Study suggests city of Rifle increase water rate by 11% every year until 2025
A utility rate study currently being conducted by outside consulting firms suggests the city increase water rates by 11% every year until 2025.
Consultants with Raftelis Financial Consultants, Inc. and JVA Consulting Engineers, hired by the city for $100,000 to analyze utility rates in an effort to maintain fees to fund the city’s infrastructure, said during a city workshop on April 21 the increases would lead to early repayment of a previously made water tank loan. If the city were to raise the rates, the loan would be paid off by 2022 and thereby save money on the interest rate.
In 2015, the city went forward with an agreement with NBH Bank N.A. for a $5 million loan to be paid over 20 years with an interest rate of 3.13%. The loan helped fund a new water tank and the rehabilitation of the Graham Mesa water tank.
Meanwhile, the loan on the water tank is being defrayed by a 12% surcharge on customers’ water bills. Once the loan is paid off, that would thereby essentially reduce customers’ bills by 12% in 2022.
If the city votes to raise water rates by 11% each year until 2025. Note: there’s a 12% reduction for 2022.
2021: $30.63 per month
2022: $29.93 per month (with added 11% increase but deducted the 12% surcharge)
2023: $33.3 per month (with added 11% increase)
2024: $36.97 per month (with added 11% increase)
2025: $41.04 per month (with added 11% increase)
“I like scenario one because at the end of 10 years it would be at (51.8% cumulative adjustments,” council member Clint Hostettler said. (But) 11% per year isn’t going to make anybody very happy.”
In addition to paying off the loan and saving money in the long run, however, the city would also bolster its cash reserves. An increase in reserves will help pay for future infrastructure projects under consideration by the city.
Between now and 2030, the city is planning up to $51.15 million in improvements to the water purification facility, the water distribution system and the raw water system. In addition, they look to do $120.4 million in recommended wastewater treatment facility and sanitary sewer collection system improvements.
The projects would combine for up $171.6 million for wastewater and water treatment work.
If the city opts for the 11% increase, the yearly bumps would help increase the total ending fund balance of the water utility fund from $6.1 million in 2021 to $13.9 million by 2031, increase target reserves from $2.5 million in 2021 to $3.1 million in 2031 and increase unrestricted reserves from $3.1 million to $10.8 million.
As it currently stands, residential, commercial and industrial customers pay a monthly base charge of $30.63 for 2,000 gallons of use. If the city were to vote for the yearly 11% increase, which would also implement the 12% reduction in 2022, that’d mean customers would have to pay a little more than $40 per month of use by 2025.
Raftelis and JVA also presented two other main scenarios for water utility rates the city could choose in an effort to accumulate funds to support future projects.
One would be to increase the water utility rate by 1.25% each year until 2031. That route, however, would mean no early repayment of the 2015 loan, which thereby still leaves customers’ with a 12% surcharge until that loan is paid off. In addition, cash reserves wouldn’t grow as much.
The other option would be to increase the rate by 1.5% every year until 2026, then increase the rate by 9% for every year after that until 2031. This option would also mean less in cash reserves by 2031 compared to option one.
Raftelis and JVA also presented two options to increase city wastewater rates in order to help defray future capital projects. The first option would include raising the wastewater rate by 4.2% each year until 2027, while the second would include raising the rate 10% each year until 2029, then another 4% in 2030 and a final 3% in 2031.
Put simply, whatever option chosen by city council will determine what capital improvements Rifle can and cannot afford in the future.
Raftelis and JVA plan to come back and present more information and data found in the utility rate study in early May.
Reporter Ray K. Erku can be reached at 612-423-5273 or email@example.com
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