07-Sep-2010

By: Mark Schlachtenhaufen The Edmond Sun

EDMOND — City Council members will soon vote on water and wastewater rate increases needed to complete planned capital improvements in Edmond’s water system.

On Sept. 27, during the City Council’s next regularly scheduled meeting, members are expected to vote on a resolution to increase water and wastewater rates for five years, starting in November.

During Tuesday’s workshop, City Council members heard from Dan Jackson, managing director and chief executive of economists.com, the economic and financial consultant that conducted a $49,100 water and wastewater rate study and financial forecast for Edmond.

Jackson said capital improvements are investments in the infrastructure of a city’s system, which will provide better quality of service to rate payers and attract economic development.

“Businesses, homeowners aren’t going to come to communities that have poor water and sewer service,” he said. “They want the better quality of service, but that quality of service comes at a cost.”

Jackson said nationally the average utility has been increasing rates 5 percent to 6 percent per year, a trend that is expected to continue. Increases in inflation, insurance costs, electricity and chemicals contribute to those increases, he said.

A utility can have low rates or a high quality of service but not both, Jackson said. Some cities have kept rates low and delayed capital investment in their systems, which fall apart, he said.

“Higher rates are simply an unavoidable and unfortunate fact of life in the United States,” he said.

The study compared rates charged by a number of Oklahoma cities.

In Edmond, the current monthly bill for 10,000 gallons of water and 5,000 gallons of wastewater is $54.87, according to the study. Of that, $41.12 is water, and $13.75 is wastewater.

Jackson said Edmond is within $3-$4 dollars of the vast majority of cities in the area.

Customers in Edmond pay more than customers in Norman, Del City, Moore, Oklahoma City and Midwest City, about the same as customers in Stillwater and less than customers in Nichols Hills.

Edmond water resources superintendent Fred Rice said unlike some other cities, Edmond’s utility rates reflect a stand-alone entity, which incurs expenses that include administrative costs. Many other cities subsidize some or all of those costs, Rice said.

“So when you look at the rates it’s important to know that sometimes we’re not using a yardstick with the same length,” he said.

The study offered two rate plan scenarios.

Scenario one included full funding of $163.8 million in needed capital improvement projects including $102 million for a raw water line. Jackson said the costs are comparable to other cities the size of Edmond. The study projects $122 million in net debt to fully fund this scenario.

Under this scenario, to fully fund the plan the study recommends that the monthly retail charge for 5,000 gallons of water increase from $20.37 to $22.82 effective in November. The rate would increase incrementally to $37.39 in November 2019.

The rate for 10,000 gallons of water would increase from $41.12 to $74.45 in November 2019.

In scenario two, which excludes the raw water line project, and contains a total of $61.3 million in capital improvement projects, the study projects $25 million in debt.

Under this scenario, to fully fund the plan the study recommends that the monthly retail rate for 5,000 gallons of water increase from $20.37 to $22.33 in November. The rate would increase incrementally to $25.44 in November 2014 and remain unchanged in November 2019.

The rate for 10,000 gallons would increase from $41.12 to $51.04 in November 2014 and remain unchanged in November 2019.

City Manager Larry Stevens said his staff recommends the option which involves the largest capital expenditures.

“If we don’t fund major capital issues through our utility rates then how do we fund them?” Stevens said. “There are some other ways. I don’t think they’re very palatable, what this community would be in line with.”

In June 2009, the city requested proposals for the study and received eight, Rice said. Economists.com was chosen from that list. City staff are pleased with the results, including the report, Rice said.

A 50-year water supply plan was developed by a committee and consulting firm in 2008-09, and the final report was issued in May 2009. Unresolved issues that could affect city plans include what happens with Sardis Lake.

Edmond customers had told the city that water system improvements should be a main concern.