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Consideration of recommendation for 2024 Utility Rate changes
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Submitted by:
John Ruggini
Department:
Finance Department
A. Issue
The 2024 Budget included a 5.0% Sanitary Sewer increase. Based on a higher than expected Milwaukee Metropolitan Sewerage District (MMSD) rate increase and better than anticipated local revenues, we recommend forgoing the local rate increase.
B. Background/Options
The City’s Sanitary Sewer utility includes a local charge and MMSD charges. The Local Sewer Usage is a charge we set based on water usage for maintenance of our sanitary sewer system.
The sewer usage portion of residential (1-2 family) bill is based on the previous year’s winter quarter. For example, 2024 sewer usages will be based off 2023 winter quarter usage. The reasoning behind this method is to offer a discount, in that we understand that not all of the water that is used in summer will be going down the drain. Some water will be absorbed or drain into the storm sewer during watering of the grass/gardens/flowers, washing of cars, going into swimming pools, etc
MMSD charges a Sewer Usage charge based on water usage to cover the billings for water treatment and a Sewer Connection is a fixed charge for connection to our sanitary sewer system. Both are billed through our Sanitary utility.
The 2024 Budget included a 5.0% increase in the local sanitary sewer rate. At that time, a 4.0% MMSD increase was assumed which would have resulted in a total sanitary increase of 4.6%. Combined with a 0% Water and 0% Stormwater, the total utility bill increase was projected to be 2.2%. However, a 7.0% MMSD increase, combined with a 5.0% local increase, would result in a 5.9% sanitary sewer increase and a 2.5% bill increase. In addition, it appears the winter quarter average is not decreasing, as originally thought, but remaining consistent for most residential customers.
Given the recent water rate increase, we decided to review 2023 and 2024 sanitary revenue estimates. Upon review, we believe both 2023 and 2024 sanitary revenues will exceed budget and reserves are forecasted to remain above our 25% minimum through 2030 as shown below. Based on this information, we recommend forgoing the 5% sanitary local rate increase as a way to provide ratepayer relief for the 7.0% MMSD increase and the prior year water rate increase.
The table below shows historical and the revised 2024 estimate for an average quarterly utility bill. The total average bill is estimated to increase 1.3% from $347.72 to $352.34.
C. Strategic Plan (Area of Focus)
N/A
D. Fiscal Impact
Based on a revised revenue estimate, 2024 local sanitary revenue will exceed budget even with forgoing the 5.0% rate increase so there is no anticipated negative impact on the budget.
E. Recommendation
We recommend that sanitary sewer local rates be increased 0.0% for the 2024 fiscal year. As budgeted, water and storm sewer rates will remain at a 0.0% increase as well.