Scandia Sewer Utility 2023 Rates PresentationSCANDIA SEWER UTILITY 2023 RATES AND BUDGET
PRESENTED TUESDAY, DECEMBER 20, 2022
BIG MARINE SEWER:SUMMARY HIGHLIGHTS OF 2023 RATE CHANGES
•Big Marine Sewer Utility rate consists of only as base charge.
•The Base Charge is recommended to be increase by 25% for difference of $61.71/qtr. OR $246.82/yr.
•This will result in the new 2023 rate to be set at $1,234.10/yr. or $246.82/qtr.
•The utility is bracing for a major $1.3 million dollar improvement to the Bliss Waste Water Treatment Plant to enhance its capacity to reduce nitrate levels in its effluent. (The project is planned to be completed before the end of 2024 to utilize American Rescue Plan Act (ARPA) Funding
•Projected the projected 2023 utility rate revenue resulting from this change is $140,700, which is an increase by 28.4% over last years budget, for a difference of $31,100.
GOOD NEWS FOR BIG MARINE SEWER AND THE BLISS WWTP NITRATE IMPROVEMENT PROJECT
•It now appears the City will be potentially eligible to obtain grant funding through the State’s Point Source Implementation Grant (PSIG), which will cover up to 80% of total project costs, so long as those costs can be tied back to improvements that directly impact nitrate reduction processes.
•This grant program is funded through state infrastructure bond appropriations and the Clean Water State Revolving Fund, which also receives revenues from the Minnesota Lottery. This is good news because it is not subject to federal funding limits that have generally left the City outside of the eligibility requirements.
•Maximizing this grant program and ARPA funds will go a long way to improve the Big Marine Sewer Fund’s financial health. However, the fund will need additional revenue to reach the $400,000-$500,000 balance needed to allow it to sustain future capital improvements without 100% financing.
•Given we are not certain as to what elements of the project will eligible for funding, the budget has been left unchanged, for the time being. It will require an update when firmer project estimate become available next year.
UPTOWN SEWER:SUMMARY HIGHLIGHTS OF 2023 RATE CHANGES
•Uptown Sewer rates consist of both a base rate and consumption rate.
•The base charge is recommend to be increased by 25% for a difference of 100.63/yr. or 25.16/qtr.
•The 2023 rate will now be $503.13/yr. or 125.78/qtr.
•The Volume Charge is also recommended to be increased by 25% for a difference of $13.07/1,000gal.
•This 2023 rate will now be 65.36/1,000 gal. of consumption.
•The anticipated 2023 rate revenue based on these rates is $22,300, which is 14% higher of last year for an increase of $2,800.
•This fund does not have a fund balance adequate to address projected capital expenses, as the current fund balance hovers around $20,000.
WHY SUCH AN INCREASE?
•Both funds have exhausted reserve fund balance intended to address long range capital expenses.
•This weak cash position leaves limited funds available to cover unanticipated major repairs and planned system replacement costs outside the use of debt service.
•Limited to no rate increases over certain years and greater reliance on using fund balance savings has led to this concern.
•Balanced application of rate increases, use of available fund balance, and borrowing will ultimately allow the utility to manage more limited future rate increases. Use of property assessment is also an important tool for consideration, however these assessments are often not paid in the year assessed, so borrowing for such activities, financial position, will need to be weighed in the decision making processes of the future.