DRAFT – These minutes are not official until approved at the next regular City Council meeting.

City of Bigfork

City Council and Budget Committee Special Meeting October 23, 2007

Members Present: Mayor Amy Tendrup, Linda Koppelmann, Richard Salmi, Jean Lexvold, Mike Stevens and Amy Pifher Absent: none Also Present: none

Mayor Tendrup called the special meeting to order at 6:03 p.m. and stated that the 2008 water and sewer budgets and rates would be discussed.

City Engineer Julie Kennedy reviewed that rates for the upcoming year are set based on how much water was sold in the previous year and the proposed budget for the upcoming year. She stated that the major obstacle in setting rates for 2008 is that the anticipated costs have not decreased. They have actually increased due to an aging system. At the same time the amount of water being sold in a year has decreased considerably. Kennedy stated that it is necessary to determine why the usage decreased so much so that we can come up with a reasonable number of gallons expected to be sold in 2008. She reported that Public Works Superintendent Chuck Almhjeld has been working with her to investigate this. One major inconsistency that was found was at the hospital. According to Public Works Department records, a new meter was installed at the hospital in January 2006. Since that time, their usage has decreased about 170,000 gallons per month. This has resulted in two million gallons worth of lost revenue for the City over the past year. Almhjeld has already scheduled a calibration of the meters at the hospital in order to determine what the problem is. The meters of a few other high-end users and the meters at our municipal well houses will also be calibrated to ensure that they are correct. Kennedy felt that no firm decision could be made until the loss of usage/revenue was investigated. She stated that even if we can count on gaining one million gallons worth of revenue back from lost sources, we are still looking at about a 25% increase in rates to meet the proposed budget.

Kennedy's final point of discussion was the possibility of doing a more in-depth rate analysis. In the past few years the City has simply set a proposed budget and calculated the rate necessary based on the number of gallons predicted to be sold. This has worked well up until this point when the gallons predicted to be sold has fluctuated. Kennedy noted that, ideally, the City should figure out how much of the proposed budget is set costs; that is, those costs that exist whether or not any water is pumped through the system. The rest is considered usage-based costs and includes things such as chemicals to treat the water. Kennedy reviewed that the base rate should be set high enough to cover the set costs of the system. This ensures that the City has the money to operate the system regardless of how much water is used. She pointed out that right now, the City is relying heavily on revenue from usage and we are seeing what happens when usage drops. Tendrup felt it would be beneficial to have Kennedy, Storlie and Almhjeld figure the set costs and usage-based costs of our system so that the Council could set a more realistic base rate. Kennedy pointed out that another benefit of having a higher base rate is being able to receive a better interest rate on loans for system projects. Motion by Tendrup to have Storlie, Almhjeld and Kennedy perform this analysis, seconded by Lexvold, MCU. This analysis will be completed and presented at the regular November Council meeting.

Mayor Tendrup adjourned the meeting at 6:48 p.m.

Angie Storlie City Clerk/Treasurer These minutes are available on the City website at www.cityofbigfork.com. To sign up to receive the minutes by email, send your email address to ctyclerk@bigfork.net.