4.b 2 Discussion on 201 Sewer system 2018 budget
Staff Report
Date of Meeting: November 1, 2017
To: City Council
From: Neil Soltis, Administrator
Re: 201 Sewer System 2018 Budget
Background:
The Wastewater Advisory Committee previously discussed transferring responsibility for maintenance
elements of the system to the customer as a means to reduce the expense for City staff and to reduce the
charge. It was subsequently noted that a condition of the “201” grant assistance places the City responsible
for all components of the collector system purchased and constructed, in whole or in part, with state and
federal grant assistance and that the responsibility begins at the end of the building sewer. The property
owner is responsible for operation and maintenance of all plumbing lines and components that lie within the
walls of the structure and the building sewer which extends from the building to the sewage tank. The grant
provision do provide the City with some discretion in establishing a charge system. Citing the 1988 ordinance
language the committee recommended that an additional fee shall be charged to users of the community
sewage treatment system who, for whatever reason, require septic tank pumping more frequently than once
in two years. Based on the past 4 years this would result in a charge to 8 users and would generate an
additional $2,600 per year in revenue.
The Committee also discussed the 1988 ordinance that required the City to charge revenue sufficient to insure
adequate replacement shall be held in the replacement fund separate from the operation and maintenance
fund and the staff recommendation that the charge be raised to provide $20,000 a year to fund a replacement
reserve recognizing that the annual depreciation of the system of approximately $40,000 per year. The
Committee was in agreement that the recommended increase was too high and that the funds accumulated
would not be sufficient to materially impact the funds needed to comply with the MPCA requirements that the
system establish treatment for nitrates. The Committee recommended a 10% rate increase that would
generate roughly $8,000 per year and that the users be notified of the proposed changes
The Committee also recommended that the connection fee per dwelling unit be increased from $4,250 to
$8,000 to be more comparable to the connection charges in other cities.
Issue:
Should the sewer ordinance be changed to add a charge for septic tank pumping more frequently than
once in two years?
Should the sewer rates be increase by 10% in 2018?
Should the connection charge be increased to $8,000 per dwelling unit?
Proposal Details:
The current base use charge is $726.24 per year or $181.56 quarterly. The recommended increase is
to $798.88 per year or $199.72 per quarter.
Fiscal Impact:
Below are summaries of the projected cash flow comparing the current rate and the proposed rate which
provides for a reserve for replacement. It is important to note that based on the projected cash flow, the
cash flow in 2022, which is the projected date for the implementation of nitrate treatment, there will not
be sufficient funds to amortize the debt which will need to be issued. Any issuance of debt will require
that the charges be set to provide for the payment of debt along with the operation, maintenance, and
replacement of the system. A preliminary estimate of the cost to service general obligation sewer utility
revenue bonds issues for the engineers estimate is over $70,000 per year. This additional cost would be
spread over all 2010 system users if revenue bonds were issued or the Bliss system users if special
assessment financing were utilized.
Projected Cash flow based on current rates:
Projected cash flow based on 10% increase in 2018
201 SEWER SYSTEMS
2016 2017 2017 2018
Account Description Actual Projected Adopted Proposed
Revenue 82,149$ 80,900$ 77,900$ 88,900$ Reflects 5% increase
Operating Expenditures 110,201$ 101,495$ 101,000$ 102,650$
Net Revenues (Expenditures)(28,052)$ (20,595)$ (23,100)$ (13,750)$
Add Depreciation 38,262$ 39,000$ 39,000$ 39,000$
Less Capitalized expenditures -$ (10,400)$ (10,500)$ -$
Cash Flow 10,210$ 8,005$ 5,400$ 25,250$
Balance January 1 905,944$ 68,210$ 877,892$ 854,792$
Balance December 31 877,892$ 47,615$ 854,792$ 841,042$
Cash balance - December 31 68,210$ 76,215$ 73,610$ 101,465$
Taxes
31951 Special Assessments - principal 8,939$ 8,000$ 5,000$ 8,800$
31952 special Assessment - interest 749$ 400$ 400$ 400$
Total Property Taxes 9,689$ 8,400$ 5,400$ 9,200$
Intergovernmental Revenues
33422 Other State Grants 136$
Total Intergovernmental Aid 136$ -$ -$ -$
Other Income
36210 Interest Income 222$ 200$ 200$ 200$
36250 Misc. Refunds
Total Other Income 222$ 200$ 200$ 200$
Proprietary Fund Revenues
34401 Sewer Charges & Connection Fees 72,103$ 72,300$ 72,300$ 79,500$
Provides for a 10% rate increase. Assuming collections of 95% of billings with remainder
collected in following year as special assessment
Total Proprietary Fund 72,103$ 72,300$ 72,300$ 79,500$
Total 201 Project Sewer Fund 602 82,149$ 80,900$ 77,900$ 88,900$
FUND BALANCE SUMMARY
REVENUES
BUDGET NOTES AND HIGHLIGHTS
201 SEWER SYSTEMS
2016 2017 2017 2018
Account Description Actual Projected Adopted Proposed BUDGET NOTES AND HIGHLIGHTS
Personnel Services
101 Regular Wages & Salaries 22,519$ 19,200$ 19,500$ 19,700$ PW director - 260 hours, PW staff - 468 hours
102 OT Reg. Wages -$ -$ -$
121 PERA Coord. Employer Contribution 1,672$ 1,400$ 1,400$ 1,500$
122 FICA Employer Contribution 1,337$ 1,200$ 1,200$ 1,200$
126 MEDICARE Employer Contribution 311$ 300$ 300$ 300$
131 Health Insurance Employer Contribution -$ -$ -$ Paid by Public Works General Fund budget
133 Life Insurance Employer Paid -$ -$ -$ Paid by Public Works General Fund budget
151 Workers Comp Insurance Premium 743$ 900$ 900$ 900$
Total Personnel Services 37,007$ 23,000$ 23,300$ 23,600$
Materials & Supplies
200 Office Supplies 138$ 150$ 100$ 100$
210 Operating Supplies & Equipment 280$ 325$ 500$ 500$
240 Small Tools & Minor Equipment -$ 300$ 500$ 500$
Total Materials & Supplies 417$ 775$ 1,100$ 1,100$
Contractual Services
303 Engineering Services 5,298$ 5,600$ 3,000$ 3,000$ Bliss MPCA nitrate issues, Inflow & Infiltration reduction assistance
308 Other Professional Services -$ -$ 1,500$ 1,500$ 2015 surveying
309 Software Support & Maintenance -$ 700$ 700$ 1,400$ BDS - utility billing
317 Employee Training 2,256$ 800$ 2,100$ 2,100$
321 Telephone 2,079$ 1,920$ 1,900$ 2,000$ Frontier - Scada line, 201 dialer
322 Postage 200$ 200$ 200$ 200$
334 License & Permits 705$ 700$ 700$ 850$
361 Liability/Property Insurance 804$ 800$ 800$ 800$ 4% increase
381 Utilities 1,932$ 2,100$ 1,900$ 2,300$ 2.0% increase
385 Sewer Pumping 4,175$ 7,600$ 6,500$ 6,500$ Vacuum Systems, Olson
386 Operation & Maintenance 6,092$ 3,000$ 5,000$ 5,000$ Pace Analytical - testing
404 Machinery & Equipment Repair 10,096$ 9,600$ 8,000$ 8,000$
Pump replacement (2016- $4,470), repairs (risers & lids $17,800 in 2015), risers in 2017
($5,000).
414 Equipment Rental -$ 200$ 300$ 300$
420 Depreciation 38,262$ 39,000$ 39,000$ 39,000$ NOTE: depreciation allocated at year end, but not budgeted
438 Misc Contractual 878$ 5,500$ 5,000$ 5,000$ biosolid disposal, raise lids
Total Contractual Services 72,777$ 77,720$ 76,600$ 77,950$
Total 201 Sewer Project (602)110,201$ 101,495$ 101,000$ 102,650$
Anderson / Erickson $200,000 included for drainfield improvements in 2022
Drainfield -$ -$ -$
Bliss
Bliss Lift Station 1 - control panel -$ -$ -$ $27,500 budgeted for 2017 replacement - per engineer not needed at this time, moved to
Bliss Lift Station 2 - control panel -$ -$ -$ 2019
Nitrate treatment -$ -$ -$ $500,000 - $900,000 needed by 2025 per engineer's estimate
-$ 10,400$ 10,500$ -$
EXPENDITURES
CAPITAL EXPENDITURES