(Bruce Baker/McCook Daily Gazette)
"The request for a 3 percent increase in water rates is driven by inflation. The water treatment plant uses salt to regenerate the vessels. The price of salt has stayed fairly steady but the transportation cost to get the salt to McCook has not, due to the price of fuel. We have also seen any increase in the cost of electricity which has caused our pumping costs to go up," said Dutcher.
Dutcher explained that the water system requires a significant amount of electricity to function and even a minimal rate increase can have a significant impact on that department's budget. "To get water to the customers it is pumped several times, first by the nine wells which draw the water from the ground and send it to the plant for treatment. Once treated it is stored in a 4-million-gallon reservoir and from there it is pumped to the distribution system (water mains) and the east water tower. This is accomplished by the High Service Booster station located at the plant. The HSB uses three pumps that will produce up to 3,200 gpm each. The pumps are powered by 250 horsepower motors. Water is also pumped from the distribution system by the West Fifth booster station, again with three pumps each capable of 1,000 gpm and powered by 40 hp motors. If you add all of this up, the wells, booster stations and various transfer pumps located through the plant you get a total of right at 1,250 horsepower. It takes electricity to "feed" all of those horses," said Dutcher.
For fiscal year 2010 the water department spent $92,958 on pumping power, in the form of electricity, for the entire year. According to Dutcher, 2011 current usage looks to be on track to spend $125,000. "So far this fiscal year we have already spent $91,715. During the summer months water spends about $15,000 per month on pumping power and we have August and September to go, both are historically high use months. For fiscal year 2012, water has budgeted $133,000, this is up $10,000 over the 2011 budget and $40,000 over the 2010 actual numbers," said Dutcher.
Dutcher also identified increases to state required laboratory tests as contributors. He said that in 2008, $8,306 was spent on the tests, that number grew to $14,557 by 2010. "This is the money that we pay to do the testing that is required by the Nebraska Department of Health and Human Service and the US EPA," said Dutcher.
The request for a 5 percent sewer rate increase is driven by many of the same factors, according to Dutcher. "The cost of pumping power, lab costs, insurance, wages and on down the line have increased. The difference between water requesting 3 percent and sewer requesting 5 percent is the total budget. Water has total sales of $1.7 million per year and sewer has total sales of $1.2 million. In fiscal year 2011 sewer will pay $503,814 in loan payments, or about 42 percent of the total sales. Not much left for capital improvements and increased costs. Water on the other hand will pay $597,608 in loan payments or 30% of total sales. Granted water has some large expenses, electricity and salt being two, but water has been able to set aside money for capital improvements and the replacement of water treatment plant equipment. Sewer does not have funds to do so, thus the request for a 5 percent rate increase," said Dutcher.
Dutcher explained that the sewer department needs to make some capital improvements in the coming years. "The sewer plant for the most part was built in 1978 and much of the equipment, while very well maintained by the waste water crew, is nearing the end of its life. The heat exchanger that is used to heat sludge was refurbished in 2009 and at the time it was felt that the work that was done would only extend its life for maybe five years. The rotating biological contactors are 1978 models and have turned continually since then. The bearings and shafts have been rebuilt but the main parts of the contactors themselves are original. We have 15 RBC with a replacement cost or over $100,000 each. The clarifiers need to have the sweep arms and drives rebuilt; we did one this year it cost $100,000, we have 3 more to do. So yes capital improvements are a big factor," said Dutcher.
"The last time water rates were increased was Oct. 1, 2007. The amount then was $1.50 on the base charge that amounted to $18 per year. The current proposed 3 percent increase will amount to about $13.14 for an average residential customer."
Dutcher's comments were echoed by Jenny Blankenship, with Public Financial Management, during last week's city council meeting. Blankenship spoke via conference call to council members and said that the rate increases were at a minimal level and lower than what was projected previously.
Blankenship drafted the "financial and capital cashflow analyses" of the city's water and sewer utility funds, which was the report that ultimately led to the recommendation for city staff to request a rate increase. She reviewed the report with councilors during the meeting and explained that the water rate increase had been previously projected to be 4 percent, but with usage increasing they were able to reduce it to 3 percent. "We need revenues to go up at the same rate as expenses," said Blankenship who added that the water rate hadn't been increased in three years but expenses had been growing between 6.5 and 10 percent.
The proposed water and sewer rate increases of 3 and 5 percent, are projected to amount to an average of $14 annually on residential sewer bills and an average of $13 annually on residential water bills. They were approved on their first of three required readings during the August 15 city council meeting. If the proposed increases are approved during their second and third readings, they will go into effect Oct. 1, 2011. The second reading is scheduled for September 6, with the third and final reading scheduled for the September 19 meeting.