Willmar Municipal Utilities Commission recommends city approve water rate increases
Willmar Municipal Utilities Commission on Oct. 10 held a public hearing for the proposed water rate increases over the next four years, and approved sending the increases to Willmar City Council for approval.
WILLMAR — A public hearing regarding Willmar water rate increases took place Oct. 10 during the Willmar Municipal Utilities Commission, after which the commission passed a resolution to recommend that the Willmar City Council approve the increases.
During the hearing, Willmar Municipal Utilities General Manager John Harren explained how the commission got to the point of the recommended water rate increase, which is mostly due to the need to build an addition to the northeast water treatment plant.
“Several state funding resources have been pursued for several years and we have exhausted all avenues in being able to obtain any grant funding, both at state or federal level,” Harren said, noting the project was delayed a few years ago due as a small amount of capacity remained in the current plant at that time. “Because of the residential and industrial growth, the capacity needs of the community are growing and the project can no longer be delayed.”
A water rate study was completed and accepted by the commission on July 25, based on financing the project with bonds. The study suggested water rate increases of 20% each year in 2023, 2024 and 2025, followed by an increase of 6% in 2026.
”When the bids for the project came in $3.5 million below the engineer’s estimate, a new financial plan model was created using in-house funding versus with bonds,” Harren continued. “The commission supported the new concept to finance the ($16.79 million)project, ultimately saving approximately $3.5 million in interest by utilizing $5 million from electric reserves funds.”
This led to modified rates increase of 20% in 2023, 5% in 2024, 4% in 2025 and 3% in 2026.
“As recommended in the rate study, we are also proposing to add a multi-unit rate to capture multi-unit dwellings and apartment buildings to keep rates equitable within other rate classes,” Harren said, adding that Willmar Municipal Utilities is also adding the month of May to summer rates. He noted May can typically be a high watering month and this will help with water conservation efforts.
Harren also explained how the increased rates will impact customers. Residential customers who use an average of 720 cubic feet per month currently pay about $32 per month and the new rates will have them paying approximately $11 additional each month at the end of the four years of increases.
Commercial customers who use approximately 3,690 cubic feet per month currently pay $99.68. The new rates will have them paying an additional $35 per month at the end of the four years of increases.
Small industrial customers use an average of 110,000 cubic feet per month and currently pay $1,662 per month. They will be paying an additional $550 per month at the end of the four years of increases.
Large industrial customers use approximately 6 million cubic feet per month and currently pay about $80,000 per month. They will be paying an additional $28,000 per month at the end of the four years of increases.
Commissioner Shawn Mueske noted that Willmar water rates, when compared with Minnesota cities of similar size, have been low, and asked how this would affect their ranking.
Harren had just received a rate comparison report that showed water rates ranged from a low of $11 per month in Albertville to a high of $83 per month in Fairmont.
“We are kind of right in the middle at $33.93 when you look at the table,” he said, noting that over four years, that would bump them up a few notches on the table. “But, that would make the assumption that nobody has any rate increases — and that’s an unrealistic expectation. I would say over the four years, with our increase that we are looking at and with inflation that’s out there, we are going to remain relatively close to the middle ... in comparison to the communities that are part of this survey.”
Mueske also asked if there was a possibility to get funding retroactively from the state if it were to go into a special session.
Harren said he had spoken recently with Rep. Dave Baker, R-Willmar, and they "talked through what bonding at this point in our process would potentially mean. We anticipate that the cost to accept that bond will be roughly $2 million from our previous discussions. That was prior to going to bid," Harren said.
"Now, after we have a contractor and if we are awarded some bonding dollars, we are going to have to negotiate those increased costs that are added by accepting those bonding dollars to the project. How many dollars do we need to make it advantageous for us to accept? We don’t know that, but if we accept any dollars, we would have to work through that with the contractor.”