by Steve Peterson
Brad Potter of I & S Group, Storm Lake, presented Hawarden’s Water and Wastewater Cost of Service Study to Hawarden councilors at their March 27 meeting.
Potter told councilors the problem facing the city is when Iowa Lamb plant closed, it was the city’s major commercial user of water and wastewater.
“Water rates will need to be increased to cover current system expenses,” is the recommendation of the I & S Group study.
Currently, Hawarden’s water rates are:
Base charge (no water), $8.64 with the first 2,000 Cubic Feet (CF) per 100 CF at $1.19; the next 2,000 CF per 100 CF is $1; and all over 4,000 CF per 100 CF is $0.93.
By increasing the base charge to $11; the first 2,000 CF to $1.45; the next 2,000 CF to $1.20; and all over 4,000 CF to $1.10, it would generate $355,770 annually.
A water rate should be established that will generate enough revenue to pay the expenses budgeted without the need to transfer in from other sources, according to the study. Based on that, a total of $355,332 must be generated from the rates. Revenue from rates budgeted for the current fiscal year is approximately $285,500, leaving about $70,000 short to balance the budget.
In a letter dated March 21, the I & S Group proposed water rate increases:
• 200 CF (1,500 gallons) is currently $11.02 per water bill and they recommend increasing $2.88 to $13.90.
• 500 CF (3,750 gallons) costs $14.59 and it’s proposed to raise $3.66 to $18.25 a month.
• 1,000 CF (7,500 gallons) costs $20.54 now and will have an increase of $4.96, bringing it to a total of $25.50 per month.
Normal residential use is 4,000 – 6,000 gallons per month and single family units may be less than 267 CF, 2,000 gallons per month.
Councilor Tim Kurth asked if it would be better to have rates that encouraged conservation of water.
“You should also look at the revenue being generated,” said Potter.
“In order to maintain a positive cash flow for the next three to five years, it will be necessary to increase revenue by about $70,000 per year or about 25 percent,” the study stated. “After the proposed increase, Hawarden’s rates will still be within the lowest in the area. The city will be comparable to other area communities after the rate increases.”
Potter informed the council residential users account for $205,626 of revenue or 75.49 percent and 59 percent of use; commercial users brought in $37,808.74, which is 13.88 percent of revenue and used 21.72 percent; industrial users’ revenue was $19,252.20 or 7.07 percent with 13.78 percent of use; interdepartmental (city entities’ uses), $4,407.07 with 1.62 percent of revenue and 2 percent of use; and public authority (public entities such as schools, post office and county offices), $5,311.23 of revenue, which is 1.95 percent and have 3.49 percent of use.
“Expenses have been projected on a 3 to 5 percent increase for many of the items with some items projected to remain the same or increase slightly at the indicated rate,” according to the report. “Utility costs are expected to rise uniformly over the period.”
The following projects are expected in the 2013-2014 fiscal year: Water Scada System, $135,000; new well site development, $50,000; repaint 750,000-gallon ground storage tank, $230,000; cap two existing wells, $25,000 for a total of $340,000.
“It is recommended that a sewer rate should be established that will generate enough revenue to pay the expenses in the budget without the need to transfer from other sources”, according to the report. “A total of $417,917 must be generated from the rates. Projected revenue from the rates during the current fiscal year is about $251,750, creating a budget shortfall of approximately $166,000.”
Current wastewater/sewer rates in Hawarden are:
Base charge (no water), $14; first 1,200 CF per 100 CF, $0.50; next 2,500 per 100 CF, $0.45; next 7,500 per 100 CF, $0.40 and all over 11,200 CF per 100 CF, $0.25.
A possible increase for wastewater rates: Base charge (no water), $17.60; first 1,200 CF per 100 CF, $1.50; next 2,500 per 100 CF, $1.25; next 7,500 per 100 CF, $1 and all over 11,200 CF per 100 CF, $0.50.
It is predicted the above possible increase would generate $416,872 annually.
In a separate letter, the I & S Group proposed the following:
• 200 CF (1,500 gallons of wastewater) is currently $15 per water bill. They recommend increasing it $5.60 to $20.60;
• 500 CF (3,750 gallons) is now $16.50 and with an $8.60 increase, it would be $25.10;
• 1,000 CF (7,500 gallons) is $19 and with a $13.60 increase, it will be $32.60; and
• 2,000 CF (14,960 gallons) costs $23.60 but with a $22 increase, it will cost $45.60 per month.
In the near future, there are two wastewater projects that are required: reline frog pond sewers at an anticipated cost of $34,000 and install new building roofs, $50,00 for a total projects’ cost of $184,000.
Currently city officials use wastewater system funds to pay for stormwater system improvements and maintenance. It may be advantageous for city officials to consider implementing a stormwater utility fee in the future.
“The revenue is down from the years when the major industrial user, Iowa Lamb, generated $30,000 for the sewer department until it closed,” the report stated.
“The city will have to raise both water and wastewater rates to meet current and future budget levels.
“Rates could be increased substantially or the city can consider raising rates over a three-year period.
“Rates should be reviewed on an annual basis to determine if rate increases are providing the anticipated revenue,” said the I&S Group’s report. However, the letter recommended, “if rates are increased, revenue streams should be reviewed within six months and on an annual basis thereafter to determine if intended target goals are being met.”