2023 Rate Increase Explanation

2023 RATE INCREASE EXPLANATION

 

On December 12, 2022, the Orono City Council approved the 2023 Budget and Fee Schedule.  The Fee Schedule included increases in the City’s utility rates.  The rate increases are as follows: 2% to tiered Water rates, 2% to Sewer, 2% to Stormwater, and 4% to Recycling. These increases are needed for a variety of reasons which includes the implementation of best practices and the City’s goal to be able to fund infrastructure needs through utility rates rather than through special assessments and borrowing.

 The creation of a long-term rate structure is as follows:

Since City property taxes do not fund utility services, those costs must be recovered through monthly utility fees to residential and commercial properties within the City. The 2021 rate adjustments are based on a rate study analysis to ensure that each utility customer pays their proportionate share of the costs to provide services.

In addition to the above factors, each utility has other pressures on rates:

Water. The water fund has historically been operating at a loss. Because depreciation is a non-cash expenditure, the fund has had a positive operating cash flow since 2009. In previous years, the operating loss has been covered by the revenue received from antenna leases on the water towers. The revenue from the antenna leases has been moved out of the Water budget since 2018 and this revenue decrease has been recovered through water rates.

As presented, the operating budget for 2023 will have an operating income of $53,200. Net non-operating revenues and expenses increase the income to $63,200. The expense budget is increasing by $58,880 (5.2%). $27,560 is due to Personnel Services. The non-operating interest expense is for the interest on the 2014 Water Bonds.

2023 capital expenditures as identified in the 2023 CIP include a water plant upgrades, north tower cleaning and inspection, and water valve replacements. The Water Fund’s anticipated cash balance for the fund at the end of 2023 is $1,157,150. 

 Sewer. As presented, the operating budget for 2023 will have an operating income of $142,575. Net non-operating revenues and expenses increase the income to $194,175. The single largest expense for the sewer fund is the Met Council disposal charges which has increased from $394,530 in 2016 to $766,993 in 2023. This is a 94% increase and has a major impact on sewer rates. The total operating expense budget is increasing by $154,565 (7.9%) The major increases are the previously mentioned MCES charges ($62,000), Personnel Services (30,340), and Supplies ($30,340). 

 Upcoming capital expenditures can be covered by the fund’s current cash balances. Projects identified in the CIP for 2023 include: Annual sewer rehabilitation, lift station updates, and the Tonkawa Force Main replacement. The projected cash balance for the fund at the end of 2023 is $1,176,080. 

 Stormwater. The Stormwater Fund is for the most part project based. Operating expenditures are mainly limited to engineering associated with NPDES, SWPPP and other state and federal requirements. Public Works time and materials spent on culvert cleaning/replacement are also charged to this fund. The purpose of this fund is to collect money for the larger Stormwater projects that will be required in the future. 

 Potential CIP projects in 2023 include: Projects performs in conjunction with road projects, Navarre parking lot manholes, Cherry Place Ravine Improvements, and other Storm Water Improvements. The projected cash balance for the fund at the end of 2023 is $1,838,546.

 Recycling. The recycling funds major expenditure line is for contracted recycling charges. The current contract with Waste Management is increasing 4%. The full-time wages that are charged to the fund represent 10% of the City Clerks wages. The projected cash balance for the fund at the end of 2023 is $70,382. 

If you have any additional questions about the rate changes, please contact: 


Additional Resources

  1. 2023 Utility Fee Schedule
  2. 2022 Utility Fee Schedule