Utilities under water
Stumpff presents rate consultant’s report to Newcastle City Council
Mary Stroka
NLJ Reporter
Water, sewer and garbage rates will need to increase in the city of Newcastle, according to an analysis Public Works Supervisor Greg Stumpff presented on Sept. 3.
The proposed rate increases are based on the 173-page rate analysis report that Carl Brown, the president of GettingGreatRates.com, completed for the city, Stumpff said. The City Council now needs to decide whether to follow the recommendations, which Stumpff advised members to do. The rates would increase but not as much as they did the last time, he said.
“It is basically a restructure of our water, sewer and garbage rates, rather than just adjusting rates,” Stumpff said.
The main reasons for raising rates are to cover the costs of system improvements, in addition to operating and related costs. An increase would also help build reserves over the next decade, Brown said in the report. Because the customer base for the city is “growing slowly if at all,” the existing customer base must pay for cost increases related to inflation — but it is difficult to spell out exactly what that will mean for each resident or household.
“Everyone wants to know what the bottom line of the rates is,” Stumpff said. “This is a very difficult subject to talk about because it’s not just one thing. There’s multiple things involved in this, including the end of the life of our infrastructure. Because of past events, this council is forced to make difficult decisions that affect the community.”
Stumpff said the city built its asset management around the budget, and the city budgeted “basically” $46 million in improvements, not including equipment replacements. The only way to increase the budget in order to add projects is to increase the rates — or acquire more grant funding.
He said the city needs to re-evaluate the plan over time and to plan the rate increases in small increments, such as the 4% Brown recommended unless the city sees “a major change.”
Stumpff indicated that if there are “major changes,” the city can go between models 3 and 4 that were presented to the council. Models 1 and 2 were draft models, and the difference between models 3 and 4, according to the report, is that model 4 assumes a 50% rise in the cost of capital improvements over those currently expected. (See Sidebar.)
“We tried to plan as much as we possibly could of what we need to get done. The problem is, there’s more pipe out there that needs to be replaced than we have time for in the next 10 years,” Stumpff said.
He is also trying to develop a management plan for the streets.
“The problem is, we neglected them for so many years,” he said. “We didn’t do the maintenance on them. We did do the preventative maintenance. The chip seals, the crack seals got moisture underneath them. Our soils do not release moisture worth a dang.”
No grant money is available for streets, such as the Rodeo and Sheridan streets, because grant funding “gets used up” by the state and “somewhat” reaches the county but never on the local level, he said.
As a result, only tax dollars or capital construction loan funding from the Office of State Lands and Investments would be available. The loan is limited to 4% of the city’s taxable base. The taxable base is $27 million, and 4% of that would be $1.2 million. The interest on the loan is 3.92%. The State Lands Investment Board could also approve up to an additional 2.5%.
Stumpff said that, while he is also trying to build “basically a reserve account” for streets, budget limitations make that difficult. There is also the cost of the road work. Wood Street did not make the project list because there’s “a significant amount of road work” that needs to be done on that street and the city has not yet done a geotechnical report to assess what work is required for the street.
Brown has completed more than 385 rate analyses as a consultant since 2005, according to the report. He did similar work for the Missouri Department of Natural Resources from 1991 to 2005.
Closer look at the rate changes
Carl Brown, president of GettingGreatRates.com, recommends in the report that the city end its 2,000 gallons per month use allowances for water and sewer. He noted that capital improvements will impact each utility’s rates.
A residential customer earning the citywide median household income level would pay 0.56%, up from 0.39%, of their monthly household income for monthly water bills. For residential in-city customers who receive one 95-gallon sanitation pickup per week, the cost for garbage pickup would first rise from 0.37% to 0.63% of monthly household income before slowly decreasing.
Water
“For cost-based rates, no water should be given away,” he said. “All volume costs money to produce, so it should be paid for in proportion to the nature of costs incurred to produce it. For customers using very high volumes, eliminating the allowance has nearly no effect on the total water bill.”
He also recommends simplifying the rate structure by assessing a level unit charge instead of having unit charge rates decrease as use increases. According to Brown, out-of-city rates should be 50% higher for individual (as opposed to wholesale) customers. Rates will need to be raised to match budget inflation of 4% each year.
According to model 3, charges per 1,000 gallons should be $4.79 for in-city customers and $7.19 for out-of-city customers, the report said. However, Stumpff noted, rates have changed since the test year.
Newcastle Clerk-Treasurer Stacy Haggerty said in a follow-up email that the base rate for water in the city limits is $19.50, which includes 2,000 gallons. After 2,000 gallons are reached, the fee is $4.60 per 1,000 gallons. Outside of city limits, there is a flat charge of $11 per 1,000 gallons.
Sewer
Total reserves for sewer were strong, according to Brown. The unit charge per 1,000 gallons would be $3.88 per 1,000 gallons.
Haggerty said the base rate for sewer service in the city is $21.53, which includes 2,000 gallons. After that, the rate is $7 per 1,000 gallons. Outside of city limits, sewer service costs $27.20, with an allowance of up to 2,000 gallons. Any additional service is $11 per 1,000 gallons.
Sanitation
Even though “in-house” operating costs will decrease for the city once it no longer operates a landfill, the city will need to borrow to afford to close the landfill, adding another $125,000 in a couple of years. The city will be paying tipping fees at the regional landfill, “assumed to be $120 per ton,” instead of collecting tipping fees from people bringing trash to its own landfill. So overall, garbage costs will rise, according to the report, based on budget data Brown received.
Get more information
The city will hold two town hall meetings about the analysis, Newcastle Clerk-Treasurer Stacy Haggerty told the News Letter Journal in a follow-up email. The events will take place at the Weston County Senior Center, 627 Pine St. in Newcastle, at 6 p.m. on Sept. 24 and at 6 p.m. on Oct. 15.
NLJ has posted a video on its YouTube channel of Public Works Supervisor Greg Stumpff’s presentation, and the city has posted the report on its website, at newcastlewyoming.com/public-works.