Craig water, wastewater rates could increase in 2012
November 10, 2011
If you go…
What: Consideration of Ordinance 1017, to increase water and wastewater rates in 2012, at the Craig City Council meeting
When: 7:30 p.m. Nov. 22
Where: Craig City Hall, 300 W. Fourth St.
The Craig City Council on Tuesday unanimously approved the first reading of an ordinance that, if passed, will increase certain utility rates in 2012.
Ordinance 1017 aims to hike water and wastewater rates by an average of 5 percent.
City Manager Jim Ferree said water and wastewater bills are broken up into two separate charges — a base rate, or availability fee, that pays for system operations and another cost based on customer usage per 1,000 gallons.
According to the ordinance, the city plans to increase usage rates in 2012.
Ferree said the reason the adjustment is looked at in terms of a five-percent average is because rate increases will vary depending on each customer's use.
"For example, everyone will pay the same base rate," Ferree said. "But, your actual increase will be different from mine if you use 5,000 gallons and I use 10,000 gallons."
Ferree said officials are mandated by the city's charter to evaluate water and wastewater rates each year at budget time, and city council has increased those rates by about five percent annually since 2008.
Ferree said the reason for the annual rate adjustments stems from a major infrastructure problem that occurred in 1997.
"In 1997, the city had not adjusted its water or wastewater rates for 20 years," Ferree said. "Then we had a controversy about substandard water pressure on the northeast side of town."
Ferree said the city hired an engineer to evaluate and develop a plan to fix the water pressure problem, which turned out to be a $1.6 million project. Ferree said the city was able to acquire a significant energy impact grant, but still had to pay for half of the project costs.
"City council, at that time, raised the rates by 50 percent because they hadn't touched them in so long and to address the infrastructure issue," Ferree said.
Rather than repeat past mistakes, Ferree said city council decided in 2008 to hire Denver-based Red Oak Consulting to evaluate the city's capital needs and costs associated with equipment replacement and daily water and wastewater operations.
The results of the study showed the city was not producing enough revenue to meet its costs and Red Oak recommended the city begin raising rates by 8.5 percent per year for water and 5.5 percent per year for wastewater.
"We thought that increase was a little high," Ferree said. "But we did decide to adjust the rates annually, rather than wait 10 years and then bump it up when something catastrophic happens."
Despite the annual rate increases, Ferree said the water fund is not doing as well as officials would like because the city is still carrying debt from a three-year, $9 million upgrade to the water treatment plant that was completed in 2009.
"We were running out of capacity in the water plant, so we needed to upgrade that facility to serve our existing needs, treatment needs and future growth," Ferree said. "But it has affected the water fund."
Ferree said the water treatment plant upgrades coupled with a discontinuation in energy impact grant funding has forced the city to put water and wastewater infrastructure upgrades on hold.
"We were investing $400,000 to $500,000 a year in water line improvements, but have been forced to scale back since the energy impact grants were discontinued three years ago," Ferree said.
Although water and wastewater upgrades are on hold, Ferree said no services will be cut in 2012.
Ordinance 1017 is scheduled for a second reading during city council's next meeting on Nov. 22. Ferree said residents are encouraged to attend and provide comments.
If passed, the ordinance will take effect Jan. 1, 2012.