## Richfield City Council Agenda May 12, 2026 -- 5:45 PM ## Richfield Municipal Center ## Bartholomew Conference Room ## 6700 Portland Avenue South 1. Call to Order ## 2. Item Discussion a. Discussion of Park Alcohol Ordinance Update. b. Discussion of outstanding items from the March 24, 2026 Utility Rate Study work session. 3. Adjournment Auxiliary aids for individuals with disabilities are available upon request. Requests must be made at least 96 hours in advance to the City Clerk at 612-861-9739. Includes Materials - Materials relating to these agenda items can be found in the Council Chambers Agenda Packet book located by the entrance. The complete Council Agenda Packet is available electronically on the City of Richfield website. Page 1 of 55 ## City Council Meeting 5/12/2026 ## Agenda Section: Item Discussion Agenda Item: 2.a. ## Report Prepared By: ## Karl Huemiller, Recreation Director ## Department Director: ## Karl Huemiller, Recreation Director ## Item for Consideration: Discussion of Park Alcohol Ordinance Update. ## EXECUTIVE SUMMARY The new Wood Lake Nature Center building will have a 3,000-square-foot room with a catering kitchen, one of the largest event spaces in the City. During the building design process, the community expressed a desire to host events such as weddings, anniversaries, and fundraisers in the space. The community also shared a desire to have alcohol at events in the new space. City Code Chapter VII, Section 840 contains ordinances pertaining to park use. In section 840.11, the sale, possession with intent to consume, or consumption of alcoholic beverages is prohibited in the parks except for two situations expressly permitted. The first is as part of a City Council-authorized community celebration at Veterans Memorial Park. The second is by a Junior Hockey Team at the Ice Arena. These two exceptions were added piecemeal as the need arose. With the development of the new Wood Lake Nature Center Building, there is now an opportunity to revise the City Code regarding alcohol use in the parks in a more comprehensive manner. Staff has drafted an ordinance that would give the City the flexibility to manage alcohol use in the parks without having to revise it every few years. The drafted ordinance still prohibits general alcohol consumption in the parks but makes a few key changes. • Defines low alcoholic beverages as anything with less than 17% alcohol by volume, providing flexibility in what can be consumed as drinking trends change, while preventing hard liquors, which can be more prone to overconsumption. • Outlines locations where alcohol may be consumed, including Wood Lake Nature Center, the Community Center, Richfield Ice Arena, and designated park areas for City-sponsored events. This will allow alcohol at large events and allow discretion when alcohol is appropriate for events in the parks. • Defines the requirements for serving alcohol, including licensure, permitting, and approvals. • Expands the locations where a City Council-approved community Celebration could take place and serve alcohol. Page 2 of 55 • Defines ordinance enforcement that was not defined in the previous ordinance. It is important to note that with these changes, there will not be a significant immediate change to how or when alcohol is consumed in park spaces. The draft ordinance only provides the latitude to allow consumption in park spaces. ## RECOMMENDED ACTION Staff is seeking feedback and direction on the draft ordinance change, specifically on the option to have alcohol at events in park spaces and the limitation of beverages with an alcohol by volume of less than 17%. ## HISTORICAL CONTEXT ## EQUITABLE OR STRATEGIC CONSIDERATIONS OR IMPACTS Alcohol can be an important cultural aspect to celebrations and events. The current prohibition of alcohol in the parks impacts who chooses to use City spaces for special events. The ability to consume alcohol at City facilities impacts the potential revenue generated by these facilities and their eventual cost recovery. ## POLICIES (RESOLUTIONS, ORDINANCES, REGULATIONS, STATUTES, ETC.) ## City Code Chapter VII section 840.11 ## CRITICAL TIMING ISSUES Changes in this ordinance will impact the operations of the new Wood Lake Nature Center Building. ## FINANCIAL IMPACT Decisions around alcohol use at City facilities like Wood Lake Nature Center and the new Community Center will have impacts on their revenue generation capacity, which would impact the amount of subsidy needed for these facilities. ## LEGAL CONSIDERATIONS The proposed ordinance update was drafted with the City Attorney's office. ## ALTERNATIVE RECOMMENDATION(S) ## Discussion Only ## ATTACHMENTS ## 1. Draft Alcohol in Parks Ordinance Page 3 of 55 ## DOCSOPEN\RC160\7\1092637.v1-4/29/26 840.11. - Sale and consumption of beer in parks. Subdivision 1. Definitions. For purposes of this subsection, terms defined in the subdivision have the meanings given them below. (a) "Sale", “sell” and “sold” means all means of furnishing alcoholic beverages and includes but is not limited to the furnishing for money or other consideration. (b) "Beer" means any beverage which is produced wholly or in part from the brewing of any grains or malt or malt substitute and containing more than “Low alcohol beverages” mean any beverage which contains less than seventeen percent (17%) alcohol by volume but more than one-half (½) of one percent (1%) alcohol by volume. (c) "Organization" means any entity having a club, or religious, veteran, charitable or non-profit organization business activities as its principal purpose and which qualifies in all respects for the issuance of a license to sell the type of beer to be furnished at the activity or event for which the permit is being sought. (d) “Alcoholic Beverages” means any beverage containing more than one-half (½) of one percent (1%) alcohol by volume. (e) “Director” means the Recreation Services Director or their designee. Subd. 2. Sale and consumption prohibited. The sale, possession with intent to consume, or consumption of alcoholic beverages is prohibited in the public parks of the City, except as expressly permitted by subdivisions 3 and 4 of this subsection. (Amended, ## Bill No. 1999-6; Bill No. 2013-16) Subd. 3. Alcohol allowed in certain recreation facilities and parks. Low alcohol beverages may be sold and consumed in the following places, subject to the requirements in subdivision 4: (a) Inside the Wood Lake Nature Center building and on designated decks, patios, and outdoor areas which are adjacent to the Wood Lake Nature Center building. (b) Inside the Community Center building and on designated decks, patios, and outdoor areas which are adjacent to the Community Center building. (c) Inside the Richfield Ice Arena. (d) In park areas and park pavilions approved by the Director for City-sponsored events only. Subd. 4. Requirements for sale and consumption of alcohol. Sale and consumption of low alcohol beverages allowed by this subsection is subject to the following requirements: Page 4 of 55 ## DOCSOPEN\RC160\7\1092637.v1-4/29/26 (a) Persons, organizations, or entities selling or dispensing low alcohol beverages must have an appropriate liquor license or permit from the City and/or the State of Minnesota and meet all applicable provisions of city code and state law. (b) Alcohol sales or consumption are allowed only in connection with banquets, receptions, social functions, tasting events, or community festivals approved by the Director. (c) The Director must give written approval to the host of any event at which low alcohol beverages will be sold or consumed. (d) The host of an event at which low alcohol beverages will be sold or consumed must enter into a user or indemnification agreement with the City if determined appropriate by the Director and City Attorney. Subd. 3 5. Community celebration. An organization or other authorized liquor licensee nonprofit corporation that has obtained a community celebration license in accordance with subsection 850.09 of this code may sell 3.2 percent malt liquor in Veteran's Memorial Park low alcohol beverages in connection with the licensed community celebration, provided that the corporation also obtains a license under subsection 1210.07 1202.05, subdivision 3 of this code and applicable state law. The community celebration license and temporary on-sale license must designate the area(s) of Veteran's Memorial Park where sales may be made. A person of legal age may possess with intent to consume or consume alcohol purchased pursuant to this subdivision within the areas designated in those licenses. (Added, Bill No. 1999-6) Subd. 4. Richfield Ice Arena. An establishment holding a food license may sell 3.2 percent malt liquor at the Richfield Ice Arena, located in Veteran's Memorial Park, provided that the establishment obtains a license under subsection 1202.05, subdivision 3(a)(1) of this code. The 3.2 percent malt liquor license must designate the area(s) of the arena where sales may be made. Sale and consumption of 3.2 percent malt liquor under this subdivision are allowed only during junior hockey league games at the arena for consumption on the premises. Upon the effective date of special legislation enacted by the State of Minnesota Legislature allowing the issuance of on-sale wine and malt liquor licenses for beverage sales at the arena, this subdivision shall become null and void. (Added, Bill No. 2013-16) Subd. 6. Enforcement. Those selling, possessing or consuming alcoholic beverages in public parks in violation of this subsection or other applicable provisions of city code or state law may be removed from public property. A violation of this subsection is a misdemeanor. Page 5 of 55 ## City Council Meeting 5/12/2026 ## Agenda Section: Item Discussion Agenda Item: 2.b. ## Report Prepared By: ## Scott Kulzer, Senior Analyst ## Department Director: ## Kristin Asher, Public Works Director ## Item for Consideration: Discussion of outstanding items from the March 24, 2026 Utility Rate Study work session. ## EXECUTIVE SUMMARY Staff and the consultant will present findings and recommendations related to moving commercial and multifamily accounts to a conservation/tiered rate structure modeled similar to the existing residential conservation/tiered rate structure. These findings and recommendations are included in the attached City Council memo which was distributed to City Councilmembers on May 7th, 2026. Staff and consultant will also cover the revised utility rate structure proposal for 2027 and beyond based on feedback received at the March 24th, 2026 work session. ## RECOMMENDED ACTION Staff and the Utility Rate Study consultant are seeking feedback and direction on a number of items that were refined or further explored following the March 24, 2026 work session on the Utility Rate Study. These items include but are not limited to: • Proposed rate structure for 2027 and beyond; • Sanitary sewer reduced quarterly minimum volumetric charge (from 7kgal to 5kgal); • Feasibility of a tiered rate structure for multifamily residential properties; and • Feasibility of a tiered rate structure for commercial properties. ## HISTORICAL CONTEXT ## EQUITABLE OR STRATEGIC CONSIDERATIONS OR IMPACTS ## POLICIES (RESOLUTIONS, ORDINANCES, REGULATIONS, STATUTES, ETC.) ## CRITICAL TIMING ISSUES Page 6 of 55 ## FINANCIAL IMPACT ## LEGAL CONSIDERATIONS ## ALTERNATIVE RECOMMENDATION(S) ## ATTACHMENTS 1. MFtieredRateStructure CC memo 2. [combined] 05122026_MF&CommercialTieredRateStructures Page 7 of 55 ## City Council Memorandum Date: May 6, 2026 Item No. To: The Honorable Mayor and Members of the City Council ## From: Katie Rodriguez, City Manager CC: Kristin Asher, Public Works Director ## Russ Lupkes, Utilities Superintendent ## Scott Kulzer, Public Works Senior Analyst ## Subject: Multifamily/Commercial Conservation/Tiered Rate Structure Analysis ## Background At the March 24, 2026 work session, Public Works staff and the City’s engineering consultant HDR, Inc., presented the findings and recommendations of the Utility Rate Study. Throughout the presentation and discussion, City Council indicated the desire for Public Works to explore the implementation of a conservation/tiered rate structure for multifamily and commercial properties. ## Conservation/Tiered Rate Structure Richfield charges residential properties (including duplexes but excluding multifamily buildings) for their water consumption based on a conservation/tiered rate structure, per the MNDNR recommendation (Minnesota Statues, section 103G.291). The conservation/tiered rate structure is designed to encourage water users to reduce consumption by charging higher rates for increased water usage. Water customers pay the lowest rate for the first 15,000 gallons, a higher rate for water use between 15,001 and 25,000 gallons, and an even higher rate for any water use exceeding 25,001 gallons per quarter. Irrigation accounts are billed at the highest tier for all property types in the City. The 2026 rates are detailed in the following figure. Page 8 of 55 ## Multifamily/Commercial Conservation/Tiered Rate Structure Analysis – Page 2 For calendar year 2025, the 10,011 residential properties in Richfield (including duplexes but excluding multifamily buildings) used water at the following volumes: • 76.6% of residential accounts never exceed the tier 1 consumption limit; • 17.8% of residential accounts use tier 2 volumes (15kgal-25kgal); and • 5.6% of residential accounts use tier 3 volumes (>25kgal). ## Flat Rate Structure for Multifamily, Commercial, School, and Church Properties Richfield charges multifamily, commercial, school, and church properties a rate equal to the tier 1 water rate ($5.54 per 1kgal for 2026) for all water consumption, regardless of use. Put another way, the conservation/tiered rate structure does not apply to these property classifications. ## Hypothetical Multifamily Consumption & Conservation/Tiered Rate Structure Based on feedback from the work session, staff set out to investigate whether or not multifamily residential buildings were using enough water per residential unit to warrant development of a conservation/tiered rate structure for multifamily buildings. In order to equitably implement a conservation/tiered rate structure for multifamily buildings, staff would need to create a unique rate structure for each property. To keep things simple for this exercise, staff assumed that 1 residential unit in a multifamily building would be allotted the same water consumption volumes as a single-family property. For instance, a 14-unit apartment building would have a conservation/tiered rate structure that was 14 times that of a single-family home. For this example, the 14-unit apartment building would have the following conservation/tiered rate structure: ## Highest Multifamily Users and Random Apartments Spot Check Analysis Using the multifamily conservation/tiered rate structure scheme detailed above, staff looked at the 9 highest use multifamily properties as well as 10 other randomly selected multifamily buildings using 2025 consumption data. Staff found: • 88.1% of the billing cycles for these properties fell within tier 1 consumption volumes; • 6.6% of the billing cycles for these properties would have had water consumption that pushed these properties into tier 2 water rates; • 5.3% of the billing cycles would have moved into tier 3 rates, with 3 of those 4 barely eclipsing the tier 3 threshold of 25,001 gallons per unit; and Page 9 of 55 ## Multifamily/Commercial Conservation/Tiered Rate Structure Analysis – Page 3 • The financial impact or difference in revenue from not capturing these higher consumption volumes via a multifamily conservation/tiered rate structure is $5,044.58. It is worth noting that 4 of the 9 billing cycles that crossed the tier 2 threshold all belong to the Villa Healthcare property which is a long-term care/rehabilitation/memory care facility and could arguably be removed from this analysis. The data for this exercise is below, with the billing cycles that eclipsed tier 1 consumption limits highlighted green. ## Citywide Multifamily Conservation/Tiered Rate Structure Analysis Staff then ran the same exercise on all 249 multifamily buildings in the utility billing system, using the same process and assumptions with 2025 consumption data. Staff found: • 88% of multifamily buildings never exceeded the tier 1 consumption limit per unit (they are billed correctly, they use less than 15kgal per quarter per unit); • 10% of multifamily building units used tier 2 volumes (15kgal-25kgal); and • 2% of multifamily building units used tier 3 volumes (>25kgal). Staff calculated the difference in revenue from not having multifamily accounts on a conservation/tiered rate structure which breaks down as follows: • $13,140.96 difference in tier 2 revenue; and • $5,901.54 difference in tier 3 revenue. ## Commercial Accounts Analysis As stated earlier, commercial accounts are billed at the tier 1 rate for all water use. Staff reviewed the 2025 water use for commercial accounts and found: Page 10 of 55 ## Multifamily/Commercial Conservation/Tiered Rate Structure Analysis – Page 4 • 51% of commercial accounts averaged water use that was within the residential tier 1 volume limit; • 11% of commercial accounts averaged water use that fell within the residential tier 2 volume limits; and • 38% of commercial accounts had water use that reached residential tier 3 volumes. Staff calculated the difference in revenue from not having commercial accounts on the same conservation/tiered rate structure as single family residences which breaks down as follows: • $5,834.08 difference in tier 2 revenue; and • $181,065.80 difference in tier 3 revenue. Put another way, moving commercial accounts onto a structure that is modeled after the residential conservation/tiered rate structure would amount to a 44.4% increase in annual water expenses for all businesses that use water at tier 3 volumes. An estimated 115 commercial accounts would be affected by this change. ## Other Considerations for Commercial Accounts Staff believes the question of whether or not commercial accounts should be moved onto some sort of conservation/tiered rate structure is ultimately a policy decision that must be made by City Council. Some considerations include: • How “business friendly” does Richfield want to be? Is creating a conservation/tiered rate structure for businesses even considered unfriendly to business? • How can we make a conservation/tiered rate structure that is fair to both small and large businesses? Large corporate campuses and small independent stores would all fall under this same rate structure. • Would a conservation/tiered rate structure influence businesses to implement water conservation measures, thereby reducing overall consumption and possibly revenue to the City when compared to the current system? Is a business even able to conserve water use and reap the benefit of lower water rates, or are they already doing everything they can given the nature of their business? • Does the immense volume of water purchased from the City by many businesses outweigh the fact that they enjoy a flat rate for their water service when compared to single family residential properties? For instance, certain businesses in Richfield buy 85x to 137x more water than a typical home in a quarter. ## Staff Recommendations Multifamily properties: Based on the analysis above staff recommend no change to the current fixed tier 1 water rates for multifamily buildings. Each property would need a unique volumetric structure based upon the number of units in each building, and this will become an administrative burden in more ways than one. The limited difference in revenue and the likelihood of further complicating an already very complicated utility billing system led staff to this conclusion. Page 11 of 55 ## Multifamily/Commercial Conservation/Tiered Rate Structure Analysis – Page 5 Commercial: As detailed above, staff believe the decision to change the utility billing structure for commercial properties ultimately is a policy decision that must be made by the City Council. Arguments can be made both in support of and opposition to a change to the commercial billing structure and that’s why staff have no formal recommendation here. ## Conclusion Thank you for taking the time to read and understand this information. We hope this memo helps inform your discussion and ultimately any decisions you make related to the structure of our billing system for different classes of water users. Staff intends to present an abbreviated version of the information contained in this memo at the May 12, 2026 City Council work session. If you have any questions about the conclusions drawn here or the underlying data used for this memo please let me know and staff would be happy to discuss. Page 12 of 55 ## Multifamily& Commercial Conservation/Tiered ## Rate Structure Analysis ## City Council Work Session Scott Kulzer May 12 th , 2026 Senior Analyst Page 13 of 55 ## Current Billing Structure •Multifamily residential, commercial, schools, & churches are billed at a flat tier 1 rate Page 14 of 55 ## Residential Consumption (2025) Actual residential consumption trends (10,011 accounts): •76.6% tier 1; •17.8% tier 2; and •5.6% tier 3. Page 15 of 55 ## Multifamily Consumption Trends (2025) Residential conservation/tiered rate structure multiplied by units (249 accounts): •88% tier 1; •10% tier 2; and •2% tier 3. Revenue difference from current: •+$19,042 Page 16 of 55 ## Commercial Consumption Trends (2025) Commercial conservation/tiered rate structure (299 accounts): •51% tier 1; •11% tier 2; and •38% tier 3. Revenue difference from current: •+$186,900 Page 17 of 55 ## Staff Recommendations Multifamily rate structure •No change from status quo Commercial rate structure •Policy decision •Things to consider Questions? Page 18 of 55 © HDR 2024, all rights reserved. ## City of Richfield ## Rate and Financial Analysis ## for Infrastructure Renewal Planning May 12, 2026 © HDR 2024, all rights reserved. Page 19 of 55 Purpose of the Presentation •Overview of proposed policies and preliminary rate analyses presented at previous work session •Updated analyses based on Council feedback •Water rate design alternative – tiered commercial rate structure •Confirm preferred sewer rate design alternative – lower minimum charge from 7,000 gallons to 5,000 gallons quarterly •Summary and next steps 8 Page 20 of 55 ## Study Challenges •Upcoming water, sewer, and stormwater infrastructure system renewal and replacement needs •Renewal and replacement funding sources undefined at this time •Study begins to provide funding for future replacement •Challenge not specific to the City •Unique to the City is majority of infrastructure put in place in same time period •Adequately funding ongoing capital infrastructure improvements •Balancing customer bill impacts while maintaining prudent financial metrics (i.e., financial policies) 9 Page 21 of 55 A g e n d a ## 1.0Rate Study Overview ## 2.0Rate Design Analysis and Alternatives 3.0Summary and Next Steps 10 Page 22 of 55 1.0 ## Rate Study Overview 11 Page 23 of 55 ## Purpose of a Rate Study •Provide sufficient revenue to operate and maintain the City’s water, sewer, and stormwater infrastructure •Develop cost-based water, sewer, and stormwater rates •Reflect prudent financial planning criteria •Prudent funding of annual O&M expenses •Meet target minimum reserve balances •Adequately fund identified capital improvement and replacement needs •Develop the study using generally accepted methodologies tailored to the City’s system and customer characteristics 12 Page 24 of 55 ## Summary of Prior Presentation •Reviewed process of establishing cost-based utility rates •Discussed financial policies to guide the rate setting process •Discussed renewal and replacement needs and the impacts to rates •Current analysis does not include funding of future renewal and replacement projects or renewal and replacement reserves •Developed a rate revenue projection for each utility Rate Transition PlansFY 2027FY 2028FY 2029FY 2030FY 2031 ## Water Rate Adj. 16.5%15.0%10.0%5.0%5.0% ## Water Qtr $ Change$12.34$13.07$10.02$5.51$5.79 ## Sewer Rate Adj.9.0%7.0%7.0%4.0%4.0% ## Sewer Qtr $ Change$4.11$3.49$3.73$2.28$2.37 ## Stormwater Rate Adj. 17.0%17.0%17.0%17.0%10.0% ## Stormwater Qtr $ Change$4.49$5.26$6.15$7.20$4.95 13 Page 25 of 55 2.0 ## Rate Design Analysis and Alternatives 14 Page 26 of 55 ## Present Rate Schedules ## Water Rates ## Administrative Charge ($/Qtr)$10.00 ## Minnesota State Testing Fee (Annual)$15.22 Consumption Charge ($/1,000 gal) ## Residential 0 – 15,000 $5.54 15,001 – 25,0006.66 25,001+8.00 ## Residential Irrigation ## All Consumption$8.00 Apartment (Multi-Family) ## All Consumption$5.54 ## Commercial ## All Consumption$5.54 ## Commercial Irrigation ## All Consumption$8.00 ## Sewer Rates ## Minimum Charge ($/Qtr)$45.71 Sewer Usage ($/1,000 gal) 0 – 7,000$0.00 7,001+6.53 ## Stormwater Rate ## Stormwater Rate ($/REF/Qtr)$26.44 15 Page 27 of 55 ## Rate Design Alternatives ## Water •Status Quo – adjusts all water rates by system rate adjustments, updates administrative charge to base charge •Alternative – addition of tiered rate structure for commercial customers (multi-family tiered structure considered) ## Sewer •Status Quo – adjusts all sewer rates by system rate adjustments, no rate structure changes •Alternative – updates sewer minimum charge usage from 7,000 gallons quarterly to 5,000 gallons quarterly ## Stormwater •Status Quo – adjusts all stormwater rates by system rate adjustments, no rate structure changes 16 Page 28 of 55 ## Proposed Water Rate Designs – Status Quo Status QuoPresent RatesFY 2027FY 2028FY 2029FY 2030FY 2031 ## Administrative Charge ($ / Qtr) ## Administrative Charge$10.00N/AN/AN/AN/AN/A ## Base Charge ($ / Qtr) ## Base ChargeN/A$11.65$13.40$14.74$15.48$16.25 Residential Consumption Charge ($ / 1,000 gal) 0 – 15,000 $5.54$6.47$7.44$8.18$8.59$9.02 15,001 – 25,0006.667.758.919.8010.2910.80 25,001+8.009.3210.7211.7912.3813.00 Residential Irrigation Consumption Charge ($ / 1,000 gal) ## All Consumption$8.00$9.32$10.72$11.79$12.38$13.00 Apartment (Multi-Family) Consumption Charge ($ / 1,000 gal) ## All Consumption$5.54$6.47$7.44$8.18$8.59$9.02 Commercial Consumption Charge ($ / 1,000 gal) ## All Consumption$5.54$6.47$7.44$8.18$8.59$9.02 Commercial Irrigation Consumption Charge ($ / 1,000 gal) ## All Consumption$8.00$9.32$10.72$11.79$12.38$13.00 17 Page 29 of 55 ## Proposed Water Rate Designs – Alternative AlternativePresent RatesFY 2027FY 2028FY 2029FY 2030FY 2031 ## Administrative Charge ($ / Qtr) ## Administrative Charge$10.00N/AN/AN/AN/AN/A ## Base Charge ($ / Qtr) ## Base ChargeN/A$11.65$13.40$14.74$15.48$16.25 Residential Consumption Charge ($ / 1,000 gal) 0 – 15,000 $5.54$6.47$7.44$8.18$8.59$9.02 15,001 – 25,0006.667.758.919.8010.2910.80 25,001+8.009.3210.7211.7912.3813.00 Residential Irrigation Consumption Charge ($ / 1,000 gal) ## All Consumption$8.00$9.32$10.72$11.79$12.38$13.00 Apartment (Multi-Family) Consumption Charge ($ / 1,000 gal) ## All Consumption$5.54$6.47$7.44$8.18$8.59$9.02 Commercial Consumption Charge ($ / 1,000 gal) ## All Consumption$5.54N/AN/AN/AN/AN/A ## 0 – 20,000 N/A$6.47$7.44$8.18$8.59$9.02 ## 20,001+N/A7.758.919.8010.2910.80 Commercial Irrigation Consumption Charge ($ / 1,000 gal) ## All Consumption$8.00$9.32$10.72$11.79$12.38$13.00 18 Page 30 of 55 Assumes 11,000 gallons quarterly of water usage, 3/4” meter and winter rate (when applicable) 19 Page 31 of 55 ## Proposed Sewer Rate Designs – Status Quo/Alternative Status QuoPresent RatesFY 2027FY 2028FY 2029FY 2030FY 2031 ## Minimum Charge ($ / Qtr) ## Minimum Charge$45.71$49.82$53.31$57.04$59.32$61.69 Sewer Usage ($ / 1,000 gal) 0 – 7,000$0.00$0.00$0.00$0.00$0.00$0.00 7,001+6.537.127.628.158.488.82 20 AlternativePresent RatesFY 2027FY 2028FY 2029FY 2030FY 2031 ## Minimum Charge ($ / Qtr) ## Minimum Charge$45.71$36.70$39.27$42.02$43.70$45.45 Sewer Usage ($ / 1,000 gal) ## 0 – 7,000$0.00N/AN/AN/AN/AN/A ## 7,001+6.53N/AN/AN/AN/AN/A ## 0 – 5,000N/A$0.00$0.00$0.00$0.00$0.00 ## 5,001+N/A7.347.858.398.569.08 Page 32 of 55 Assumes a monthly winter water average of 2,333 gallons and 3/4” meter (when applicable) 21 Page 33 of 55 ## Proposed Stormwater Rate Design Status QuoPresent RatesFY 2027FY 2028FY 2029FY 2030FY 2031 ## Stormwater Service Charge ($ / REF /Qtr) ## Rate Per Equivalent Unit $26.44$30.94$36.20$42.35$49.55$54.51 22 Assumes one residential equivalent factor (REU), equal to one-fifth acre Page 34 of 55 Assumes 11,000 gallons quarterly of water usage, 7,000 gallons quarterly for sewer (minimum bill) and one-fifth acre or 1 REF for stormwater 23 ## Utility Bill Affordability ## MHI 2024 - $83,058 2% of MHI - $1,661 Quarterly Bill - $415.29 Page 35 of 55 Summary of the Study •Proposed rate adjustments reflect the prudent funding of operating and capital expenses •Begins a rate transition to adequately fund ongoing and upcoming renewal and replacement needs •Does not establish a renewal and replacement reserve •Proposed rate alternatives provide revenue based on study assumptions •Status quo maintains current rate structure •Water alternative adds tiered consumption charge for commercial customers •Sewer alternative lowers minimum charge usage from 7,000 gallons quarterly to 5,000 gallons quarterly •Analysis reflects industry standard methodologies as well as the City’s specific and unique system and customer characteristics 24 Page 36 of 55 ## Summary •Council feedback and input •Updated rate design alternatives ✓Water – commercial tiered consumption charge ✓Sewer – lower minimum charge ## Next Steps •Develop written documentation •Present final study recommendations at public meeting 25 Page 37 of 55 ## Discussion 26 Page 38 of 55 ## Financial Policies Overview •Reserves are reviewed on an individual utility basis •Provides strong message to outside financial community (e.g., bond rating agencies) •Financial policy goals and objectives •Maintain sufficient operating reserves for day-to-day cash flow requirements •Maintain sufficient capital and other reserves to minimize short-term and long-term borrowing for capital projects •Fund capital projects in a prudent and least cost manner •Provide rate stability •Reserves established for different purposes and thus have different minimum and target balance amounts 1.Reserve Levels 2.Renewal and Replacement ## Funding 3.Debt Issuance and ## Management ## 4.Debt Service Coverage ## 5.Rate and Fee Setting Approach 27 ## Operating Reserve Minimum – 90 days or 25% of annual O&M expenses for each utility Target – 180 days or 50% of annual O&M expenses for each utility ## Asset Replacement Reserve Target – Equivalent to the escalated value of the fully depreciated assets divided by the number of years in the evaluation period less debt funding assumptions (no minimum and only to be used for utility infrastructure replacement) Page 39 of 55 ## Proposed Renewal and Replacement ## Policy Minimum – Fund an amount equal to annual (1.0x) depreciation expense for each utility Target – 2.0 - 2.5x annual depreciation expense for each utility or the identified renewal and replacement needs for each utility over a multi-year period (5 or 10 years) ## Renewal and Replacement Policy and Analysis Overview •Renewal and replacement funding approach for each utility based on the value of the existing system replacement costs •Majority of City’s water, sewer and stormwater assets are fully depreciated •Significant infrastructure put in place around 1960 •Capital plan includes some renewal and replacement projects •Purpose of analysis is to identify total target funding levels •Analysis for each utility based on replacement cost (in 2025 dollars) divided by total years useful for each asset •Provides an annual benchmark funding level 28 Purpose is to adequately fund the maintenance and replacement of existing infrastructure through user rates on an on-going basis Page 40 of 55 Rate funded capital dependent on proposed annual rate adjustments Assumes 4.0% inflation 29 Page 41 of 55 Rate funded capital dependent on proposed annual rate adjustments Assumes 4.0% inflation 30 Page 42 of 55 Rate funded capital dependent on proposed annual rate adjustments Assumes 4.0% inflation 31 Page 43 of 55 32 Page 44 of 55 33 Page 45 of 55 Reserve levels are dependent on proposed annual rate adjustments 34 Page 46 of 55 35 Page 47 of 55 36 Page 48 of 55 Reserve levels are dependent on proposed annual rate adjustments 37 Page 49 of 55 38 Page 50 of 55 39 Page 51 of 55 Reserve levels are dependent on proposed annual rate adjustments 40 Page 52 of 55 41 Page 53 of 55 42 Page 54 of 55 43 Page 55 of 55