Fairmont: water rates must rise
FAIRMONT — It’s a simple economic fact: Costs go up. Even those necessities we take for granted, like water, come with a growing price tag.
This week, the Fairmont City Council heard a recommendation about the need to raise water and wastewater rates to cover current and future costs, which could increase the average monthly residential bill by $25 to $30 over the next four years.
“If you’re not doing a rate increase every year, you’re going to end up falling behind in your utility funds,” Kris Swanson of Bolton & Menk told the council.
Swanson worked with Northland Public Finance, a national municipal advisor, to develop a water and wastewater rate study, laying out operating and capital costs for the two operations and evaluating the cash flow and funding to determine future rates. The study looked at rates over the next 20 years but pinpointed the next few years.
The water and wastewater funds can be maintained with annual updates on actual costs and adjusting rates to cover those costs, Swanson said. Financially healthy funds would maintain three months of operating expenses in reserve, the following year’s debt service and cash for day-to-day acquisitions.
In order to hold a solid balance in the water fund, Swanson said water rates would have to undergo significant increases primarily over the next three years.
“Today, you’re sitting at about $40 to $42 for the average water bill for a residence. That would go up over the next three years, if the council institutes these rates, to approximately $60 per average user,” Swanson said. Commercial accounts would go from an average of $87 per month to about $130.
Two substantial projects would have a major impact on the water fund. Decommissioning the lime pond, which served as a depository from the dredge, by 2022 carries a cost of $4.8, and replacing the ground storage reservoir in 2025 would run about $5 million.
The wastewater fund also will be hit with hefty demands, but this fund is “in better shape,” Swanson said. Next year, about $2 million will be needed for new screens, and a large bio solids project coming up in a couple of years will cost about $18 million.
A wastewater rate increase would be much closer to inflationary numbers, he said. Also, the existing bond on the wastewater plant will be done in 2024, which will free up money to help build the fund for future improvements.
“Your current wastewater rate is about $35 (per month) for your average user,” Swanson said. “Over the course of the next four years, even with the improvements, going up to about $43 per average user should pay for those large improvements.” Commercial accounts would go from $52 to $88 per month, which includes an adjustment in the base rate.
These increases would put Fairmont on the higher end of the spectrum when comparing these rates to communities similar in size, but Swanson cautioned against using that as the basis for approving or denying a rate change.
“I’ve been in plenty of communities that are so proud of their low water and wastewater rates. It just means that a big hit is coming in the future,” he said. “Fairmont has not been in that category. You’ve been maintaining it, but you just have additional needs that are coming up.”
The Public Utilities Commission, which heard Swanson’s presentation in August, will finalize its budget in November and make a recommendation on any rate adjustments. The issue will come back to the council in December.