Water and Wastewater Rates
April 23, 2024
Water and Wastewater:
Enterprise Funds
• A type of government fund that should ‘stand alone’ as an independent enterprise
• Has its own revenue sources (rates)
• Has dedicated expenditures (water and wastewater)
• Should never go into deficit or need to borrow from other funds What’s the Problem?
1. Much of our systems are at or beyond their
useful life.
2. We are not financially able to improve them.
Bottom Line
• Option 1: What we should do
• Rate increase in Year 1 for typical single family home: 46% • 1% above average of comparative cities
• Option 2: What we could live with
• Rate increase in Year 1 for typical single family home: 33% • 8% below average of comparative cities
Why Increase Rates This Much?
It’s a Matter of Risk
1. Quality of System
o Risk of being without water or sewer service
We’ve had minor disruptions
We had a sewer spill in 2023
Risk of more frequent and/or more severe problems
No matter what we do, some risk remains
2. Financial Stability
Need to cover operating costs
Water fund can’t issue debt to replace at-risk well
Wastewater fund will be ‘upside down’ by $1.1M
How Did We Get Here?
Primary Factors
•Water Fund
• Used Fund Balance to Keep Rates Low
• Expenses Higher than Projected (inflation and pandemic) • New Debt (water meters and wells)
• Reduced Capital Expenses
•Wastewater Fund
• Used Fund Balance to Keep Rates Low
• Actual revenues Much lower than Projected Revenues
• New Debt (sewer pump station)
• Reduced Capital Expenses
We Know This Hurts
•New Tiered Structure Helps Those Who Use
Less
•Maintains Financial Stability
•Cannot Use Rates to Subsidize Some
Residents
But Not As Much As Projected Last Fall
• New Allocation of Overhead Costs Shifts $700,000 to
General Fund
• Reduces Need for Higher Rates
• Do Not Believe Appropriate to ‘Re-pay’ Enterprise Funds • Understand Concerns
• Waiving interest is an option
Syserco Project:
High Interest to Some
• Borrowed $5M for Energy Projects
• $2.2M for Smart Meters
• $2.8M for Wells, Pump Station, other City Buildings
• Debt Service: $375K/year
• Water Fund: $169K/year
• Sewer Fund: $120K/year
• General Fund: $86K/year
• May be a Contributing Factor, but Not the Core Issue
What About the Future?
• Adding Master Plans to Better Understand System
• Review Revenues and Expenses Annually (at least)
First Rule of Holes
When You’re In One, Stop Digging
Water: Have minimal reserves and can’t issue debt
Wastewater: “In the Hole” by over $1M