Small towns, bigger water bills
- Published: May 3, 2012
This is the seventh in a series of articles examining issues regarding local water. • Click here to view all the articles the series
The price we pay for the water that flows from our taps is determined by a variety of factors, including a bit of guesswork. Professionals who recommend water rates to municipalities take into account the ongoing costs of maintaining the water system, inflation, needed improvements and the historic amount of water used, according to local engineer John Eastman, an occasional consultant for the Village. Eastman’s firm, LJB Engineering, has provided water rate analyses for a variety of communities.
Along with the other factors, water rates are also linked to anticipated changes in the community, such as the loss or arrival of companies that are big water users.
That’s where the guesswork comes in.
“A lot of that is unknown,” Eastman said of anticipating community changes. “So we tend to stay conservative, and focus on what’s known.”
Most municipalities, including Yellow Springs, aim to operate self-sustaining water systems, which fund ongoing operations, along with needed upgrades, from the revenue stream created by the rates themselves. In recent interviews, leaders in several area communities said their goal is to charge only that amount and no more, so as to keep rates as low as possible. But the trick is to charge rates high enough to cover operations and needed improvements but not too high for citizens’ pocketbooks. And sometimes a community doesn’t charge enough.
For instance, Greenville has relatively low water rates compared to other area communities.
“Our costs have exceeded our income for years,” said Greenville Water Plant Supervisor Gary Evans last week. “We’ve been holding flat for so long there’s no way to sustain it. There’s a lot of needed improvements.”
On the job for just a year, Evans found his first priority was to analyze the water system and make needed rate changes. And recently, the community’s City Council approved his recommendation of a 13 percent rate hike, which he considers the first, but possibly not the last, rate hike necessary to sustain a healthy system.
That rate hike will likely kick Greenville up the ladder on the annual survey of area municipal water rates compiled annually by the City of Oakwood. Currently, the town is one of the few small communities on the low end of the survey, because, according to Eastman, it’s simply more expensive when a town must spread the cost of operating a water system over a smaller number of people. And the towns with the lowest water rates are some of the largest municipalities, including Springfield, Oakwood, Englewood, Hamilton and Waynesville. Most of the smallest communities are clustered at the high end of the group, including Farmersville, West Milton, New Lebanon, Lewisburg and Cedarville. All of those communities have water rates that are higher than Yellow Springs, which ranks 21st most expensive out of the 66 communities surveyed.
People often overlook the challenges involved in providing water to a small community when they see their town is at the high end of the list, Eastman said.
“People look at the list and say, what’s wrong that the cost is this high? But we need to move it from the ‘what’s wrong’ category to, given the size of the community and the age of equipment, ‘what’s best for the community?’” Eastman said. “I’ve seen nothing that shows Yellow Springs has been inefficient. Yellow Springs is doing a good job with limited resources.”
In the 2012 Oakwood survey, rates are based on 22,500 gallons of water used in a three-month period — 7,500 gallons is considered the average amount used monthly. The lowest rate listed, from Fairfield, is $54.71 per 22,500 gallons, and the highest rate, Miami County, is $185.04, with a mean rate of $100.54. The quarterly rate for 7,500 gallons monthly in Yellow Springs is $112.80, based on the local rate in March, 2012.
That rate is increasing this month by 5 percent, the third of five annual water rate hikes passed by Village Council in 2010. The first two hikes, in 2010 and 2011, were 10 percent each, followed by a 5 percent hike this year, and 3 percent hikes in 2013 and 2014. The hikes reflect the recommendation of a 2009 water rate analysis by Woolpert Associates that the Village raise its rates significantly, as they had not been raised since 2001, and the water fund was operating at a deficit, with no money for needed improvements. Woolpert at the time offered several options for the hike, including initial 20 percent increases in the first two years, to raise revenues quickly. However, Council chose a more gradual path for the hikes that it hoped would address the deficit and still not overstretch villagers.
“We thought we could get the fund in reasonable shape while still meeting the needs of citizens,” Council President Judith Hempfling said recently of the decision.
It’s not clear why the water fund was allowed to go so long without rate increases, Hempfling said, stating that former Manager Mark Cundiff, who began working for the Village in 2008, brought the issue to Council. Between 2001 and 2008, the Village had four managers, a high rate of turnover that may be linked to the oversight.
The 2009 rate hikes did not affect the base rate of $6.80 per month that villagers pay, but did affect the rate’s second component, based on consumption. That rate went up in 2010 about $2.60 per month for an average user, or about $30 per year, and in the second year, the increase per average family, combined with the previous year, totaled about $60. The 2012 hike will add about $15 per year on average, and the 2013 and 2014 increases will add about $10, so that the total amount of the increase over five years for an average user will be about $100. At the time of the rate hike decision, Council members said they tied the rate increase to the consumption component of the water bill so that villagers had some control over the amount they paid.
At the time of the rate hike, Cundiff encouraged Council to put the largest increases at the front end in order to address needed capital projects. The Village’s water system — both its water plant and distribution system — are old, and need significant maintenance, according to Eastman. Cundiff hoped that the rate increase would allow the Village to make needed water line repairs, such as one to repair a significant bottleneck on the south end of town.
The increased revenues were also anticipated to help the Village address its upcoming need either to rebuild the 50-year-old water plant, revamp it, or choose instead to purchase water from another municipality. That choice has been postponed until a new Village manager is hired. The next News article in this series will address Village options regarding whether to keep its own water system or buy from another town.
While Council had hoped the increased water rates would create a surplus, the rate hikes may not be doing the job. In a January 2012 review of the Village water fund, Council members noted that the fund, even with the recent increases, is projected to dip back into the red by 2014. At a Council discussion of needed capital projects, the Xenia Avenue bottleneck project was estimated to cost about $550,000 and an upgrade to water lines on Railroad Street was estimated at $80,000. The amount needed either to revamp or rebuild the water plant was estimated at $2 million in the 2012 Village budget for capital projects, although those amounts are very rough estimates, Interim Village Manager Laura Curliss stated last week.
“We have to look at the water rates again,” Hempfling said in a recent interview. “It doesn’t seem to be the case that the increase we made is doing what we thought it would do.”
Curliss declined to discuss Village water rates for this article. However, she stated she will be bringing the issue to Council at its May 6 meeting.
Small town challenges
In recent interviews, leaders in several small area towns talked about the challenges they face providing water for their residents at a reasonable rate.
Lewisburg, with a population of 1,700, is the 18th most expensive community in the Oakwood survey, with average three-month rates of $116.70, slightly more expensive than those in Yellow Springs. Once a commuter town for those who worked at General Motors in Dayton, the village has suffered population loss, and thus higher water rates, since General Motors shut down, according to Director of Utilities Rick Prater.
“I think it’s the small size,” he said, regarding the town’s relatively high water rates. The town continues to operate its own water plant.
When a town loses population, its water system still costs pretty much the same to operate, according to Eastman, so the cost is simply spread over fewer people. In Lewisburg, town leaders try to keep costs down by doing most of the maintenance work themselves.
“Anywhere we can stay local, we stay local,” Prater said.
The loss of local industry is also a factor that hits small towns hard in a variety of ways, including the potential for increased water rates. The loss of Corning Glass company was a major blow to Greenville, Evans said. And the loss of several small industries has been challenging for municipal leaders of Indian Hill near Cincinnati, according to City Manager Michael Burns. That city, which serves about 5,500 accounts, has kept costs relatively low by selling water to even smaller municipalities, he said. The town also does its best to keep up with upgrades to its water plant, which was constructed in 1949.
“It’s undergone substantial renovation over the years,” he said.
In Yellow Springs, the loss of Vernay Laboratories in 2003 was followed within a few years by a 5 percent decline in water revenues, according to a chart provided by Village Finance Director Sharon Potter. And the 2008 closing of Antioch College was followed within two years by an additional loss of 4 percent of revenues, so that the rate hike in 2010 was preceded by an almost 10 percent decline in water fund revenues.
Currently, the largest water users in Yellow Springs are Morris Bean and Yellow Springs High School, according to Finance Director Potter. Other large users are Friends Care Community, the Highlander Laundry, YSI and the Winds Cafe. Currently, the Village has 1,768 water customers.
Some small towns have opted to purchase water from larger municipalities, rather than keep pouring money into aging plants. However, some have found this option not as economical as hoped. Brookville, which has water rates that are higher than Yellow Springs, purchases water from Dayton, having decided several decades ago that the town couldn’t afford EPA-mandated upgrades to its plant. But Dayton keeps increasing its rates, including a recent hike of 4 percent, an increase that will be passed on to consumers.
“Our hands are tied,” said Sonja Keaton, the town’s finance director, of the rate hike.
In West Milton, where residents pay about $72 more per year for water than in Yellow Springs, the village has been purchasing water from Troy since 2003, when it faced extensive water plant upgrades and chose to purchase water instead. However, the rates have risen several times since then because West Milton not only pays a fee to Troy for the water, but 10 percent more to Miami County, which provides a water main to transport the water, according to Municipal Manager Matt Kline. And West Milton still has to add more chlorine to the water it receives.
“Our rates are so much higher now,” he said.
The high water rates have been a factor in keeping some potential businesses from town, according to Kline, who is new on the job.
“It would be nice to have more control” of the water, he said. “If you have a good solid source you can run a plant economically. You can be more competitive” in luring new business.
However, Kline also said he has seen instances where buying water from a larger municipality has proved a good choice, such as is the case in Mason, which purchases low-cost and good-quality Cincinnati water and has one of the lowest water rates in the Oakwood survey.
Unusual among the small municipalities is Union, pop. 6,000, which has very low water rates, the third lowest in the Oakwood survey at $55.25 per three months average. The town’s low water cost may be linked to its manager, John Applegate, who has worked for the town for almost 48 years, having started his employment with the town in high school as a meter reader and moving up through the ranks, so that he’s familiar with all aspects of the water plant operation. While the community considered purchasing water from Englewood at one point, Applegate is grateful they didn’t, as they would have had to double their rates.
“We said we’d do it ourselves,” he said.
Applegate credits his staff with the town’s relatively low utilities costs. The municipal staff is quite small — 20 fulltime workers — and everyone is cross-trained to do a variety of jobs, Applegate said. For instance, he can run a snow plow in a storm, or help to fix a pipe if needed.
“We don’t have departments,” he said. “If we have a main break, and if someone’s sick, I’ll go out and repair it.”
And he’s proud to have maintained local control of the town’s water.
“I hope you hang on to your water plant,” he said. “You can control your destiny when you control your water.”
All in all, according to West Milton Manager Kline, who has worked for six Ohio municipalities, each community must consider its own specific situation in determining how to provide water in the most economical and efficient way to its residents. How close is the town to larger water providers, and how expensive would transporting that water be? How important is it to the municipality to maintain local control over its water?
““For Mason, buying was the best move,” he said, due to that town’s proximity to Cincinnati. “For each community, it depends on their unique factors.”