By Ryan Gueningsman
DELANO, MN Delano City Council approved a sewer rate increase Tuesday night during the city council meeting.
After reviewing a presentation by city Finance Director Brian Bloch, the council agreed to a 10 percent increase in June, and an additional 10 percent increase in October.
Another possible increase will be reviewed in December but not implemented unless deemed necessary.
In his presentation to the council, Bloch said the sanitary sewer fund has two primary expenses operations and capital/debt (replacement and new).
Several factors remain fairly consistent, including that there is an average of 6,000 gallons of water used per month by the average household, reconstruction debt, expansion/new capacity debt, and operating costs, which Bloch said showed a 0.5 percent decrease for the 2011 budget.
The biggest inconsistency factored in is the city’s growth/hook-up fees. The city saw 164 units added in 2005, compared to 10 units in 2009, and 11 in 2010.
“Obviously, that goes up and down, depending on the economy, quite drastically,” Bloch said.
He reviewed the sanitary sewer fund back to 2006, when rates were lowered from $8.69 per 1,000 gallons to $5.35 per 1,000 gallons.
At that time, following a study done by city staff, it was determined the city had been able to build up an adequate reserve for slowdowns in growth and in the event of emergencies, if either should arise.
Despite this thought, with the economic slowdown that has taken place over the past few years, the city has not experienced growth, and its reserve funds are decreasing.
The city began to notice this trend and, in 2009, increased the rate back to what it had been in 2006 $8.69.
“In late 2008, the council took a good look at it, considering we weren’t getting infrastructure fees in,” Bloch said after the meeting. In 2010, the city added a base charge, and also bumped up the rate by a $1 per 1,000 gallons, to $10.12.
“This year, we had a 5 percent increase in January,” Bloch added. The 2011 sewer rate, before the increase goes into effect, is $10.63 per 1,000 gallons. Following the increases, the rate will be $11.70 per 1,000 gallons effective July 1, and $12.87 per 1,000 gallons starting Oct. 1.
By comparison, a check with neighboring communities showed different rates. In Rockford, there is a unit cost per 1,000 gallons of $4.52.
In Watertown, from 1,000 to 2,000 gallons, the rate is $2.16; and anything from 2,001 gallons and up is $5.37 per thousand gallons.
In Maple Plain, there is a flat charge of $60.36 for the first 6,000 gallons, then a charge of $5.31 for every thousand gallons after that.
Bloch outlined several actions the council could take to keep a healthy sewer fund, including taking no action and continuing to utilize the reserve fund.
A refinancing option was also presented, which would have added about $3.4 million dollars of additional interest expenses over the life of the debt.
The third option, which the council approved, was a sanitary sewer rate increase.
The average resident’s monthly fee will increase from $68.72 to $85.90, according to Bloch’s presentation.
Before approval was given for the rate increase, Council Member Betsy Stolfa asked about combining the refinancing option and the rate increase option so the rate increase wouldn’t be as significant.
Bloch said even if the city refinances, user rates would still need to be increased.
“We need to do something,” Bloch said, adding that if the city doesn’t refinance or raise its rates, and continues to go into reserves, that fund will eventually become depleted.
Council Member Dan Vick asked if there was any way to reduce operation costs, and City Administrator Phil Kern said city staff has met with Veola Water and feel the plant is running pretty lean.
City staff also noted a short-term loan of $235,000 from Delano Municipal Utilities to support the sewer fund.