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UTILITY RATE MEETING
JANUARY 7, 2010
The meeting was called to order at 6:00 p.m. by Chairman of the Utility Committee Cindy Endicott. Present for the meeting were Chair Endicott; supervisors Jeff Bachke, John Goman and Greg Andrews; MSA representative Jerome Flogel; clerk Patti Alander; deputy clerk Cammy Hansen and residents Mark North and Randy Kniep.
Patti distributed information regarding 2009 utility revenue/expenses. After extraordinary items are removed, the revenue was $257,854.76 and expenses were $266,735.55 resulting in a net operating deficit of $8,880.79. Cindy asked if these expenses include prorated amounts for office support, insurance, etc., which they do. What is not included and is a significant expense is the audit portion of the Utility Fund which Patti estimates is 20% of our audit fee or $5,000.00. WLSSD has sent us notification that our District Wide Allocation will be increasing to $11,077.00 and our WLSSD fee will be increasing to $43,815.00. This results in an increase of $14,000.00 (37.7%) in WLSSD costs for 2010. Adding the $8,880.79 2009 deficit, $5,000.00 audit expense and $14,000.00 WLSSD increase calculates to a shortage of $27,880.79 (will use a round number of $28,000.00 for discussion purposes.) We have a total of 266 sewer users in the Town and 344 water users. Water costs are not of as much concern as any cost increases are passed directly to the users when the City of Duluth increases our rates. Patti mentioned some other things to consider: snow bird rates, foreclosed properties, fees for turning water off/on and remote readers for all town properties. As of now only the new W. Calvary connections have the remote read readers. Having accurate readings in a timely manner will help to control major fluctuations in usage. Funds were set aside (approximately $80,000.00) for the purpose of installing remote read meters last year and was estimated at approximately $300.00 per house. Patti reported that through November 2009, our sewer flows were 18,700,000 and water was 28,000,000 gallons (through December 2009.) We billed for water use of 12,500,000 gallons. Cindy states that she believes that the amounts discussed above need to be covered by the users of the system-partially through the gallons used and partially through the fixed fee. Greg states that his opinion is we should look for bids to get the remote readers installed. Jerome asked what the flows were from W. Calvary. Patti responded that it was 538,655 for 2009, a relatively small amount. (Mark North and Randy Kniep excused themselves at approximately 6:45 p.m.) The increase in the WLSSD fee is the result of anticipated flow increases for 2010. Cindy clarified: We were billed from Comfort Systems for 28.4 million gallons of water and we billed out for 12.4 million gallons of water; WLSSD billed us for sewage flows of 26.1 million gallons and we billed out for approximately 10 million gallons. Cindy and Patti remarked that it seems strange that there is a difference of 16 million gallons for both services. Jeff asked what our next step is. Cindy said that we need to find out where this 16 million gallon difference is (Jerome calculates that this is about 30 gallons per minute and could be as little as six toilets leaking all year around.) Jerome will contact WLSSD to find out what flows are going through each individual lift station, but thinks that the East Calvary Road leak is at least a significant amount of the difference. Jerome is also researching some possible additional funding sources as well as a service that Minnesota Rural Water Association provides for leak detection. He is hoping to have further information for next week’s board meeting. John states that he sees no alternative to increasing the service fee. Jeff asked how many additional users are yet to be added on W. Calvary Road. Patti and Cammy estimate about 15 or 20. Cindy also states that the monthly service charge be increased for sewer system to cover the WLSSD cost increase and possibly part of the overhead increases. Jeff asked if she meant to increase the monthly service fee to $10.59 (current fee of $6.75 + increase of $3.84) and then a half or quarter of the overhead costs which are about another $4.00 per month, as an increase in the price per unit (per 1000 gallons charge for both water and sewer charges.) Cindy states that we would need to divide that amount over what we are billing, not what we are being billed. Jerome has a software program that he can send us that will help to calculate what our fees should be. That amount per 1000 gallons would need to be increased by $.565 to cover the overhead increase of $14,000.00. Greg summarized that this will be about a $5.00 per month increase for most users. There was some discussion over the actual amount of the increases as one of the figures Patti has was through November rather than December. To calculate some average uses, we calculated 50 gallons per day x 2.5 people x 30 days= 3,750 gallons (average per household per month.) This would result in a new monthly cost to an average resident with sewer and water services of $93.45 (water: 3750/10x10.16=38.10 sewer: 3750/1000x10.76=40.35 water and sewer total: 38.10+40.35=93.45.) Average family use would increase from $86/mo to $93.45, or an 8.67% increase. Patti made the point that the monthly fixed charge for water is not being increased as the WLSSD increase is for sewer only. The remaining overhead increases need to be spread over both water and sewer services. Utility rate increase needs to be a board decision. Patti also pointed out that we have not calculated liability insurance rate increases into these numbers, so this is a “best case” scenario.
In conclusion, Cindy made the recommendation that the Town increase the monthly fixed service fee for the sewer utility of an amount equal to cover the increase in the WLSSD fee for 2010. In addition, she is recommending that the 2009 deficit and estimated audit fees be increased in the form of increasing the per gallon charges for both water and sewer (estimated at $.56 per 1000 gallons, but subject to complete review of costs prior to implementation.)
Jeff asked Cindy if she is aware of the call we received from Jim Holmgren regarding extending the water and sewer line to his property. Cammy stated that Mary Frances Skala told her that there is nothing preventing the Town from charging a Sewer Access Fee for future connections (other than Holmgren) to the line even though Holmgren would be paying for the line. Jerome said that Jim mentioned that in the past he has had contracts that reimburse the cost to the original payer of the cost of the system. Cindy said that MP also has a provision about this; she said that they provide a reimbursement of a specific percentage for a specific period of time. She will do further research on this. We need to set up a meeting with all parties prior to the 8th of February when Greg will be leaving. Greg and Patti both stated that Mary Frances and David Oberstar should also be in attendance at the meeting.
After some discussion, the payapp for RJS (lift station #1) was tabled until Tuesday’s Board Meeting. Although Jerome is confident that the flow meter issues we are having will be appropriately resolved between WLSSD and RJS, some board members had concerns about our leverage to get it corrected if we pay the entire amount due.
Having no further business to discuss, the meeting was adjourned.
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