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Village Council— Village utility rates may rise

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A utility rate analysis commissioned by the Village is recommending significant increases in water and sewer rates over the next three to four years, with automatic annual rate increases thereafter. Wayne Cannon of the Ohio Rural Community Assistance Program, or RCAP, presented the report to Village Council members at their Sept. 21 work session.

The increases are needed to pay for the construction of a new water treatment plant in the Village, estimated at $5.3 million, and to address maintenance issues and inefficiencies throughout the Village’s distribution and collection systems, according to the report.

The RCAP report also points out that the Village’s past budgeting practices have not adequately put aside money for emergencies, unanticipated maintenance and future capital needs. All of these items are factored into the budget recommended by RCAP.

Despite water rate increases each year from 2011 to 2014 (ranging between 2.5 and 11.5 percent), the Village water department has been in the red for four of the past five years, the report’s figures show. The sewer department has been cash negative for three of the past five years. Sewer rates during that period have not risen.
“Rates have been too low for too long,” Cannon told Council.

Water rates could double
To meet capital needs, catch up on deferred maintenance and build up reserves, the report recommends increasing water rates by 30 percent each year over the next three years, and sewer rates by 15 percent each year over the next four years. After the stabilization year (year three for water, year four for sewer), the report recommends rates be raised 2.25 percent each year, primarily to offset inflation.

If implemented on the schedule recommended by RCAP, these increases would mean villagers could see their water bill double in three years. The report assumes a current typical monthly water cost of $30.43; by 2018, the typical Yellow Springs household would be facing a monthly water bill of $60.14, according to the report’s figures.

The picture is a little less stark for sewer costs. Over the four years of the recommended 15 percent annual increases, sewer costs would increase by more than half. The typical household paying $37.45 today would be paying $65.50 by the stabilization year of 2019.

“There’s going to be a little sticker shock,” acknowledged Council Vice President Lori Askeland in response to Cannon’s presentation.

Beyond the increase in rates, the report recommends a threefold increase in the base or minimum charge. Villagers currently pay a “readiness for service” charge of $6.80 monthly for water and $11.80 monthly for sewer. Rates based on usage are added to that minimum charge. The RCAP report recommends raising the base to $24.17 for water and $34.14 for sewer to more realistically cover fixed costs of these utility operations.

This recommended rise in the base rate is not reflected in the report’s calculations of rate increases, Village Manager Patti Bates clarified by phone this week. Council needs to discuss this and all other aspects of the report’s recommendations before making any decisions, she emphasized.

Measuring affordability
While the recommended utility cost increases are steep, Cannon told Council that rates would remain below the affordability index in each of the next 10 years covered by the report’s budget projections.

The affordability index is a measure of utility costs as a percentage of median household income. The median income in Yellow Springs is $60,707, according to the 2009–2013 American Community Survey, the demographic data source used in the report. The index assumes “typical” household water usage of 4,500 gallons per month.

Yellow Springs water rates are currently 0.6 percent of median household income, while sewer rates are currently 0.74 percent, according to the RCAP report. Under the recommended increases, the affordability index for water would jump to 1.19 percent in year three of the budget, followed by more gradual upticks. For sewer, it would hit 1.32 percent in year four, followed by gentler rises.

For both water and sewer, an affordability index of 1.5 percent is considered the minimum requirement for low-interest loan and grant eligibility, explained Cannon. This means funding agencies consider rates up to this level affordable.

Rates above 2 percent of median household income are considered “burdensome,” according to the RCAP report, while rates over 2.5 percent are considered unaffordable.

Existing rates low or high?
Cannon told Council members that Yellow Springs’ existing water and sewer rates are relatively low (the RCAP report calls them “very affordable”). But he cautioned against benchmarking Yellow Springs against other communities because of the difficulty of making true “apple-to-apple” comparisons.

Bates referenced the Oakwood report, an annual survey of water and sewer rates in communities in our area conducted by the city of Oakwood. According to that report, she said, Yellow Springs’ rates are comparatively high.

“Those numbers are meaningless,” said Cannon, noting that a community’s true utility costs, including debt on capital improvements, may not be fully factored into rates. Consumers will nonetheless pay for water and sewer expenses in other ways, he said, such as through tax assessments.

Hindsight is 20/20
“In hindsight, we could have started this process five years ago,” said Askeland, referring both to the budgeting needed to more accurately anticipate costs and the rate increases required to cover those costs.

RCAP’s rate analysis was commissioned by the Village last spring, said Bates in a phone interview. The Village paid around $16,000 for the report, she recalled, about $8,000 per utility. This is a “minimal fee” for this kind of work, she said. RCAP is a grant-funded agency whose fees are substantially offset by state and federal grants.

The study was triggered by the sewer department’s ongoing CMOM (Capacity, Management, Operations, and Maintenance) implementation, based on findings from a 2013 RCAP study, and the pending construction of a new water treatment plant. Cannon worked in collaboration with Bates, Assistant Manager Melissa Vanzant, Village Electric and Water Distribution Supervisor Johnnie Burns and other Village staff in preparing the report.

Bates said by phone that she “wasn’t surprised” by the recommended increases. “Our costs have been going up, but we haven’t been raising the rates for citizens.”

“These are legitimate conclusions,” she said after Cannon’s presentation. “In a perfect world, we would have started sooner, but it’s our responsibility to start working on this.”

Askeland voiced a similar view. “It’s not happy news, but it’s good to feel like we know where we stand.”

Council agreed to discuss the report’s budget projections and rate increase recommendations further at its budget sessions in November.

Any rate increases voted on by Council would likely go into effect on January 1, 2016, said Bates.

The RCAP report can be accessed at yso.com by clicking on the board packet link under “Council Meeting” for Sept. 21.

More detail on the RCAP report’s findings and other items of Council business will be covered in the Oct. 1 issue of the News.


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