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Council considers rate hike
- Published: December 17, 2009
At the Dec. 7 Village Council meeting, Village Manager Mark Cundiff recommended that the Village increase water rates next year in order to address water department capital needs. The last water rate increase was in 2001, and expenses have gone up since then, while some major utility users have been lost, according to Cundiff. Consequently, the water utility fund is operating at a deficit.
“Since we’re operating at a deficit, it’s difficult to make improvements,” he said. “The staff feels an adjustment is needed.”
Council members and Cundiff agreed that the first step to a rate increase is to give community members time to weigh in with their concerns. Council will probably vote on a rate adjustment at its second January meeting. Villagers are encouraged to contact Council members or Cundiff to express their preferences before then.
The utility rate discussion followed a September presentation by Woolpert Consultants, a firm the Village hired to conduct an analysis of Village water and sewer rates. Woolpert recommended that the Village increase both water and sewer rates over the next five years. However, because revenues in the sewer fund currently exceed expenses, Cundiff did not recommend increasing sewer rates, although he did urge Council to examine sewer rates on an annual basis to see if an increase is needed. Sewer rates were last raised in 2005.
Regarding water rates, Woolpert offered three alternatives for rate increases in the upcoming five-year period. In the first alternative, the Village would “front-load” the increase, with a 30 percent hike in the first year and none in the following years. This alternative would present customers with the largest “sticker shock,” according to Cundiff, but would also provide the Village with the quickest revenues to make improvements. However, the total revenues would be less. With this alternative, the typical 3,000 cubic-foot-per-quarter user would see an increase of $29 per quarter, and a typical 1,000 cubic-foot-per-quarter user would see an increase of $10 per quarter.
In the second alternative, rates would increase by about 20 percent in the first year, followed by two yearly increases of 5 percent and two years of 3 percent. With this alternative, the 3,000 cubic-foot-per-quarter customer would see an increase of $19 per quarter the first year, while the 1,000 cubic-foot-per-quarter user would pay $6 more per quarter. Over the five-year period, the larger user would see a $39 increase, and the smaller user a $13 increase.
With the third alternative, rates would increase 3 percent in each planning period. While this more gradual increase would eliminate “sticker shock,” it would also leave the Village with less revenue with which to make capital improvements, according to Cundiff. In this alternative, the larger user would pay $16 more per quarter over the entire five-year period, while the smaller user would pay $5 more per quarter.
The best alternative seems the second one, according to Cundiff, who also stated that the initial increase could be smaller than that recommended by Woolpert, perhaps 10 percent, with a slightly larger second-year increase.
“I feel we need to have large enough increases in the initial years to allow us to build up our capital improvement funds to perform capital projects as well as tapering down to a smaller annual increase so that we can maintain our fund balance,” Cundiff stated in a written report to Council.
The water system does have several capital needs, according to Cundiff, who identified one need as fixing a bottleneck in the pipes leading from the Village wellfield. The Village applied for stimulus funds to repair the problem, but didn’t receive the funds.
Council members seemed in agreement that a water rate hike is necessary.
“After eight years of no increases, we have to make up for lost time,” said Rick Walkey.
While many people are struggling in the current economy, people do have some say in how much water they use, according to Karen Wintrow.
“The economy is terrible and it’s not a good time for an increase, but it’s something that people do have a choice about,” she said.
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