Willmar, Minn., Council sets June 17 hearing on wastewater rate hikes
WILLMAR -- The Willmar City Council is proposing wastewater rate increases that would rely less on water consumption and more on fixed charges to pay debt service, operations and maintenance on the 2½-year-old, $83 million wastewater treatment facility and on the western interceptor sewer project.
The council discussed the proposed increases Monday night and voted to hold a hearing June 17 to take public comments and voted to propose a $10-per-month increase in the meter charge to help meet revenue needs.
The $10 increase will shift more of the rate increase onto the water meter charge and less on water consumption charges. Wastewater rates are based on water consumption, but consumption has declined significantly due to residential and industrial conservation, and revenues have not hit targeted levels, according to financial analysis.
Based on 2012 preliminary figures, financial consultant Springsted Inc. of St. Paul says revenues are estimated to be about $1.7 million lower than those targeted for 2012 in a 2008 study.
As a result, the fund balance has been drawn down and the city requested a review of rates and charges. Kathleen Aho, Springsted president, recommended the city have funds in reserve to cover three months of operating expenses and 12 months of debt service.
Because consumption has decreased, the council's Finance Committee asked Springsted in May to explore the use of a higher meter charge accompanied by a decrease in consumption charges as a more stable source of revenue.
Based on the calculation that each dollar increase in the meter charge generates about $100,000, Springsted said a $5 increase would raise about $500,000 and a $10 increase would raise an estimated $1 million.
The increases are needed to resolve funding needs by 2017 and to keep the system in balance once the increases are ramped up, according to Aho.
"We didn't want the city to generate more cash than expenditures. We wanted to get to a point where rates were leveled out. We wanted to use reasonable assumptions regarding expenses and growth in the number of users, moderate the impact of changes in consumption by increasing the fixed charge, and we used the meter fee,'' Aho said.
"By the time we get out to 2017, you have refilled the reserves and we looked out into 2020-2022 to make sure you were staying in balance and not generating a lot of excess cash, but staying at the recommended level,'' she said.
Before the effect of a meter charge increase was studied, the residential meter charge was to have remained steady at $18 per month through 2017, and the average monthly bill would have gone up from $42 in 2012 to $56 in 2017.
Under the $10 scenario, the meter charge will increase from $18 per month in 2012 to $28 per month in September this year and remain steady thereafter and the average monthly residential bill would increase from $54 in 2013 to $58 in 2017.
Aho did not recommend either the $5 or $10 scenario. Finance Committee Chairman Denis Anderson made the motion, seconded by Rick Fagerlie, to set the hearing date and to propose the $10 meter increase.
"It gives us a better fixed amount of income coming,'' Anderson said.