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May 21, 2019

6/23/2017 7:03:00 AM
5% rate hike for sewer and water
by Ken Haggerty

The Cannon Falls city council passed 5% rate hikes for sewer and water for each of the next three years at the June 13 council meeting. Storm sewer rates will increase 2%, 2.25%, and 2.5% over the next three years.

The rates will go into effect for August of 2017, March of 2018 and January of 2019.

The average monthly residential bill (based on 800 cubic feet of usage per month) will increase $4.75 from $96.55 to $101.30 with the first hike and then will increase $4.99 and $5.25 with the next two hikes.

The average commercial monthly bill will go from $331.30 to $347.78 based on usage of 2,600 cubic feet. The next two hikes would increase that bill $17.33 and $18.19 per month.

Council member LeRoy Mc-Cusker was the lone no vote on the measure, which has been under discussion since May 2. No one from the public commented on the rate hike proposals during the public hearing before the council vote.

The hikes were recommended based on numbers put together by the city's contracted financial advisor, Ehlers and Associates.

Ehlers said the city should aim to have six months of operating costs in cash reserves in the sewer and water fund in case of funding delays or other issues. Cash reserves for the water and sewer fund were $1,561,778 at the end of 2016.

Ehlers also recommended funding 100% of annual depreciation costs to try and prevent having to borrow money when equipment fails or needs significant repairs.

Ehlers also recommended budgeting to cover 100% of the next year's debt service. The city still has annual debt service of about $1.5 million per year through 2021 from expansion and modernization of the water tower, pumping stations, sewage treatment facility and other infrastructure. Anticipated growth in new residential housing and commercial business that would have helped cover that debt with sewer and water access connection fees and monthly billing has yet to be realized. The debt falls off to about $800,000 in 2022 and $250,000 in 2023.

Ehlers' forecast calls for just 1% sewer and water hikes in 2020 and 2021. Ehlers recommends 3% and 3.5% hikes to the storm water rate in 2020 and 2021.

Residential water rates in August will have a $6.33 base charge with a charge of $2.68 per 100 cubic feet of water up to 300 cubic feet. State law mandates higher rates for higher usage, as an incentive to conserve water. The rate for usage of 301 to 900 cubic feet of water per month will be at $3.34 per 100 cubic feet. For 901 to 6,000 cubic feet, the rate goes to $4.17.

The residential sewer base rate per month is $28.22. The commercial/industrial rate is $40.64 per month. Both those rates allow 400 cubic feet of usage. Over 400 cubic feet, the rates goes to $9.85 per 100 cubic feet, including the first 400 cubic feet used. May through September, rates are adjusted to factor in outdoor water use on lawns and gardens that doesn't go in the sanitary sewer system.

Ehlers estimates the new rates will generate $148,448 additional revenue for the city in the next 17 months and $150,000 per year in following years.

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