HomeMy WebLinkAboutVI-03 - 1st Reading_Order for Public Hearing - Ordinance Amendment
City Council Memorandum
To: Mayor Hicks & City Councilmembers
From: Melanie Lammers, Finance Manager
Date: December 3, 2018
Item: First Reading/Ordinance Amendment-Adjustment of Utility Rate Fees
Council Action Requested:
Council is requested to conduct a first reading and order a public hearing for December 17,
2018 to consider an ordinance amendment adjusting the Utility fees.
Background Information:
In 2016 the City worked with Ehlers on a utility rate study and took an in-depth look at the
structure of our utility funds and sustainability. The study recommended a rate restructure
which was passed and implemented in July 2017. The 2019 rate recommendation is based
upon information from the Utility Rate study, our identified capital needs for infrastructure
paid through utility funds, and for long term sustainability of the utility funds.
Staff has recommended a 5% increase in Water rates. This is based on analysis of the above
factors and to avoid a negative cash flow in the Water Fund. The Engineering department is
planning on redoing an older section of street in 2019. The cost to the Water fund is
significant. Staff is also looking at future road projects and estimating the impact to the Water
fund, mitigating as much cost and work as possible to keep the rate increases to the Fund
reasonable.
A 3% increase is being recommended for our Sewer Rates. This adjustment keeps the Fund in
line with inflationary increases to expenditures, and the Met Council increase of 3.24%. (Met
Council is the largest expense for the Sewer Fund)
A 3% increase is also being recommended for our Storm water fund. The Storm Water Funds
future capital projects are driving this proposed increase.
Financial Impact:
The proposed rate increase is included in our 2019 budget. It is anticipated this increase will
create a neutral or positive revenue stream from each of the utility funds. Rate increase requests
in future years will be evaluated based on the fund health, and are expected to be in line with
inflationary measures and Capital projects. Staff also recommends a utility rate study be
budgeted for 2020, for an outside viewpoint of how the new rate structure is functioning.
If approved, the updated fee structure will be effective with the January 2019 billing.
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Residential Impact Chart – quarterly bill
Average Single Family Home
City Average based on 15,000 gallons
2017 2018
2017/2018
Increase
2019
w/5/3/3
2018/2019
Increase
WATER 15 15 15
0.91 0.99 1.04
13.65 14.85 15.60
SEWER 15 15 15
3.32 3.98 4.10
49.80 59.70 61.50
Water 13.65 14.85 1.20 15.60 0.75
WA Fixed 15.09 16.45 1.36 17.27 0.82
Sewer 49.80 59.70 9.90 61.50 1.80
SW Fixed 14.66 17.59 2.93 18.12 0.53
Stormwater 14.44 18.05 3.61 18.59 0.54
MN Test Fee 1.59 1.59 0.00 1.59 0
109.23 128.23 19.00 132.67 4.44
Advisory Commission Discussion:
N/A
Council Committee Discussion:
November 15th Finance Committee meeting included discussion on the utility funds and rate
increase requests.
Attachments:
Ordinance amendment
Finance Committee Memo and Recap
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CITY OF HASTINGS, MINNESOTA
ORDINANCE NO. 2018- THIRD SERIES
AN ORDINANCE OF THE CITY OF HASTINGS, MINNESOTA AMENDING
CHAPTER 34 OF THE HASTINGS CITY CODE PERTAINING TO FEES FOR
MUNICIPAL SERVICES
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF HASTINGS AS
FOLLOWS:
Chapter 34 of the Hastings City Code is hereby amended as follows:
Section 34.03 Fee Schedule
Current Proposed
Water Base Charges
5/8” Meter $16.45 $17.27
1.0” Meter $41.10 $43.16
1.25” & 1.5” Meter $82.22 $86.33
2.0” Meter $131.54 $138.12
3.0” Meter $246.65 $258.98
4.0” Meter $534.38 $561.10
6.0” Meter $1,150.99 $1,208.53
Irrigation Base Charges
5/8” Meter $32.90 $34.54
1.0” Meter $82.20 $86.31
1.25” & 1.5” Meter $164.44 $172.66
2.0” Meter $263.08 $276.23
3.0” Meter $493.33 $518.00
4.0” Meter $1068.76 $1122.20
6.0” Meter $2301.98 $2417.08
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Water Consumption Current Proposed
Residential Users (applies
all year)
0 – 15,999 gallons $.99/1,000 gallons $1.04/1,000 gallons
16,000 – 30,999 gallons $1.29/1,000 gallons $1.35/1,000 gallons
31,000 – 60,999 gallons $2.06/1,000 gallons $2.16/1,000 gallons
61,000 gallons and above $3.91/1,000 gallons $4.11/1,000 gallons
Other Users
0 – 15,999 gallons $.99/1,000 gallons $1.04/1,000 gallons
16,000 – 75,999 gallons $1.29/1,000 gallons $1.35/1,000 gallons
76,000 – 200,999 gallons $2.06/1,000 gallons $2.16/1,000 gallons
201,000 gallons and above $3.91/1,000 gallons $4.11/1,000 gallons
Sewer Fixed Charges $17.59 $18.12
Sewer Consumption
Charge (based on metered
use during winter billing
quarter)
$3.98/1,000 gallons $4.10/1,000 gallons
Storm Water Utility Rates
Low Density Residential $18.05/lot $18.59/lot
Medium Density
Residential
$9.92/lot $10.22/lot
High Density Residential $70.39/acre $72.50/acre
Manufactured Housing $54.14/acre $55.76/acre
Commercial/Office $86.63/acre $89.22/acre
Industrial $75.80/acre $78.07/acre
Public/Institutional Exempt/acre Exempt/acre
Golf Course $16.25/acre $16.74/acre
Open Space/Vacant $18.05/lot $18.59/lot
Agricultural $18.05/lot $18.59/lot
Section 34.03 Effective Date
This ordinance shall be effective with the January 2019 billing.
Moved by Councilmember , seconded by Councilmember
to adopt the ordinance as presented.
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Adopted by the Hastings City Council on this 17th day of December, 2018, by the
following vote:
Ayes:
Nays:
Absent:
CITY OF HASTINGS
____________________
Paul J. Hicks, Mayor
ATTEST:
_____________________
Julie Flaten, City Clerk
I hereby certify that the above is a true and correct copy of the Ordinance presented to
and adopted by the City of Hastings, County of Dakota, Minnesota, on the 17th day of
December, 2018, as disclosed by the records of the City of Hastings on file and of record
in the office.
_____________________
Julie Flaten, City Clerk
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To: Finance Committee (Vaughan*, Balsanek, Braucks)
From: Melanie Lammers, Finance Manager
Cc: Melanie Mesko Lee, City Administrator
Date: November 15, 2018 7:45am
2019 Budget Considerations.
The committee is asked to review a number of options for final budget preparation. The 2019 insurance
rates were favorable, so there is approximately $100,000 in general levy available within the 2019
Preliminary Levy.
10% insurance overage budgeted – total of approximately $100,000 general levy
$100,000 overage in our budget- need to decide what course of action we would like to take.
• Lower the levy by $100,000.
Current tax rate for 2019 estimated at 59.55% (information from Dakota County)
New rate with decrease estimated at 59.05%
Half a percent decrease in rate lowers median value home tax approx. $10 for the year
• Use the monies to build fund balance in an internal service fund for insurance.
All insurance will be paid out of the insurance fund moving forward.
Funds/departments will contribute to the insurance fund for premiums. The goal is to
establish a fund that the City can use if a claim is not covered by our insurance. Current
liability is up to $2 million per occurrence. Another $1 million costs $32,000 a year.
This fund can also be used for paying deductibles, carrying a higher deducible,
emergency situations (money for natural disasters), and phasing in large insurance
increases if needed.
Staff recommends working toward a $500,000 fund balance at this time. Note: this is for
liability and work comp insurance, not payroll funded employee items (health, dental,
etc.) and will take many years to reach our initial target.
• Use the monies to fund a project or item that didn’t make the final cut in the 2019
budget. Staff will make recommendations based on department priorities, available
funding, and outstanding needs.
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2019 UTILITY RATES
The adopted Utility Rate study had projected future rate increases based on anticipated
projects to be funded out of the utility funds. The rate study increase implementation schedule
for the next few years:
2017 2018 2019 2020 2021 2022 2023
Water 9% 9% 9% 9% 9% 9% 7%
Sewer 20% 20% 3% 3% 3% 3% 3%
Storm 25% 25% 25% 25% 5% 5% 5%
Using the existing study, we refined the numbers with a debt/cash combination for the
requested Capital projects. We also have been working with the public works department to
refine and provide more detail for future anticipated capital projects. Here is the current,
budgeted, and projected projects worked into the model.
Actual Budgeted Projected Projected Projected Projected
2018 2019 2020 2021 2022 2023
Water 1,246,000 1,271,550 1,060,963 650,000 968,000 965,000
Sewer 450,000 592,000 609,569 840,000 411,000 552,700
Storm 150,000 260,000 90,600 225,000 31,000 21,000
Public works will continue to refine the projects identified for the next several years to ensure
we are planning appropriately. Based on the projects in the next few years, we are budgeting a
2019 utility rate increase effective with the January 2019 billing of 5% Water, 3% Sewer, and
3% Stormwater,. These increases are much smaller than the prior two increases adopted by
the Council.
We have prepared several graphs showing the capital project amounts and the Target working
capital for each fund with various rate increases. We are balancing the need for expensive
capital investment with the impact to the property owner.
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No 2019 increase, resume at 9% in 2020
2019 – 5% Increase 2020 – 9% Increase
2019 – 9% Increase. 2020 – 9% Increase
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Water Fund Capital Unrestricted Cash Reserves
Target working capital Actual working capital
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Water Fund Capital Unrestricted Cash Reserves
Target working capital Actual working capital
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Water Fund Capital Unrestricted Cash Reserves
Target working capital Actual working capital
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No 2019 increase, resume at 3% in 2020
2019 – 3% Increase – estimating 3% yearly inflationary increase
(1,000,000)
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Sewer Fund Capital Unrestricted Cash Reserves
Target working capital Actual working capital
(1,000,000)
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Sewer Fund Capital Unrestricted Cash Reserves
Target working capital Actual working capital
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2019 – No increase, resume 3% in 2020
2019 – 3% Increase – estimating yearly 2% or 3% inflationary increase
0
500,000
1,000,000
1,500,000
2,000,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Storm Water Fund Capital Unrestricted Cash Reserves
Target working capital Actual working capital
0
500,000
1,000,000
1,500,000
2,000,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Storm Water Fund Capital Unrestricted Cash Reserves
Target working capital Actual working capital
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Customer Impacts
With the budgeted rates identified above, the impact to a residential customer would be as
follows.
Average Single Family Home
City Average based on 15,000 gallons
2017 2018
2017/2018
Increase 2019 w/5/3/3
2018/2019
Increase
WATER 15 15 15
0.91 0.99 1.04
13.65 14.85 15.60
SEWER 15 15 15
3.32 3.98 4.10
49.80 59.70 61.50
Water 13.65 14.85 1.20 15.60 0.75
WA Fixed 15.09 16.45 1.36 17.27 0.82
Sewer 49.80 59.70 9.90 61.50 1.80
SW Fixed 14.66 17.59 2.93 18.12 0.53
Stormwater 14.44 18.05 3.61 18.59 0.54
MN Test Fee 1.59 1.59 0.00 1.59 0
109.23 128.23 19.00 132.67 4.44
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Finance Committee Meeting: 2019 Levy/Budget, Utility Rates
November 15, 2018
Hastings City Hall: Volunteer Room
7:45 a.m. – 8:00 a.m.
Members Present: Councilmembers Balsanek, Braucks, Vaughan*
Staff Present: City Administrator Melanie Mesko Lee
Finance Manger Melanie Lammers
Overview
Committee was asked to review 2019 Budget options for Health Insurance overage.
Health Insurance was budgeted at a 10% increase, but came in at a 0% increase. This
created lower expense in the amount of approximately $100,000 in our Levy supported
funds.
Three option were presented and discussed for the budget overage
1. Lower the Levy by $100,000
The impact of this was discussed. It would be around $10 less of tax for a median home
in Hastings.
2. Put the $100,000 in the newly created insurance fund.
This fund was created to more easily monitor insurance expense and claims, and to
build a reserve for items not covered by insurance, or emergency use.
-Our current insurance policy covers up to $2miilion per incident
-If the City is found liable for more than $2million for an incident, the City must pay the
money out of its coffers for the claim.
-Additional $1 million in coverage is $32,000 a year
-A built up insurance fund will also allow us flexibility in choosing our deductible, a
higher deductible creates lower insurance rates. To have a higher deductible, we need
money to cover incidents-the insurance fund would provide this.
-Staff Recommends fund balance target of $500,000 initially-this will take several years
to get to.
Councilmembers asked how much the fund should have in it, want to be prudent to
not build up to many funds by overtaxing. – Staff explained it is a policy decision for the
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Council to make. Many Cities have larger insurance fund balances upward of $1 million,
some keep less available.
3. Use the monies to fund a project or item that didn’t make the final 2019 budget cuts.
Discussion ensued on which projects, or how you would pick. Staff explained option for
well vetted items could be presented. Councilmembers questioned adding items that
had already been rejected. Also discussed splitting the overage between insurance fund
and a project.
Finance Committee members voted unanimously to put the $100,000 in the insurance
fund.
Utility Funds
Staff presented the three Utility funds and the financial outlook for each fund. Explained the
recommended increases to each fund, and talked about the capital projects in the next 5 years driving
the request. Staff also recommended having another utility rate study in 2020. The study would be less
in-depth, and rather take a look at how each fund performed under the new rates.
Water 5% - Staff recommended increasing water by 5%. The schedule from the rate study suggests a 9%
increase. Staff is cognizant of the large increase/changes from the rate study implementation, and is
sensitive to our customers, trying to keep any increase manageable for our residents. The water meter
replacement project, along with street reconstruction costs each year are driving the Water fund rate
increases. Engineering is looking at how to cut future replacement costs using technology to determine
if we can leave any of our Water infrastructure in the ground.
The future Capital projects dictate 9% rate increases in the future, but will be analyzed each year to
confirm. This fund is the most financially challenged, with Water projects being some of the most
expensive in the City.
Sewer 3%- Staff recommended increasing sewer by 3%. This is in-line with the rate study and
inflationary costs. It also maintains the funds financial sustainability when looking at future capital
projects.
Stormwater 3%- Staff recommended increasing stormwater by 3%. This is significantly less than the 25%
increase recommended in the Utility rate study. The lower increase is to keep up with inflationary costs.
The fund does not have solid future capital items to warrant a 25% increase at this time.
Customer impact charge was presented. The proposed changes will have a $4.44 increase to a
residential customer using 15,000 gallons of water a quarter. The last increase impact was $19.00 per
quarter for the same household.
-council member Balsanek stated his water bill is lower than that as he doesn’t use that much water,
asked what his increase would be. Staff explained it will be lower than the $4.44 if he is using less water
than 15,000 gallons.
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Finance committee discussed some of the upcoming Capital projects coming up. Councilmember
Vaughn stated he approves of the rate increase on the condition we have another Utility study in 2020.
3-0 Unanimous vote to recommend the rate increase.
Motion to dismiss, Second.
*Committee chair
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