Finance Committee continues wastewater rate increase discussion
WILLMAR — The Willmar City Council’s Finance Committee is continuing the discussion begun late last year on a proposed five-year schedule of wastewater rate increases.
The increases are being recommended by financial adviser Springsted Inc. of St. Paul. The city engaged Springsted last year to review the new wastewater utility’s financial performance and to recommend rate changes necessary to meet the utility’s required cash flow needs.
City officials say those needs consist primarily of operational expenses, capital replacement and maintenance, debt service payments on loans taken out to finance the project, and cash reserve requirements.
The city’s $83 million wastewater treatment plant and conveyance system went into operation in the fall of 2010. Springsted said the new plant’s operations are about as efficient as possible.
The study, introduced to the council last November, recommends the city increase rates to have positive cash flow and net income to pay for debt service and to pay for anticipated projects such as the proposed Lakeland interceptor sewer line project and the western interceptor sewer project.
Springsted says the increases will allow the utility to restore positive net income by 2014, and allow the city to accumulate recommended minimum cash reserves by 2017. Springsted does not foresee any rate increases from 2018 to 2022.
City Administrator Charlene Stevens said staff was looking for council direction. She asked if the committee was ready Monday afternoon to proceed with increasing rates or if the committee wanted other options investigated.
“I think we have looked at many of the alternatives,’’ she said. “We have looked at operations. But it’s not really the operations that are driving the rate increase. It is the capital expenses.’’
Stevens said the council can continue to delay the increase.
“It’s just the longer we delay the rate increase … we’re looking for some direction, in terms of a timeline or timeframe so we can proceed appropriately,’’ she said.
The council would first need to introduce an ordinance and hold a public hearing before rates could be increased, said Finance Director Steve Okins. He said the council may be looking at August to implement the rates.
Committee Chairman Denis Anderson asked if staff has looked at other financing alternatives.
Stevens said all alternatives have been explored.
“There aren’t a lot of other options,’’ she said. “I wish I had better solutions for you. Unfortunately, the picture is what the picture is.’’
The “upside’’ to the picture is the city removed the old treatment plant and eliminated the plant’s odor problem. The new plant is located out of town, has better treatment and the cleaner effluent is contributing to improved water quality, Stevens noted.
Wastewater rates are based on water usage. Kathleen Aho, Springsted president, said another reason for the increase is that a major industry has reduced water consumption.
Committee member Rick Fagerlie suggested Springsted study the effect of increasing the meter charge by $1. Fagerlie said if the volume charge goes up, people will use less water.
The Municipal Utilities, which operates the water utility, has 8,575 meters. Okins said meter charges accelerate as meter sizes increase. Meter sizes range from the smallest for residential users to the largest for industrial users. Springsted proposes monthly meter charges remain unchanged through 2017.
Anderson asked Springsted and staff to study the meter alternative and other options. Staff agreed to bring the information to the May 13 committee meeting.
“Then I think we’re going to have to move forward,’’ Anderson said.