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Home My WebLink About11-02-2015 Work SessionCH COLUMBIA HEIGHTS City of Columbia Heights 590 40th Avenue NE, Columbia Heights, MN 55421 -3878 (763) 706 -3600 TDD (763) 706 -3692 Visit our website at: www.columbiaheightsmn.gov Meeting of: Date of Meeting: Time of Meeting: Location of Meeting: Purpose of Meeting: NOTICE OF WORK SESSION Columbia Heights City Council November 2, 2015 6:30 PM City Hall- Conference Room No. 1 Worksession 1. Report on Solar Engineering Study 2. Utility Rate Study 2016 -2020 3. Discussion regarding 2016 Budget (Bring Budget Materials) a) Administration (plus Cable TV) b) Liquor (including analysis of privatization alternative) c) Community Development d) Public Works (including utility rate study) Mayor Gary L. Peterson Councilmembers Robert A. Williams Bruce Nawrocki Donna Schmitt John Murzyn, Jr. City Manager Walter R. Fehst The City of Columbia Heights does not discriminate on the basis of disability in the admission or access to, or treatment or employment in, its services, programs, or activities. Upon request, accommodation will be provided to allow individuals with disabilities to participate in all City of Columbia Heights' services, programs, and activities. Auxiliary aids for disabled persons are available upon request when the request is made at least 96 hours in advance. Please call the City Clerk at 763 - 706 -3611 to make arrangements. (TDD /763- 706 -3692 for deaf or hearing impaired only.) CH COLUMBIA HEIGHTS AGENDA SECTION CONSENT ITEM NO. WS 1 MEETING DATE NOVEMBER 2, 2015 CITY OF COLUMBIA HEIGHTS - COUNCIL LETTER ITEM: SOLAR POWER FOR CITY BUILDINGS DEPARTMENT: Public Works CITY MANAGER'S APPROVAL: BY /DATE: Kevin Hansen / October 29, 2015 BY /DATE: BACKGROUND: At the Council Meeting on June 8, 2015, the City Council authorized the preparation of an engineering report to evaluate the feasibility and benefit of adding solar panels for electrical power generation at four (4) public buildings: Top Valu 1 liquor store, the Public Safety Building, the Municipal Service Center and the new Library. The Solar Engineering report is complete and attached. In Minnesota consideration for solar power is largely due to both Federal Tax Credits and State Programs providing incentives for solar power. A large push is being made in 2015 and 2016 as the solar programs are either being reduced or eliminated at the end of 2016. Two programs available and evaluated for adding solar power to our City buildings are: • Made in Minnesota (MIM) • Rooftop Solar Made in Minnesota is a state lottery based system providing rebates for equipment made in Minnesota. The program is for smaller systems up to 40KW. Staff applied for this program and Top Valu 1, located at 4950 Central Avenue, was selected by the State from the lottery program. Rooftop Solar is a new program started in 2015 for larger systems from 100KW to 1,000KW utilizing Xcel Energy capacity credits and demand charges, which provide reductions in the electric billings we pay to Xcel. This program would apply to the other three buildings. In both of the programs above, there are minimal or no upfront costs to the City. A third party investor purchases and installs the systems and operates them within a specific timeframe: 10 years for MIM, and 15 or 20 years for the Rooftop Solar program. The City enters into a Power Purchase Agreement (PPA) with the third party for the program timeframe, projected with a modest annual cost savings. At the end of the term, the ownership of the panels is turned over to the City along with the full energy benefits. MIM: The energy study provides a 10 year cash flow analysis, detailed graphically on page 4 of the report. The City would save $700 to $900 annually in energy savings for the building. After 10 years, the PPA concludes and the full energy benefits of the 40 KW system will provide more than $7,000 in electrical savings annually. Over time this will deliver significant savings, realizing more than $92,000 over 20 years and over $156,000 in 25 years. Rooftop: The energy study evaluated both a 15 year and 20 year PPA period for all three buildings. The 15 year PPA requires a small annual cost to the City of approximately $4,900 total for all three buildings, but offers the greatest cash flow benefit over time. The City would realize over $352,000 in cumulative savings in City of Columbia Heights - Council Letter Page 2 20 years and over $859,000 cumulative savings in 25 years under the 15 year PPA. By comparison, for a 20 year PPA, the City would save $4,400 per year in electrical costs in each of the first 20 years, but would have a smaller cumulative savings of $111,700 at year 20 and $618,900 at year 25. For all four buildings, the structural analysis has provided that the buildings can support the addition of solar panels on the rooftops. STAFF RECOMMENDATION: City staff recommends the Made in Minnesota Lottery award for Top Valu 1 with a 10 year PPA. Staff also recommends the 15 year PPA for rooftop solar at the Public Safety Building, the Municipal Service Center and the new Library. Cumulatively, adding solar power to these four buildings will save the City $444,000 in 20 years following installation and over $1,015,000 after 25 years of operation. RECOMMENDED MOTION(S): Move to accept the Solar Engineering Study prepared by Apex Engineering of Anoka and authorize the preparation of a 10 year PPA for adding solar power at: Top Valu 1; and a 15 year PPA at the Public Safety Building, the Municipal Service Center, and the new Library. Attachment: Solar Engineering Study (Apex Engineering, dated Oct 27, 2015) City of Columbia Heights Solar Opportunities Apex Apex Efficiency Solutions Page 1 403 Jackson Street, Anoka, MN 55303 www.Apex -Co.us Background Apex Efficiency Solutions was hired by the City to evaluate the feasibility of installing solar photovoltaic panels on municipal owned buildings. As part of the evaluation we applied for the State of Minnesota's Made In Minnesota Solar Incentive Program. This is a program that is lottery -based and provides a production incentive to solar systems that are installed in Xcel Energy territory and are made up of solar panels that are manufactured in the State of MN. We submitted four applications on behalf of the City. The site we applied for are: • Top Valu I, 4950 Central Ave NE, Columbia Heights • Top Valu II, 2105 37th Ave NE, Columbia Heights • Public Safety, 825 41" Ave NE, Columbia Heights • Public Works, 590 401h Ave NE, Columbia Heights Of the four applications, only the Top Valu I store at 4950 Central Ave NE was selected in the lottery. Because of that selection, the project is eligible for the Made In Minnesota Incentives and is limited to 40 kW in size. In addition to the Made In Minnesota applications, we have also developed potential solar projects at the following three sites. • Public Safety • Public Works • Library These three sites are not eligible for Made In Minnesota incentives and, as such, are not limited to the 40 kW size. Tax Based Incentives Solar photovoltaic systems are eligible for two different tax -based incentives: Federal Investment Tax Credit. The owners of solar photovoltaic systems are eligible for a tax credit of 30% of the system's cost. This tax credit is scheduled to be reduced to 10% on January 1St, 2017. 2. Modified Accelerated Cost Recovery System ( MACRS). This incentive allows the system owner to have an accelerated depreciation schedule of 6 years. If the owner takes the 30% investment tax credit, they can only depreciate 85% of the system cost over the 6 years. The ironic part of the tax -based incentives is that while they provide a significant benefit to for - profit entities, they provide no benefit to non - profits or municipalities. In order to capture the tax -based incentives, we utilize a program where a for - profit entity pays for and owns the solar system. They own, operate, insure, and maintain the system for a number of years. During this time, the system owner /tax investor has a Power Purchase Agreement (PPA) with the municipality and also captures the Investment Tax Credit and the MACRS depreciation. They also receive revenue from the municipality through the PPA. The municipality pays for the electricity that is Apex Efficiency Solutions Page 2 403 Jackson Street, Anoka, MN 55303 www.Apex -Co.us generated from the panels to the owner /tax investor. At the end of the PPA term the panels are effectively turned over to the municipality. In the end, it is a great program for municipalities to acquire solar panels for no cost. Even though the City is not eligible for tax based incentives, we have also analyzed an option where the City would purchase the system and own it. Under this option the City would bear the costs of operating and maintaining the system, as well as insuring the system. The operation, maintenance and insurance costs are paid for by the tax investor under the third party tax investor model. This option is interesting because it highlights how much the third party tax investor model is worth to the City over a 25 year horizon. Made In Minnesota Solar System As stated above, the Top Valu I site at 4950 Central Ave was selected for the Made In Minnesota incentive program. The program provides a 13 cent - per -kWh incentive directly from the State of MN to the City of Columbia Heights. The project details are: System Size (Watts) 39,770 Price per Watt $ 3.20 System Cost $ 127,264 Annual kWh 48,917 Value of kWh $ 0.105 Bill Reduction $ 5,136 PPA Rate $ 0.220 PPA Escalator 1.50% PPA Cost $ 10,762 MIM Rebate (13 Cents /kWh) $ 6,359 The system size will be 39,770 watts and will generate 48,917 kWh per year. The system will cost $127,264 dollars to the system owner /tax investor. The system will not have any cost to the municipality. As electricity is generated by the solar system, the power will go directly into the building and will be consumed within the building. The result will be that the electricity consumption from the grid (Xcel Energy) will be reduced by 48,917 kWh per year. The value of this electricity, when we combine the demand charge reductions and usage charge reductions will be $5,136, which equates to 10.5 cents /kWh produced. This will be a savings to the City of $5,136 per year. The City will also receive the Made In Minnesota incentives from the State of MN. These are worth 13 cents /kWh. These incentives are worth $6,359 per year to the City. That is a total economic benefit to the City of $11,495 per year. Apex Efficiency Solutions Page 3 403 Jackson Street, Anoka, MN 55303 www.Apex-Co.us There is a cost to the City for this system, which is the Power Purchase Agreement with the owner /tax investor. In order for the investor to recoup the remaining system investment, after the Investment Tax Credit and the depreciation, and cover their operations and maintenance costs for the system, they need to charge a rate per kWh to the municipality. In this case, the investor receives 22 cents per kWh that the system produces. This will be a net cost to the City of $10,762 per year. After deducting the $10,762 in annual costs from the $11,495 in annual benefits, the City is left with an annual net benefit of $734. When we factor in a utility escalation rate of 3.2% and a PPA escalation rate of 1.5 %, the annual net benefit to the City over the 10 -year Power Purchase Agreement term looks like this: During the 10 -year PPA term the City has a net benefit of roughly $700 to $900 a year. After the 10th year both the Made In Minnesota incentives and the Power Purchase Agreement expire. From that point on, the system simply generates free power for the City to use. This results in over $7,000 in economic benefit annually. With no capital outlay on the part of the City, this system will provide a cumulative cash flow of more than $92,000 over 20 years, and more than $156,000 over 25 years. This is a great way to obtain a solar photovoltaic system with no cost to the taxpayers. Over time it becomes a free power source that generates substantial savings to the taxpayers. Apex Efficiency Solutions Page 4 403 Jackson Street, Anoka, MN 55303 www.Apex -Co.us Roof Mounted Solar Systems As stated above, only the Top Valu I site at 4950 Central Ave was selected for the Made In Minnesota incentives. Because of this, we developed a different solar model for the following three sites: • Public Safety —101 kW system • Public Works — 85 kW system • Library — 135 kW system Each of these sites are over 40 kW. The Library system is a 135 kW system, the Public Works system is a 85 kW system, and the Public Safety system is a 101 kW system. For the non -Made In Minnesota incentive systems, the City can either purchase the systems themselves, or they can enter into a Power Purchase Agreement with a tax investor who becomes the system owner. The Power Purchase Agreements (PPA's) can be for either 15, 20 or 25 years. The longer the PPA term, the lower the PPA rate. The shorter the PPA term, the higher the PPA rate. In this specific case, for a 15 -year PPA, the rate is 15.75 cents /kWh. The 15 -year PPA rate is so high that the City would have negative cash flow during the PPA term, but it provides the greatest cumulative cash flow over a 25 -year horizon. For the 20 -year PPA the rate is 13.4 cents /kWh. The 20 -year PPA has less cash flow to the City in the early years, but provides a greater cumulative cash value over a 25 -year horizon For the 25 -year PPA, the rate is 12.3 cents /kWh. The 25 -year PPA provides greater cash flow to the City in the early years, but has a lower cumulative cash value over 25 years. City Owned Solar As mentioned above, the City has the option to pay for the solar system and own the system immediately. By becoming the owner of the system the City is responsible for the operations and maintenance expenses of the system, as well as the insurance on the system. The details of how this would work are as follows: Watts 321,000 Price of System $674,100 Annual kWh 391,620 Value of kWh $ 0.1050 Bill Reduction $ 41,120 Xcel Energy Capacity Credit $ 12,968 Xcel Demand Charge Holiday $ 6,512 Xcel PDL Penalty $ 3,697 The total size of all three systems (Public Safety, Public Works and the Library) is 321,000 watts. These three systems will cost the City over $670,000 to build. They will produce more than 391,000 kWh of electrical energy every year that will be consumed in the buildings, saving the City more than $40,000 every year in electricity consumption. Apex Efficiency Solutions Page 5 403 Jackson Street, Anoka, MN 55303 www.Apex-Co.us Xcel Energy will provide a Capacity Credit and a Demand Charge Holiday to the City because of the solar installation. The Capacity Credit and Demand Charge Holiday will be worth about $19,480 annually. There will also be a penalty the City will pay in increased utility costs to Xcel Energy of over $3,600 because of the existing Peak Demand Limiting rate the City has in place. The net result is that the City will receive more than $58,200 every year in bill reductions, capacity credits, demand charge holidays, and including the penalty from Xcel energy for the change in the Peak Demand Limiting rate that the City is currently on. By owning the system, the City would be responsible for the annual operations and maintenance costs as well as the insurance of the system. These costs, for three systems of this size, typically would run about $13,480 annually. This would leave the City with a net economic benefit of over $44,300 annually. In order to evaluate the return of this potential investment, a repayment of the initial purchase price should be included. For the sake of analysis, we have modeled that the City would either obtain a loan for this initial cost, or they would borrow from themselves and then pay themselves back over a defined period of time with a defined rate of return. For this model, we have modeled a 15 year loan /repayment schedule with an interest rate of 4.5 %. Finance Amount $ 674,100 Finace Term (years) 15 Finance Interest Rate ( %) 4.50% Annual Repayment Amount $ (62,768) In order to meet this repayment schedule, the City would have to repay itself a little more than $62,700 per year for 15 years. When we factor in all of the annual benefits and costs, the annual cash flow to the City would look similar to the following: Apex Efficiency Solutions 403 Jackson Street, Anoka, MN 55303 www.Apex -Co.us Page 6 Cumulative Cash Value (15 Years) $ (158,572) Cumulative Cash Value (20 Years) $ 171,063 Cumulative Cash Value (25 Years) $ 545,150 15 year PPA The 15 Year PPA details are as follows: Watts 321,000 Price of System $674,100 Annual kWh 391,620 Value of kWh $ 0.1050 Bill Reduction $ 41,120.10 PPA Term 15 Years PPA Rate $ 0.1575 PPA Escalation 2.50% PPA Cost $ 61,680.15 Xcel Energy Capacity Credit $ 12,968 Xcel Demand Charge Holida, $ 6,512 Xcel PDL Penalty $ 3,697 The total size of all three systems (Public Safety, Public Works and the Library) is 321,000 watts. These three systems will cost the owner /tax investor over $670,000 to build. They will produce more than 391,000 kWh of electrical energy every year that will be consumed in the buildings, saving the City more than $40,000 every year in electricity consumption. The 15 -year PPA rate the City will pay the owner /tax investor is 15.75 cents per kWh generated by the systems. This will cost the City more than $61,000 annually. Xcel Energy will provide a Capacity Credit to the City and a Demand Charge Holiday which will be worth more than $19,450 annually. There will also be a penalty the City will pay in increased utility costs to Xcel Energy of over $3,600 because of the existing Peak Demand Limiting rate the City has in place. The net result of a 15 -year PPA will be the City paying more than $4,900 a year above and beyond what they are currently paying in utility bills. This negative cash flow will continue for all 15 years of the PPA. Apex Efficiency Solutions Page 7 403 Jackson Street, Anoka, MN 55303 www.Apex -Co.us 15 year PPA Cash Flow Cumulative Cash Value (15 Years) $ (92,473) Cumulative Cash Value (20 Years) $ 352,023 Cumulative Cash Value (25 Years) $ 859,266 When we compare the City owning the panels themselves and paying themselves back in 15 years, and an investor owning them for 15 years and then the City taking ownership, we can see how the tax incentives can be quantified. The difference in the cumulative cash flows between our City owned model and the 15 year PPA model are as follows: City Owned 15 Year PPA Difference Cumulative Cash Value (15 Years) $ (158,572) $ (92,473) $ 66,098 Cumulative Cash Value (20 Years) $ 171,063 $ 352,023 $180,960 Cumulative Cash Value (25 Years) $ 545,150 $ 859,266 $314,115 Over 15 years the tax investor model provides $66,000 of additional benefit to the City. Over 20 years the tax investor model provides $181,000 of additional benefit to the City, and over 25 years the tax investor model provides an additional $314,000 of benefit to the City. Apex Efficiency Solutions Page 8 403 Jackson Street, Anoka, MN 55303 www.Apex-Co.us 20 year PPA The 20 year PPA details are as follows: Watts 321,000 Price of System $674,100 Annual kWh 391,620 Value of kWh $ 0.1050 Bill Reduction $ 41,120.10 PPA Term 20 Years PPA Rate $ 0.1340 PPA Escalation 2.50% PPA Cost $ 52,477.08 Xcel Energy Capacity Credit $ 12,968 Xcel Demand Charge Holida, $ 6,512 Xcel PDL Penalty $ 3,697 The 20 -year PPA rate that the City will pay the owner /tax investor is 13.4 cents per kWh generated by the systems. This will cost the City more than $52,000 annually. Xcel Energy will provide a Capacity Credit to the City and a Demand Charge Holiday which will be worth more than $19,450 annually. There will also be a penalty the City will pay in increased utility costs to Xcel Energy of more than$3,600 because of the existing Peak Demand Limiting rate the City has in place. The net result of a 20 -year PPA will be the City having a positive cash flow of more than $4,400 a year. This positive cash flow will continue for all 20 years of the PPA. Apex Efficiency Solutions Page 9 403 Jackson Street, Anoka, MN 55303 www.Apex -Co.us 20 year PPA Cash Flow Cumulative Cash Value (15 Years) $ 76,681 Cumulative Cash Value (20 Years) $ 111,696 Cumulative Cash Value (25 Years) $ 618,939 Apex Efficiency Solutions Page 10 403 Jackson Street, Anoka, MN 55303 www.Apex-Co.us 25 year PPA The 25 Year PPA details are as follows: Watts 321,000 Price of System $674,100 Annual kWh 391,620 Value of kWh $ 0.1050 Bill Reduction $ 41,120.10 PPA Term 25 Years PPA Rate $ 0.1230 PPA Escalation 2.50% PPA Cost $ 48,169.26 Xcel Energy Capacity Credit $ 12,968 Xcel Demand Charge Holida, $ 6,512 Xcel PDL Penalty $ 3,697 The 25 -year PPA rate that the City will pay the owner /tax investor is 12.3 cents per kWh generated by the systems. This will cost the City more than $48,000 annually. Xcel Energy will provide a Capacity Credit to the City and a Demand Charge Holiday which will be worth more than $19,450 annually. There will also be a penalty the City will pay in increased utility costs to Xcel Energy of more than $3,600 because of the existing Peak Demand Limiting rate the City has in place. The net result of a 25 year PPA will be the City having a positive cash flow of more than $8,800 a year. This positive cash flow will continue for all 25 years of the PPA. Apex Efficiency Solutions Page 11 403 Jackson Street, Anoka, MN 55303 www.Apex -Co.us 25 year PPA Cash Flow Cumulative Cash Value (15 Years) $ 155,860 Cumulative Cash Value (20 Years) $ 224,489 Cumulative Cash Value (25 Years) $ 306,473 Summary These solar models provide a way for the City of Columbia Heights to obtain a solar system for the Top Valu I site that is worth $127,264, and systems for the Public Safety, Public Works, and the Library which are worth $674,100 with no capital outlay. That is a total of more than $800,000 of solar panels with no impact to the tax payers. These systems also have the ability to generate cash flow for the City on an annual basis. If the City chooses the 20 -year PPA option, the City will get more than $4,400 in annual cash flow until the PPA terms are complete, and then the cash flow improves substantially. Over 25 years, this option will provide over $775,000 in cash flow to the City with no capital costs. In the end, the City will not only receive more than $800,000 in solar systems, it will also receive more than $775,000 in cash over a 25 year horizon with no capital costs and no impact to the taxpayers. Apex Efficiency Solutions Page 12 403 Jackson Street, Anoka, MN 55303 www.Apex-Co.us CH COLUMBIA HEIGHTS AGENDA SECTION WORK SESSION ITEM NO. WS 2 MEETING DATE NOVEMBER 2, 2015 CITY OF COLUMBIA HEIGHTS - COUNCIL LETTER ITEM: UTILITY RATE STUDY UPDATE AND RECOMMENDATIONS DEPARTMENT: Public Works CITY MANAGER'S APPROVAL: BY /DATE: Kevin Hansen / October 29, 2015 BY /DATE: BACKGROUND: The City of Columbia Heights has conducted two utility rate studies for the development and implementation of equitable rate structures for sanitary sewer, storm sewer, and water utilities. Both of these have concluded with a 5- year rate structure, completed in years 2003 and 2007. A legislative mandate required the implementation of conservation rates in 2010; concurrent with this, a mid -term extension of the utility rates (3.0%) was approved through 2014. The approved 5 -year rate structure for years 2010 — 2014 has concluded. Utility rates in 2015 were kept at the 2014 levels. Staff has reviewed operations including the impacts of governmental mandates, the Capital Improvement Program (CIP), debt service, along with future projections, and is recommending a rate structure update for years 2016 — 2019. It should be reminded that the CIP for all utility departments was reduced over the original five -year rate study period by nearly fifty percent to lessen potential rate increases. This update examined our rates in terms of revenue and expenses and is making recommendations through 2019. The engineering consulting firm of TKDA has reviewed various rate scenarios for our water, sanitary sewer, storm sewer and refuse enterprise departments. This was done to ensure that the necessary revenues would be available for debt repayment and the uninterrupted operation and maintenance of these services. The findings and recommendations are summarized below along with the attached tables. The final Utility Rate Study report will be presented to the Council following this review. The following are factors that are influencing the current operations of each Enterprise Fund: 1. The water, sanitary and refuse budgets are all impacted by service contracts (half the budget or greater): Sanitary by MCES for sewage disposal; Water for purchase from the MWW (under long term contract); and Refuse to both our hauler contract and tipping fees. As an example, MCES fees have increased 4.5% and 5.5% in the last two years and our tipping fees have increased 68% since 2009. 2. The Sanitary Sewer Fund does not currently generate sufficient revenue to cover operating expenses. The 2015 CAFR shows a net shortfall of $200,000. 3. The Sanitary Sewer department has also experienced additional demands: internal aggressive sewer cleaning, 1/1 disconnect program, backflow prevention program; and externally the MCES 1/1 surcharge program - -that may add $125,000 per year until satisfactory 1/1 reductions are made. We have been able to offset the annual surcharge but most of the eligible expenses are now only credited at a 50% rate of cost. 4. The Water department budget has been impacted primarily in capital improvements with the addition of a cleaning and lining program under the City of Minneapolis annual program, and water main replacements. 5. The Storm Sewer Fund does not currently generate sufficient revenue to cover operating and debt service expenses. This situation will continue and likely worsen due in large part to the requirements of the City's NPDES Phase III permit and pending TMDL requirements, and capital investments. The 5 -year permit ( NPDES) was recently revised in June of 2014 increasing the demands of the department. 6. Our Capital Improvement Plan (CIP): The city's infrastructure is aging; while we are investing to address those needs with repairs, rehabilitation and replacement, it is Public Works opinion that the current levels are not adequate to meet the long-term need of our utility infrastructure needs. City of Columbia Heights - Council Letter Page 2 Table 1 (attached) shows the impact on various size families of the recommended annual rate adjustments for each of the years from 2016 to 2019. The following represents the average increase in the quarterly bill in both dollars and as a percentage: Average Family Utilitv Bill (increase): 2015 $0.00 0.00% 2016 $6.24 3.00% 2017 $13.24 6.20% 2018 $7.90 3.50% 2019 $8.21 3.50% Average: $7.12 3.24% STAFF RECOMMENDATION: Staff is recommending increases in each of the utility funds to address overall fund deficits, debt service for capital improvements, operational inflationary increases, and agency rate increases such as the Metropolitan Council Environmental Services, Minneapolis Water Works and Great River Energy (tipping fees). The recommended rates for the years 2015 through 2019 are on the attached resolution. As a percentage each year, the recommended rate increases for the commodity charges are as follows: Capital Improvement Program: After earlier rate increase recommendations approached 10 percent, staff has refocused and modified (reduced or delayed) the CIP to lower needed rate increases averaging 3.24% for years 2015 — 2019. Staff is also recommending suspending major capital improvements in one year, either 2017 or 2018, to allow the funds to recover from operating at a deficit. (see Cash Balance Table 2, attached). Commercial Fixed Fee: In TKDA's review, they noted that commercial accounts are paying a fixed fee the same as on a residential unit basis creating a significant disparity from multi - family properties. The industry standard for non- residential accounts is to use meter sizes as the basis of rates for fixed fees. The following table proposes the fixed fee rates for non - residential customers: Water and Sewer Commercial Fixed Fee (based on meter size): # of Customers • Less than 1" 2015 2016 2017 2018 2019 Sanitary Sewer 0% 7% 8% 3.5% 3.5% Storm Sewer 0% 5% 8% 3.5% 3.5% Water 0% 3% 8% 3.5% 3.5% Refuse & Recycling 0% -2% 2% 3.5% 3.5% Capital Improvement Program: After earlier rate increase recommendations approached 10 percent, staff has refocused and modified (reduced or delayed) the CIP to lower needed rate increases averaging 3.24% for years 2015 — 2019. Staff is also recommending suspending major capital improvements in one year, either 2017 or 2018, to allow the funds to recover from operating at a deficit. (see Cash Balance Table 2, attached). Commercial Fixed Fee: In TKDA's review, they noted that commercial accounts are paying a fixed fee the same as on a residential unit basis creating a significant disparity from multi - family properties. The industry standard for non- residential accounts is to use meter sizes as the basis of rates for fixed fees. The following table proposes the fixed fee rates for non - residential customers: Water and Sewer Commercial Fixed Fee (based on meter size): # of Customers • Less than 1" $ 47.21 87 • 1" meter $ 94.42 100 • 1.5" meter $118.03 79 • 2" meter $188.84 32 • 3" meter $424.89 9 • 4" meter and larger $755.36 4 Senior Citizen Rate: TKDA has suggested removing the senior citizen discount moving forward, the senior discounts that are in the past rate resolutions are only for the fixed fees for water and sanitary sewer, and the "any- size" refuse for the 32 gallon price. Currently, there are 191 utility customers at the senior rate. This saves them about $20 to $30 per quarter, depending on whether they really get any value from full service refuse relative to the minimum refuse service. City of Columbia Heights - Council Letter If the senior discount is put back in, the projected annual revenue would be reduced approximately as follows: • Water $4,000 reduction • Sanitary Sewer $4,000 reduction • Refuse —no measurable effect • Storm sewer $8,000 reduction Page 3 Storm sewer is somewhat of a quandary as senior discounts for storm water have never been approved by Council and were not part of the original fee structure when the Storm Sewer fund was set up in 1999. If it is desired to leave the senior discount intact as in past rate resolutions, staff would recommend following the original intent and not providing a senior discount on the storm water rates. RECOMMENDED MOTION(S): None —work session review. 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