In fixing and establishing water utility rates, fees or charges, the city council shall be guided by, and conform to, the following standards:

    A.    Water rates, fees or charges shall be sufficient to recover all costs or expenses incurred by the water utility, such as:

    1.    Operation, maintenance, salaries, wages and benefits;

    2.    Depreciation and replacement of obsolete treatment, storage, or collection systems, facilities or apparatus;

    3.    Capital improvement program;

    4.    Research for and, if feasible, development of alternative water supplies;

    5.    Payments of bonded indebtedness or other financing methods, including principal, interest, and any required reserves;

    6.    Reserves for contingencies or unanticipated expenditures;

    7.    Other reasonable charges or transfer expenses that may occur from time to time.

    B.    In the event that revenue exceeds costs and expenses as defined in subdivisions 1 through 7, by one hundred thousand dollars in any given fiscal year, the city council shall apply the excess to the current debt principal on the one million five hundred thousand dollar loan on the Empire Street Reservoir. (Prior code § 23-28)