After a work session prior to Monday night’s council meeting, it appeared likely that we will see an increase in Normal water rates — sooner rather than later.
And that unlike recent years, the rate increase could be substantial.
About a year ago, the Normal Town Council received a report from a consultant who concluded that given the current and future capital needs of the system and the increased costs of pumping and treating water, the current rate structure is unsustainable.
In his introductory comments, City Manager Mark Peterson said Normal’s not alone is addressing water rates. Other nearby communities like Peoria and Champaign are proposing large increases. However, Peterson said the Town’s current band aid approach of 10 percent increases every three years isn’t keeping up with costs.
“We have not compromised the integrity of the system. But if we don’t come up with a more permanent solutions, we will have an issue,” Peterson cautioned, adding that there’s no hurry to act, but that the “sooner we can agree on a course, the better.”
Running a municipal water system is a costly proposition, particularly when you're dealing with the U.S. EPA. Repainting an elevated water tank would require full containment of the structure and cost in the neighborhood of $700,000. While I would take issue with the priority on several of the projects, Town staff have identified $58 million in unfunded water projects, including a $15 million water treatment plant expansion not needed for 20 years or so.
Personally, I have been planning for this day. The current economic conditions make any significant increase a last resort. I agree we need to take our time on this to make sure we are doing what’s right for the water system and for the water users and ratepayers of the community.
Because municipal water departments are so-called “enterprise funds,” they must be self sustaining. That is, water rates, tap on fees, and other water charges must be high enough to pay for the system’s fixed administrative and variable costs.
In addition, capital projects likes replacement water mains, new wells, water treatment plant improvements, or water tower repainting and repairs must also be funded out of available water revenue.
Dipping into the general fund to pay for water projects is to be avoided at all costs.
In Normal, we believe it is a wise budget policy to maintain a budget surplus if at all possible. Our general fund reserves are roughly 10 percent of the overall Town operating budget, or about $5 million. This year, the poor economy and its impact on sales tax collections will force us to end the current fiscal year with a fund balance of slightly less than 10 percent.
In the case of the water fund, the consultant recommended a 35 percent surplus to be achieved in the fifth year following a rate increase. Town staff is recommending 20 percent.
I have asked staff to come back and re-compute the proposed water rates based on maintaining 10 percent surplus and lower levels of annual capital improvements to fund a long list of potential, unbudgeted water projects.
As long as I’ve been on the Town Council, and before then, the Town has typically approved a 10 percent increase in water rates every three years. In recent years, to address increasing capital needs, the council imposed a flat $2.50 monthly maintenance fee, regardless of the amount of water used.
Today, our water rate is $3.96 cents per 1,000 gallons of water.
As my council colleague Cheryl Gaines pointed out, you can buy 1,000 gallons of treated Normal water for about the same price as you can purchase a case of bottled water on special at Sam’s Club. That’s three gallons of water.
Bottled water is more than 300 times more expensive than cool, clean refreshing Normal tap water.
City manager Mark Peterson pointed out that’s about two bottles of water purchased at a major league baseball game for the price of a 1,000 gallons of great tasting Normal tap water.
So, relatively speaking, our water’s a pretty good deal.
Town staff would like us to boost the rate about 35 percent the first year to about $5.25 per 1,000 gallons. The average family that washes a load of clothes, showers, and uses the dishwater regularly uses about 6,000 gallons per month.
The average Normal household would see their monthly water bill jump $8.99 from $26.26 to $35.25, under the staff proposal.
A single person using about 2,000 gallons per month would see their monthly charge go from $10.42 to $14.25 in the first year.
The proposed rate increases would occur every year and help the Town set aside $2 million for water-related capital projects each year, which would represent a fairly aggressive reinvestment in an aging infrastructure. Again, I have asked to see what the impact on the proposed rate increase would be with a slightly less aggressive approach.
Staff recommends any rate increase become effective Oct. 1, 2009. Mayor Koos would like to look at stretching out the increase over a longer period to see how that would impact the proposal.
I’ll have more on the proposed water rate increase this week.