Bill’s coming due; Analysis says 50% water rate hike ‘urgent and unavoidable’

RAWLINS — In the six months since a catastrophic failure of the city of Rawlins water system, area residents have endured a 5-day boil water order and a series of stiff restrictions to their water use. 
Now it seems they also may expect their water bills to go up about 50% in the near future. 
That’s the recommendation of a new report commissioned by the city to delve into how it can pay for and maintain the estimated $20 million in needed emergency repairs. 
“The bottom line literally is the ‘bottom line.’ Rates must be adjusted, most must be increased, and as soon as possible,” Carl Brown, president of GettingGreatRates.com, wrote in his water rate analysis dated Aug. 25. 
“Recovery from the source water system failure depends on it,” he continued. “Fortunately, even after the needed rate increases, your rates will still be more affordable than the commonly accepted national average.” 
When the water system failed on March 3, residents in Rawlins and Sinclair, which also is served by Rawlins, went five days without potable water. 
In the months since, the city has imposed a raft of water use restrictions. Last week, people weren’t allowed to water their lawns while the situation is monitored week-to-week. 
While increasing water rates is inevitable, Brown also recommended Rawlins change its rate structure to a cost-to-share model. 
In a nutshell, cost-to-share would mean customers using more water would be billed appropriately, and vice versa. 
“Quite simply, if a customer causes the utility to incur a cost, that customer should reimburse the utility for that cost,” Brown wrote. “Your current water rates are not structured that way, so the structure needs to change.” 
Brown also outlined how much Rawlins water users are consuming and paying and what they need to pay to cover the $20 million in unavoidable repairs and upgrades.
More importantly, he noted the city’s utility financial structure needs to do more than keep up with current needs. It needs to save for future pay-as-you-go repairs and maintenance. 
“The city produces its own water, most from a spring water source and less from wells. Recently, the spring water source failed,” Brown wrote. “During the driest months last year and again this year, the wells could not keep up with demand. The spring water source system is being replaced now and that will increase the system’s costs markedly. That cost will be the main driver of higher rates very soon.” 
On average, people in Rawlins and Sinclair use about 10,400 gallons of water per billing cycle at a cost of $5.09 per 1,000 gallons, according to the report. 
That means people with average usage would see their water bills rise from about $51 a month to about $76 a month. 
While that still would put Rawlins water users paying less than the national average, Brown recognized such a large increase at once won’t be popular. 
“Even after making the needed rate increases, your rates will still be more affordable than the commonly accepted national average,” Brown wrote. “In that context, you rates are ‘cheap,’ though I bet few of your ratepayers would think so.” 
In addition to monthly bills going up by half immediately, Brown said going forward, the city also needs to plan for at least a 4% annual increase. That could be more, depending on inflation at the time.
Brown’s analysis said the city needs “substantial improvements” to its system, primarily replacing its spring water collection system at a cost of about $20 million, which is “the main driver of rate increases.” 
It’s something that’s “urgent and unavoidable.” 
Paying for that means the city will incur a new debt load of about $421,000 a year, raising its annual payments to $1.3 million in a few years, which is about three times current debt payments. 
“Obviously, the new debt will be the main driver of higher costs,” the report said. 
While the analysis was done as a worst-case-scenario situation, it can be improved with grant funding, but most of those available programs would require rate increases to qualify. 
There is no option not to make the improvements. 

 
Rawlins has a practice of doing repairs and replacements on an as-needed basis, which is fine; however, the city needs a new rate structure that allows the city also to save ahead to pay for those when the time comes. 
In addition to higher costs for larger meters, costs of peak flow capacity also need to be built into the base charges for customers. 
“That structure also reduces the minimum charge for smaller meter customers where the most difficult-to-pay customers are concentrated,” the report said. 
Glenn Addition residents now are billed collectively for overall usage. Brown recommends the city install individual meters for those properties so they can be appropriately billed for their usage. It wasn’t clear if those users would be charged tap fees to install the meters. 
“Individually metered use will more fairly assess fixed costs to the Glenn Addition through the individual minimum charges and usage,” he wrote. 
Also, people in the area could be spurred to adjust their own water use habits if they’re charged more reflectively of their usage. 
The baseline for the report shows the city has had 28% water loss across its system before the failure, and at least half of that was likely lost through leakage and other system failures that need repair. 
 
 
This story was published on Sept. 7, 2022.