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remaining 21 % will be assigned to the wastewater revenue to correspond to the expenses. The <br />average reclaim revenue of approximately $180,400 will be removed from the water fund. This <br />decrease would be equivalent to an offset of a 3.5% onetime increase in the potable water rate or <br />could smooth out over time. <br />Long Term Capital - Neither marginal option contains a recovery mechanism for long term capital. <br />With the recent WWTP upgrade project much of the reclaim system has been replaced. However, <br />future capital projects both budgeted and yet to be identified would either need to be fully <br />supported by the utility funds or accounted for in the long term capital programs for General Fund <br />- Parks and/or the Golf Course Fund. Current budgeted projects are accounted entirely in the utility <br />funds. <br />Opportunity Costs - The City has been approached on numerous occasions to expand the reclaim <br />system to private businesses. Due to the lack of adequate amounts of excess reclaim supplies, <br />these discussions have been limited. The expressed interest has been at the current rate of 75% of <br />the potable rate. In addition, the City is routinely approached for the leasing of effluent with higher <br />values offered from businesses that the City may not desire to be associated with. Finally, from <br />an economic development prospective, providing reuse to an area like Conoco/Phillips could assist <br />in incentivizing or attracting development. From a strict financial stand point, the Utility could <br />achieve greater revenues from these other sources than what is being proposed with a marginal <br />reclaim rate. Staff would request that the new reclaim rate be clearly defined as a "City -only <br />reclaim rate" to avoid complications or future negotiations of reclaim or effluent. In addition, the <br />existing policy of 75% of potable rate should be maintained for all non -City customers. <br />Conclusion: <br />The determination of a reclaim rate is challenging and can be calculated in a variety of ways. City <br />Council sets reclaim rates by resolution. Utility staff recommend that the rate remain at 75% of <br />the potable rate for all non -City customers. However, the proposed pre unit reclaim rate of $0.85 <br />per thousand gallons for City -only reclaim customers is defensible and there are no objections to <br />utilizing this rate moving forward. This rate structure would begin in 2019. <br />12 <br />