HomeMy WebLinkAbout2021-03-02 City Council Work Session Meeting PacketAgenda
City Council Work Session
City of Edina, Minnesota
VIRTUAL MEETING
Call 800-374-0221, enter Conference ID 3068593 to listen to meeting
Tuesday, March 2, 2021
5:30 PM
I.Call To Order
II.Roll Call
III.Utility Rate Study
IV.Adjournment
The City of Edina wants all residents to be comfortable being part of the public
process. If you need assistance in the way of hearing ampli"cation, an
interpreter, large-print documents or something else, please call 952-927-8861
72 hours in advance of the meeting.
Date: March 2, 2021 Agenda Item #: III.
To:Mayor and City Council Item Type:
Reports / Recommendation
From:Don Uram, Finance Director
Item Activity:
Subject:Utility Rate Study Discussion
CITY OF EDINA
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
ACTION REQUESTED:
Discussion only.
INTRODUCTION:
On August 18, 2020 the City Council approved a service contract with Ehlers to provide an update to the 2018
Utility Rate Study. T he contract was based on a three-step approach designed to accomplish the following:
Step 1: Implement inflationary increases to utility rates for 2021
Step 2: Evaluate water and sewer rate structures in 2021 for changes in 2022
Step 3: Evaluate storm water Residential Equivalency Factors (REF’s) for commercial and residential property
Step 1 was completed on October 10, 2020 with a presentation at a Council work session and an ordinance
revision completed in December.
The attached presentation outlines the results of Steps 2 and 3.
ATTACHMENTS:
Description
Utility Rate Study Presentation
City of Edina
Utility Rate Study
2/25/2021 2
Purpose of a Utility Rate Study
•Review the current financial status of all utility funds
Analyze adequacy of revenues
Establish rate structure that meets policy goals
Balance cash and bonding to pay for capital projects
•Parameters
Assure funds pay for capital, operations and annual debt service
Provide sufficient cash reserves
Target: 40% of operating costs + next year’s debt service + annual
depreciation
2/25/2021 3
Utilities are Capital Intensive
Operating
31%
Debt25%
Capital
44%
Water Expenditures 2021
Operating21%
Debt8%
Capital23%
MCES48%
Sewer Expenditures 2021
Operating
14%
Debt
26%
Capital60%
Storm Water Expenditures 2021
Utilities’ Capital Improvement Plan
2/25/2021 4
Major Projects Year Amount
Street Improvement Program (water, sewer, storm)Annually $7,580,000
Water Treatment Plant 2026-2027 $18,000,000
Sanitary Trunk Capacity Expansion 2022 and 2026 $2,500,000
Lift Station Improvements 2021-2022 $3,750,000
Morningside Flood Protection Projects 2022-2023 $4,000,000
Total 2021-2030 capital costs (today’s cost) = $156.4 million
•Volumetric Charges for Water and Sewer
Rate per 1,000 gallons
For water, rate increases for higher consumption (“tiers”)
•Meter Charges
Fixed fee per quarter based on meter size
Currently only water has meter charges
•Sewer Minimum Charges
Customers pay for a minimum amount of use even if actual is less
Rate Structure Components-Water and Sewer
2/25/2021 5
2/25/2021 6
Three-Step Approach to Current Rate Study
•Step 1: Review capital needs to adjust utility rates/fees to address
revenue needs for 2021
Completed Fall of 2020
•Step 2: Evaluate water and sewer rate structures in 2021 for
changes in 2022
•Step 3: Evaluate storm water Residential Equivalency Factors
(REF’s) for commercial and residential property
2/25/2021 7
Summary of Rate Study Results
Projected Annual Usage Rate Increases
Utility 2018 Study 2020 Study 2021 Study*
Water 5.00%5.00%3.00%
Sewer 5.00%5.00%6.00%
Storm Water 8.00%8.00%8.00%
* For water and sewer, 2022 percentage increase varies due to new rate structure.
These proposed water and sewer percentage increases begin in 2023.
2/25/2021 8
Summary of Rate Study Results –
Development Fees
2021
Water Connection $2,780
Sewer Connection $1,700
Total $4,480
Future increases 6.5% per year consistent with prior studies.
City offers discounts if there is no plumbing for laundry or disposals in multi-family
units.
•Promote water conservation
•Meet statutory requirements for multifamily projects
•Examine sewer minimum bill and winter quarter averaging
•Increase equity between customer classes
•Ease of administration
Step 2 Objectives: New Rate Structures for
Water and Sewer
2/25/2021 9
Water Conservation –Current Tier Breaks
2/25/2021 10
722
1972
2592
2115
1397
957
632 435 316 242 221 158 116 97 79 67 41 52 47 26 38 15 13 15 12 15 92
0
500
1000
1500
2000
2500
3000
To To To To To To To To To To To To To To To To To To To To To To To To To To To
Residential Single Family Water Accounts
Fall Quarter, 2019 Data
TIER 1
0-26,000
TIER 2
26,001-49,000 TIER 3Over 49,000
Number of AccountsQuarterly Water Consumption (in 1,000 gallons)
Water Conservation –Proposed Tier Breaks
2/25/2021 11
722
1972
2592
2115
1397
957
632 435 316 242 221 158 116 97 79 67 41 52 47 26 38 15 13 15 12 15 92
0
500
1000
1500
2000
2500
3000
To To To To To To To To To To To To To To To To To To To To To To To To To To To
Residential Single Family Water Accounts
Fall Quarter, 2019 DataTIER 1
0-12,000
TIER 2
12,001-24,000
TIER 3
Over 24,000
Number of AccountsQuarterly Water Consumption (in 1,000 gallons)
Proposed Residential Water Rates
2/25/2021 12
Water Fund
2021 2022
Residential
Tier One $ 2.58 $ 2.30
Tier Two $ 3.43 $ 3.50
Tier Three $ 5.36 $ 5.79
2% increases to residential meter fees proposed for 2022
Quarterly Bill
Low Volume
Customer
(10,000 gal)
Medium
Customer
(24,000 gal)
High Volume
Customer
(95,000 gal)
2021 Water Bill $49.34 $94.03 $424.64
Proposed 2022 Water Bill $47.01 $103.22 $514.22
$ Difference ($2.33)$9.19 $89.58
% Difference (4.7%)9.8%21.1%
Single Family Residential Water Bill Impacts
2/25/2021 13
•Morningside Neighborhood uses water purchased from Minneapolis
•Evaluated Morningside rates to ensure they cover all allocable costs
Road reconstruction, pipe lining projects, billing and admin
•Proposed rates for 2022:
Morningside pays Edina meter charge
Rate = $1.11 per 1,000 gallons plus Minneapolis cost of water
$0.36 increase over current “surcharge”
Morningside Water Rates
2/25/2021 14
•Current tiered rate structure
•Proposed rate for 2022:
$3.45 per 1,000 gallons
•Increases equity
Multifamily customer class pays for their share of water used
Multifamily Water Rates
2/25/2021 15
Water Conservation -Commercial Water Rates
2/25/2021 16
154
70
25 24 23 14 11 10 10 11 5 5 3 3 4 5 1 6 2 3 1 2 1 2 0 2 1 0
22
0
20
40
60
80
100
120
140
160
180
To To To To To To To To To To To To To To To To To To To To To To To To To To To To To
Commercial Water Usage
Fall 2019New Tier Breaks
Proposed 2022 Commercial Water Rates
2/25/2021 17
Commercial Customers
Proposed Tier Breaks 2021 2022
0-50,000 Tier One $ 2.58 $ 2.30
50,001 -200,000 Tier Two $ 3.43 $ 2.88
Over 200,000 Tier Three $ 3.59
•Reduce tier breaks to match single-family residential
Proposed 2022 Irrigation Rates
2/25/2021 18
Irrigation Water Rates
2021 2022
Tier One –up to 12,000 gallons $3.43 $3.50
Tier Two -over 12,000 gallons $5.36 $5.79
2/25/2021 19
Water Fund Projected Cash Balances
Target cash = 40% of operating costs + next year’s debt service + annual depreciation
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Target Cash Ending Cash
Bond Proceeds
•Winter Quarter Averaging
Residential sewer is billed on water use in winter quarter
Customers do not pay sewer fees on outdoor water use
•Conclusion after Review:
Most common and equitable system used in cold weather climates
Keep winter quarter averaging
Sewer Rates –Structural Issues
2/25/2021 20
•Sewer Minimum
Currently, all residential accounts are billed a minimum of 12,000 units or $72.00
per quarter per residential unit
Does not promote water conservation
•Conclusion after Review:
Maintain a sewer minimum charge for revenue stability
Reduce minimum to 8,000 gallons or $52.00 per quarter
Institute a meter charge for 1 ½” and larger meters
Sewer Rates –Structural Issues
2/25/2021 21
Proposed 2022 Sewer Rates
2/25/2021 22
Volumetric Rate per 1,000 gallons 2021 2022
Residential & Commercial $6.00 $6.50
Industrial Customers (Very High Volume)N/A $6.17
Meter Size 2022 Meter Charge
1 ½”$27.00
2”$35.00
3”$400.00
4”$500.00
5”$600.00
Quarterly Bill
Low Volume
Customer
(8,000 gal)
Medium
Customer
(12,000 gal)
High Volume
Customer
(40,000 gal)
2021 Sewer Bill $72.00 $72.00 $240.00
Proposed 2022 Sewer Bill $52.00 $78.00 $260.00
$ Difference ($20.00)$6.00 $20.00
% Difference (28%)8%8%
Single Family Residential Sewer Bill Impacts
2/25/2021 23
2/25/2021 24
Sewer Fund Projected Cash Balances
Target cash = 40% of operating costs + next year’s debt service + annual depreciation
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Target Cash Ending Cash
•Basis is Residential Equivalency Factor (REF)
Establish a standard volume of runoff from a typical single-family
residential unit to apply to various land uses
•Current ordinance charges quarterly
Step 3 –Storm Water Rates
2/25/2021 25
REF x Acreage x Storm Water Rate
2/25/2021 26
Storm Water Utility
•Maintaining annual 8% rate increases allows:
Completion of all scheduled projects in CIP
An extra $2M per year for flooding mitigation (2022-2030)
Covering all operations and maintenance
Maintaining adequate cash balances
•May need to revisit rates if additional flood mitigation is required
Storm Water REF Factors
2/25/2021 27
Property Classification
Residential
Equivalency Factor
(REF)
Golf Course/Cemetary 0.75
1-2 Unit Residential 1
Med-High Residential 8
Churches 8
Schools 3
Hospital 12
Comm/Industrial 13.5
No changes in rate structure recommended.
8% annual increase in storm water rate in 2022 and beyond.
2/25/2021 28
Storm Water Fund Projected Cash Balances
Target cash = 40% of operating costs + next year’s debt service + annual depreciation
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Target Cash Ending Cash
2/25/2021 29
Impact Analysis
•Examples of Combined Utility Bills for various users
•Compares 2021 to proposed 2022
2/25/2021 30
Sample Quarterly Residential Utility Bill
Low Volume Customer*
* 10,000 gallons of water and 8,000 gallons sewer and a 3/4“ meter
Actual Proposed
2021 2022 2023 2024 2025 2026
Quarterly Residential Bill
Water $ 49.34 $ 47.01 $ 48.42 $ 49.87 $ 51.37 $ 52.91
Sewer $ 72.00 $ 52.00 $ 55.12 $ 58.43 $ 61.93 $ 65.65
Storm $ 40.60 $ 43.85 $ 47.36 $ 51.14 $ 55.24 $ 59.65
Total $ 161.94 $ 142.86 $ 150.90 $ 159.45 $ 168.54 $ 178.21
Percent Increase -11.8%5.6%5.7%5.7%5.7%
Amount Increase-per quarter ($19.08)$8.04 $8.55 $9.09 $9.68
2/25/2021 31
Sample Quarterly Residential Utility Bill
Medium Volume Customer*
* 24,000 gallons of water and 12,000 gallons sewer and a 1” meter
Actual Proposed
2021 2022 2023 2024 2025 2026
Quarterly Residential Bill
Water $ 94.03 $ 103.22 $ 106.32 $ 109.51 $ 112.79 $ 116.17
Sewer $ 72.00 $ 78.00 $ 82.68 $ 87.64 $ 92.90 $ 98.47
Storm $ 40.60 $ 43.85 $ 47.36 $ 51.14 $ 55.24 $ 59.65
Total $ 206.63 $ 225.07 $ 236.35 $ 248.29 $ 260.93 $ 274.30
Percent Increase 8.9%5.0%5.1%5.1%5.1%
Amount Increase-per quarter $18.44 $11.28 $11.94 $12.64 $13.38
2/25/2021 32
Sample Quarterly Residential Utility Bill
Very High Volume Customer*
*95,000 gallons of water and 40,000 gallons sewer and a 1” meter
Actual Proposed
2021 2022 2023 2024 2025 2026
Quarterly Residential Bill
Water $ 424.64 $ 514.22 $ 529.65 $ 545.54 $ 561.91 $ 578.76
Sewer $ 240.00 $ 260.00 $ 275.60 $ 292.14 $ 309.66 $ 328.24
Storm $ 40.60 $ 43.85 $ 47.36 $ 51.14 $ 55.24 $ 59.65
Total $ 705.24 $ 818.07 $ 852.61 $ 888.82 $ 926.81 $ 966.66
Percent Increase 16.0%4.2%4.2%4.3%4.3%
Amount Increase-per quarter $112.83 $34.53 $36.21 $37.99 $39.86
2/25/2021 33
Sample Quarterly Utility Bill –Multifamily*
* 83 Condo Units: 526,000 gallons of water and sewer and a 3" meter
Actual Proposed
2021 2022 2023 2024 2025 2026
Quarterly Multifamily Bill
Water $ 1,608.90 $ 2,086.59 $ 2,149.19 $ 2,213.66 $ 2,280.07 $ 2,348.48
Irrigation Meter -687,000 gallons $ 3,565.65 $ 3,949.44 $ 4,067.92 $ 4,189.96 $ 4,315.66 $ 4,445.13
Sewer $ 5,119.99 $ 3,819.00 $ 4,048.14 $ 4,291.03 $ 4,548.49 $ 4,821.40
Storm $ 4,362.06 $ 4,711.24 $ 5,088.14 $ 5,495.19 $ 5,934.81 $ 6,409.59
Total $ 14,656.60 $ 14,566.27 $ 15,353.39 $ 16,189.84 $ 17,079.03 $ 18,024.59
Percent Increase -0.6%5.4%5.4%5.5%5.5%
Amount Increase-per quarter ($90.33)$787.12 $836.45 $889.19 $945.57
2/25/2021 34
Sample Quarterly Utility Bill
Small Commercial Property*
Actual Proposed
2021 2022 2023 2024 2025 2026
Quarterly Small Commercial Bill
Water $ 49.34 $ 47.01 $ 48.42 $ 49.87 $ 51.37 $ 52.91
Sewer $ 72.00 $ 65.00 $ 68.90 $ 73.03 $ 77.42 $ 82.06
Storm $ 71.25 $ 76.96 $ 83.12 $ 89.77 $ 96.95 $ 104.70
Total $ 192.59 $ 188.97 $ 200.44 $ 212.67 $ 225.73 $ 239.67
Percent Increase -1.9%6.1%6.1%6.1%6.2%
Amount Increase-per quarter ($3.62)$11.47 $12.24 $13.06 $13.94
* Small shop at 50th & France: 10,000 gallons water and sewer and ¾” meter
2/25/2021 35
Sample Quarterly Utility Bill
Large Commercial Property*
Actual Proposed
2021 2022 2023 2024 2025 2026
Quarterly Small Commercial Bill
Large Commercial: 502,000 gallons
water and sewer and 1" meter
Water $ 1,731.87 $ 1,665.18 $ 1,715.14 $ 1,766.59 $ 1,819.59 $ 1,874.17
Sewer $ 3,012.00 $ 3,263.00 $ 3,458.78 $ 3,666.31 $ 3,886.29 $ 4,119.46
Storm $ 767.34 $ 828.77 $ 895.07 $ 966.68 $ 1,044.01 $ 1,127.53
Total $ 5,511.21 $ 5,756.95 $ 6,068.99 $ 6,399.57 $ 6,749.88 $ 7,121.17
Percent Increase 4.5%5.4%5.4%5.5%5.5%
Amount Increase-per quarter $245.74 $312.04 $330.59 $350.31 $371.29
* Industry using 502,000 gallons water and sewer and 1” meter
•Restructure water rates to
Promote water conservation
Conform to new billing software
•Restructure sewer rates to
Improve customer satisfaction
Conform to new billing software
Increase equity between customer classes
•No changes proposed for storm water rate structure
Summary of Rate Study Results
2/25/2021 36
•Proposed rate structures enhance equity between customer classes
Summary of Rate Study Results
2/25/2021 37
Customer Class
% of Total
Water Used
% of Total
Revenue
Generated
Residential 54.9%53.4%
Multifamily 14.9%14.1%
Commercial 20.4%17.3%
Irrigation 9.8%15.2%
2/25/2021 38
Summary of Rate Study Results
Projected Annual Usage Rate Increases
Utility 2018 Study 2020 Study 2021 Study
Water 5.00%5.00%3.00%*
Sewer 5.00%5.00%6.00%*
Storm Water 8.00%8.00%8.00%
* For water and sewer, 2022 percentage increase varies due to new rate structure.
These proposed water and sewer percentage increases begin in 2023.
2/25/2021 39
Next Steps
•Discussion of proposed rate structures
•Adopt 2022 rates