MONROE - The City of Monroe Common Council in about three months will have an opportunity to consider the water rate increase proposed by the Wisconsin Public Service Commission, according to the city's financial advisors, Greg Johnson and Dave Wagner of Ehlers, Inc., Tuesday, Aug. 20.
Ehlers prepared the city's full rate case application to the PSC asking for an average increase of 17 percent in water rates, based on the water utility's 2013 financial numbers, and submitted on Aug. 1.
Wagner said submitting the request after Aug. 1 would have required factoring in another year of inflation for operating expenses, which likely would have resulted in a higher rate.
The 17 percent increase is not across the board for every water user, and the Council does not have to raise the rate to the maximum recommended by the PSC, which could recommend an even higher rate than requested, Wagner said.
A typical customer paying $36 quarterly for water could see another $6 added to their bill, he added. Water billings are calculated on the meter size plus the volume of water used. The water rate does not hit the sewer bill portion of the bill. That billing is figured separately and not dictated by the PSC.
The last water rate increase was in 2010 when the council approved a 16.1 percent increase, foregoing the 29 percent increase recommended by the PSC.
If the utility continued under its current rate, the utility would begin to see net losses in operations and asset value by 2016.
The utility has been losing about half its operation revenue surplus each year since 2010, dropping from $409,000 to a projected $74,000 in 2014.
Depreciation alone will eat up $24,000 more of the 2014 operating expense budget than it did in 2013. Repairs and maintenance are expected to increase $13,000, and labor and benefits, $8,000.
Another full rate increase may be needed in 2016.
Wagner said the current water rates have allowed the water utility's revenue for capital improvements and construction to fall below the PSC-recommended level of 5.25-5.75 percent of the infrastructure value, called the "return on rate base."
The utility's return on rate base is at 2.26 percent for 2013 and is expected to be 1.18 percent next year, without the increase.
The 2014 water bill rate increase will bring that return rate back to 4.19 percent for 2014, but it drops to 2.85 in 2015. A 2016 rate increase would once again result in a 4.78 percent return rate.
Ehlers recommended forecast scenario through 2026, including normal inflation, can be a working document for the utility, allowing the city to pre-determine the need for rates increases and borrowing for capital projects while maintaining for the utility a minimum of six months cash for operating expenses and 12 months of debt service. Wagner recommended updating the document annually.
A five-year water system capital improvement plan, prepared by the utility staff, shows a need for about $7.8 million to meet current and anticipated improvements.
Included in that amount is $888,000 annually for water main replacements. That project is expected to run another five years beyond the current capital improvement plan, according to Utility Director Alan Eckstein. The Department of Natural Resources has directed the city to do the replacement of aging water mains, some of which are reaching 100 years old.
Eckstein reported stringent requirement from the DNR are also expected, particularly for phosphate in cleaned waste water released into rivers and streams.
Ehlers prepared the city's full rate case application to the PSC asking for an average increase of 17 percent in water rates, based on the water utility's 2013 financial numbers, and submitted on Aug. 1.
Wagner said submitting the request after Aug. 1 would have required factoring in another year of inflation for operating expenses, which likely would have resulted in a higher rate.
The 17 percent increase is not across the board for every water user, and the Council does not have to raise the rate to the maximum recommended by the PSC, which could recommend an even higher rate than requested, Wagner said.
A typical customer paying $36 quarterly for water could see another $6 added to their bill, he added. Water billings are calculated on the meter size plus the volume of water used. The water rate does not hit the sewer bill portion of the bill. That billing is figured separately and not dictated by the PSC.
The last water rate increase was in 2010 when the council approved a 16.1 percent increase, foregoing the 29 percent increase recommended by the PSC.
If the utility continued under its current rate, the utility would begin to see net losses in operations and asset value by 2016.
The utility has been losing about half its operation revenue surplus each year since 2010, dropping from $409,000 to a projected $74,000 in 2014.
Depreciation alone will eat up $24,000 more of the 2014 operating expense budget than it did in 2013. Repairs and maintenance are expected to increase $13,000, and labor and benefits, $8,000.
Another full rate increase may be needed in 2016.
Wagner said the current water rates have allowed the water utility's revenue for capital improvements and construction to fall below the PSC-recommended level of 5.25-5.75 percent of the infrastructure value, called the "return on rate base."
The utility's return on rate base is at 2.26 percent for 2013 and is expected to be 1.18 percent next year, without the increase.
The 2014 water bill rate increase will bring that return rate back to 4.19 percent for 2014, but it drops to 2.85 in 2015. A 2016 rate increase would once again result in a 4.78 percent return rate.
Ehlers recommended forecast scenario through 2026, including normal inflation, can be a working document for the utility, allowing the city to pre-determine the need for rates increases and borrowing for capital projects while maintaining for the utility a minimum of six months cash for operating expenses and 12 months of debt service. Wagner recommended updating the document annually.
A five-year water system capital improvement plan, prepared by the utility staff, shows a need for about $7.8 million to meet current and anticipated improvements.
Included in that amount is $888,000 annually for water main replacements. That project is expected to run another five years beyond the current capital improvement plan, according to Utility Director Alan Eckstein. The Department of Natural Resources has directed the city to do the replacement of aging water mains, some of which are reaching 100 years old.
Eckstein reported stringent requirement from the DNR are also expected, particularly for phosphate in cleaned waste water released into rivers and streams.