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File #: 20-0767    Version: Name: 6/1/20 - Water Rates resolution
Type: Resolution Status: Passed
File created: 6/1/2020 In control: City Council
On agenda: 6/1/2020 Final action: 6/1/2020
Enactment date: 6/1/2020 Enactment #: R-20-192
Title: Resolution Regarding Water Rates
Sponsors: Jane Lumm
Resolution Regarding Water Rates
Whereas, Effective July 1, 2018, Ann Arbor's water rates were re-structured including establishing a new multi-family customer class, adding a fourth volume-based tier to single-family residential rates and eliminating the tier structure in the commercial customer class;

Whereas, The re-structuring shifted approximately $2M annually in cost to single-family residential customers and substantially increased the cost premiums paid by higher volume single-family residential water users including customers with large families;

Whereas, Within the residential customer class, the per gallon rate is 8 times higher for Tier 4 usage than Tier 1 usage and prior to the July 2018, the range from high to low was 3.8 times. In FY19, Tier 3 and 4 usage accounted for 21% of the residential usage, but 53% of the residential revenue collected; Tier 4 accounted for 6% of the usage, but 25% of the residential revenue collected;

Whereas, City staff have indicated that the elasticity assumptions made, and presumably reflected in the Cost of Service study, were understated compared with the actual experience following the re-structuring;

Whereas, A fundamental premise underlying the re-structuring proposal was that volume peaking drives costs, yet the re-structuring proposal was internally inconsistent in its application of that logic - the re-structuring expanded volume-based price tiering for single-family residential, but eliminated the tiers in the commercial customer class where the peaking impact on the system (on both a percentage and absolute basis) was even greater;

Whereas, In response to a Council resolution, Arcadis Inc. developed feasible and legal water rate structure tiering alternatives for residential (four alternatives) and commercial customers (two alternatives) that were revenue neutral to the city, and those alternatives were presented to Council at a work session on March 11, 2019;

Whereas, At that meeting, ...

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