00-0744R

RESOLUTION AUTHORIZING AN AGREEMENT WITH THE CITY OF PROCTOR FOR THE SALE OF A MAXIMUM DAILY AVERAGE OF 55,000 CUBIC FEET OF WATER.

BY COUNCILOR FENA:

RESOLVED, that the proper city officials are hereby authorized and directed to execute an agreement with the city of Proctor authorizing the sale of a maximum daily average of 55,000 cubic feet of water to Proctor for a consideration as set forth in the rate schedule of said agreement; said agreement filed as Public Document No. ________________; monies received under this contract shall be deposited in the Water Utility Fund No. 510.


STATEMENT OF PURPOSE:  The current rate structure for the cities of Proctor and Hermantown and town of Rice Lake was established by a 1978 water rate study.  Periodically, since then, rates have been increased to compensate for inflation and water system improvements.

Discussion in early 1997 with our neighboring municipalities led to the department contracting with Progressive Consulting Engineers (PCE) in May, 1997, to perform a cost of service water rate study.  The study was commissioned to determine the city of Duluth's revenue requirements from the cities of Proctor and Hermantown and town of Rice Lake.  The study was performed in cooperation with PCE and the four municipalities.  The rates in each contract are the result of the 1997 study which was recently updated in January, 2000, by PCE. Based on historic water usage, the water rates reflect the system cost of providing service to Proctor, Hermantown and Rice Lake.  Each agreement is for a term of ten years and contains rate adjustment mechanisms for adjusting the rates over time.