 2012 (funded with debt and paid from operating fund)
• $300,000 every other year to replace sewer mains under street reconstruction projects (paid from
operating fund)
• Lift Station #10 improvements in 2013
• North Part Sub - District LB -5 Trunk Lift Station in 2015
• A vactor /sewer jetting truck in 2016
• Sub - District LB -1 Trunk and Lift Station in 2018
Sanitary Sewer Connection Fees
Hook -up and platting fees are an important source of revenue needed to expand the sanitary sewer
system. We are recommending that sanitary sewer connection and platting fees increase 3% in 2013 and
annually thereafter. This is lower than the 4% annual increase in last year's study.
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 rate increases reflect the minimum rates that will
keep the City's sanitary sewer system in good financial health. The projected cash balance for the
8
Sanitary Sewer Operating Fund is shown in the following graph. The target cash reserve equals nine
months of operating expenses.
Sewer Operating Fund Ending Cash Balance
3,500,000 I —
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
I'
500,000
0
ti ^^ ^ry ^ � p ND ^6 ^1
•Target Reserves (9 mos. operating
expense)
The above graph shows the need to implement a rate increase in 2013. As growth picks up and steady
but small rate increases keep pace with expenses, the cash in the sewer operating fund begins to grow
and is expected to reach the target reserve level by 2017. Again, the MCES rate increases in the future
will have a major impact upon the sewer operating fund.
The sewer trunk fund is also expected to have adequate cash to pay for the capital costs of expanding
Chanhassen's sanitary sewer system. The graph that follows shows the projected ending trunk fund
cash balance and capital costs. No additional future debt is assumed for the sewer trunk fund. The cash
balance declines in 2015 and 2018 when new trunk lift stations are scheduled.
Sewer Trunk Fund Cash Balance
3,500,000
3,000,000 New lift stations
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
2011
2012
2013
I 2014
2015
2016
2017
2018
2019
2020
FA Ending Cash
2,887,483
3,008,355
2,808,522 3,085,101
1,383,536
1 1,795,384
2,232,272
1 502,906 925,097
1 1,371,218
9
Storm Water Fund
There is a 3% rate increase proposed for the quarterly storm water fee for 2013 and 4% annual increase in
2014 and beyond. This is less than the prior year's rate study, which projected 5% annual rate increases
beginning in 2015. The following chart shows the proposed rates for storm water quarterly fees.
Quarter) Bill - Single Family Home
2012
2013
2014
2015
2016
2017
Area Charges - Single Family Residential
Fixed quarterly fee
9.03
9.30
9.67
10.06
10.46
10.88
Annual charge
36.12
37.20
38.69
40.24
41.85
43.52
Annual Increase
3.0%
3.0%
4.0%
4.0%
4.0%
4.0 0 , !
The projected utility rates 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. Very modest use of debt in the storm water utility fund will allow for steady and predictable rate
increases.
Another important revenue source for the Storm Water Fund is the area charges collected when land is
platted. The area charges have two components: water quality and water quantity. Both of these charges
are expected to increase 6% per year in 2013 and thereafter.
Single Family Storm Water Area Charges
The projected cash balances in the storm water fund are shown in the following graph. The target cash
reserve is one year's operating plus average annual capital expenditures. The projected cash balances are
lower than the target because the City Council has prioritized small or no rate increases, and capital
expenses are projected to increase over the next four years.
10
2011
2012
2013
2014
2015
2016
Area Charges - Single Family Residential
Water Quality Fee
Fee per acre
2,540
2,667
2,827
2,997
3,176
3,367
Annual increase
0%
5%
6%
6%
6%
6%
Water Quantity Fee
Fee per acre
$ 3,640 $
3,821 $
4,051 $
4,294 $
4,552
$ 4,825
Annual increase
0%
5%
6%
6%
6%
6%
Total Area Charges Per Acre - Single Family
$ 6,180 $
6,488 $
6,878 $
7,291 $
7,728
$ 8,192
Annual increase - Before Credits
0.0%
5.0%
6.0%
6.0%
6.0%
6.0%
The projected cash balances in the storm water fund are shown in the following graph. The target cash
reserve is one year's operating plus average annual capital expenditures. The projected cash balances are
lower than the target because the City Council has prioritized small or no rate increases, and capital
expenses are projected to increase over the next four years.
10
Storm Water Fund Ending Cash Balance
2,500,000
2,000,000
1,500,000
1,000,000
500,000
■Target Cash Balance
0 Ending Cash
11
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Putting It All Together: The Utility Bill
The chart below shows a utility bill for sample of residential customers who use varying amounts of
water.
Projected Water, Sewer and Storm Sewer
Bills
Actual
Proposed
2012
2013
2014
2015
Averane Quarterly Residential Bill
26,000 gallons water and 26,000 gallons sewer
Water
53.05
56.38
58.07
59.81
Sewer
97.91
100.85
103.87
106.99
Storm
9.02
9.29
9.57
9.86
Total
$159.98
$166.52
$171.52
$176.66
Percent Increase from prior year
2.7%
4.1%
3.0%
3.0%
Amount Increase from prior year
$6.54
$5.00
$5.15
Sample Bill for Lower Water User
11,000 gallons water and 8,000 gallons sewer
Water
21.45
24.15
24.87
25.62
Sewer
27.83
28.67
29.53
30.41
Storm
9.02
9.29
9.57
9.86
Total
$58.30
$62.11
$63.97
$65.89
Percent Increase from prior year
2.7%
6.5%
3.0%
3.0%
Amount Increase from prior year
$3.80
$1.86
$1.92
Sample Bill for Higher Water User
255,000 gallons water and 26,000 gallons sewer
Water
839.32
864.17
890.10
916.80
Sewer
97.91
100.85
103.87
106.99
Storm
9.02
9.29
9.57
9.86
Total
$946.25
$974.31
$1,003.54
$1,033.65
2.7%
3.0%
3.0 0 %
3.0%
Percent Increase from prior year
Amount Increase from prior year
$28.06
$29.23
$30.11
12
AA Metropolitan Council
IAIA
Environmental Services
August 7, 2012
TO: FINANCE OFFICIALS, BUILDING AND INSPECTION DEPARTMENTS
SUBJECT: SEWER AVAILABILITY CHARGE (SAC) RATE FOR 2013
The Metropolitan Council in July adopted a $70 increase in the base metropolitan SAC rate effective January 1, 2013.
At and after that date, the new base metropolitan SAC rate will be 52,435 for metropolitan local governments connected
to our system.
Pursuant to Minn. Statute 473.517 subd. 3, a metropolitan (or wholesale) SAC is paid by your community to the
Council (MCES) as users connect to the metropolitan wastewater system for the first time or as a user's maximum
demand for sewer capacity increases. Note that these fees are for the availability of capacity (not the actual use) in the
metropolitan system as demanded by development or changes in use on specific properties in your community. Your
community may have different retail SAC rates; different credits may apply and /or you may collect the fees in a
different manner than the metropolitan SAC, pursuant to Minn. Statutes sections 473.521 (3), 444.075 (3) or other
authorities.
Details of our SAC program procedures are available in hard copy (by request) or on the web at:
http: / / www.metrocouncil.org/ environment /RatesBilling/SAC_Program.htm
As you may know, the SAC system was implemented metro -wide in 1973. The metropolitan SAC funds we collect pay
for the (unused) portion of the capital costs of the metropolitan wastewater system that is "reserved for future users."
The SAC program provides funds to support the award winning metropolitan sanitary sewer system worth billions of
dollars, and facilitates equity by imposing the costs of building reserve capacity on communities proportionate to the
new capacity demand rather than on existing users. Moreover, the regional pooling of development risk and the SAC
pay -as- you -build system has largely relieved communities of the economic risk of building major new wastewater
infrastructure.
If you have any financial questions, please feel free to contact me at (651) 602 -1196. For SAC procedural questions,
please contact Jessie Nye at ('05 1) 602 -1375 or read the SAC procedure manual on our web site at:
www.metrocouncil.org / environment /RatesBilling/SAC_Program.htm.
Please share the information in this letter with your staff as appropriate. As always, your cooperation is appreciated.
Sincerely,
6�9 �-
Jason M. Willett
MCES Finance Director
cc: Jessie Nye, SAC Program Administrator, MCES
wnv. metrocouncii. org
390 Roberi Street North F tit. Faux, MN 55101 -1805 o (651) 602 -1005 E Fax (651) 602 -1477 � 'I` Y (651) 291 -0904