It’s been said that the city that controls its water, controls its destiny.
Water and waste water billing rate costs were discussed by the Public Works Committee last week. The discussion included factors that led up to the city’s revised
The Edmond City Council in January voted 4-0 to raise both water and waste water rates. The new rates will keep Edmond ahead of the curve to install infrastructure to meet the demand of a growing community, said Dan Jackson, vice president of Willdan Financial Services.
Debt rate service over the next five years of $271 million was cited as the most expensive factor of the proposed rate plan. Most of the debt was meant to fund water treatment. $191 million in debt was to be issued in 2019 for water treatment.
Costs go up a minimum of 3% every year. A plan was deviced to pay for inflationary costs.
How to fund the projects changed when the bids came in exceeding the cost of bonds by an excess of $40 million, City Councilman Darrell Davis said. The city stated it would not take the financial risk and decided to restructure its water improvements incrementally. During this time the planned infrastructure improvements did not change and the same course of action remains in effect.
REVISED WATER PLAN
A revised plan was developed by city staff, studied by the Public Works Committee, and approved by the city council in June. The city was under a federal mandate and is following a plan to expand upon water improvements at its treatment facility. The city is not under a compliance schedule or federal mandate for the Water Plant expansion, but is for the Water Resource Recovery Facility.
“We haven’t deviated by saying, ‘We don’t need these projects done,’” Davis said. “It’s going to take a little bit longer. It’s going to cost us a little bit more.”
Mayor Dan O’Neil said the city is not using money it already has to complete projects. He said it would impact the rate study.
“These are numbers that we’ve had out there before, and we had targets with them before based on us doing these projects,” O’Neil said. “We haven’t changed anything, except we added a new one because we’re going to do this water project imminently.”
City Manager Larry Stevens and Davis respectfully disagreed, by explaining they could not do the project without setting up a revised plan.
“That statement puzzles me,” Davis said.
“I understand, but the revised plan is not a $200 million project,” O’Neil said.
“It’s more,” Davis explained. “Early phases of the plan are already being implemented by the Water Department (including) several projects that are going on with the city using that money to fund these projects.”
During the next 12 months, the city will issue about $200 million in debt with $20 million of debt in 2021, but $150 million in debt in 2024. Phasing in the cost increases makes it possible to avoid a large and abrupt rate increase at 30%, Jackson said.
Costs for the revised water plan that were approved by the city council in June will be spread over an 8-10 year period which works within the city’s current rate plan, said Kris Neifing, Water Resources director.
A large $150 million project to produce more water from the lake is set for 2024, Neifing said. There are two water plant projects, water lines, storage tanks, ground storage, and transmission lines to accomplish.
“One of the key changes is drilling 20-plus wells now to allow for some additional water system capacity until the water plant is complete in 2027 and allowing us to reduce nearly $1 million a year in fees to Oklahoma City for purchased water,” Neifing said. “The costs of the wells is budgeted at $10 million for 2019-20.
“Other projects are the Arcadia Lake Intake Structure for $45 million, two separate Interim Water Plant Projects estimated at $85 million, various other improvements needed for additional water pumping capabilities and finally the Treatment Plant itself estimated at $200 million. The Water Treatment Plant would not be built until existing Water Utility Debt is retired in 2024.”
The Northwest Water Tower was brought on line in May 2019 for $5.893 million. Current projects under construction are: the Water Plant Control Building at $7.527 million; and the Danforth Water Tower at $4.711 million.
Stevens said the city is making progress with the water control building and is paying for design work to drill the wells.
“We will expand our capability so we don’t have any reliance on Oklahoma City water,” Davis said. “And that’s a pretty large rate that we have to buy it from.”
Oklahoma City water has a little bit different make-up than that of Edmond, Moore said. Arcadia Lake and the Garber-Wellington aquifer are Edmond’s main sources of water. Edmond is not short on water, but will be increasing its capacity to provide water on its own.
RATE INCREASES IN PROGRESS
The water billing rate before the scheduled increases was $7.93. The rate increased to $11 in February 2019. It’s scheduled to go up $13 in November, $15 in November 2020, to $16.05 in 2021, and $16.85 in 2022. The city anticipates keeping its inverted rate structure for volume charges. So the more you use — the more you pay, Jackson said. The non-residential charges and wholesale charges also increased.
It’s intended to encourage conservation. All across the United States it’s been very successful in getting people to conserve to minimize excess water usage, Jackson said.
The average rate payer in Edmond uses between 5,000-10,000 gallons a month and currently pays $75.77 for that service. That amount will go up by $6.90 in November to $82.67. In November 2020 it’s expected to increase by $7.71, Jackson said.
“But then you can see lesser adjustments are necessary in 2021 and 2022,” he said.
A 10,000-gallon user currently pays $129.92. This bill will increase by $10.33 to $140 in November, about $12 a month in November 2020. And $6 to $7 a month in each of the two years afterwards, Jackson added.
Most residential rate payers will pay $8 to $10 more a month this year — about $7 to $12 a month next year — and then about $4 to $6 a month each year after that.
‘RADICAL PRESENTATION OF
INVERTED BLOCK RATE HERE’
A wet spring but then dry end to July through August that caused Edmond residents to use more water was indicated as the cause of higher water bills, according to Dan Jackson, vice president of Willdan Financial Services.
Jackson said Edmond and parts of Texas had a very wet spring. Water usage across Texas was down 8-10% last spring. Several finance directors from his client cities called him in a panic saying revenues were way down due to the rain, Jackson said.
“Well what happened in on or about the end of July, the Good Lord decided to turn-off the spigot and it suddenly stopped raining. And what happened is in August, all across Texas and my clients in here in Oklahoma — usage skyrocketed,” Jackson said. “So I think you saw a rather radical presentation of the inverted block rate here in August.”
This fuels enormous concern among ratepayers in Oklahoma and Texas, Jackson said. Jackson said Edmond’s rates are on the high side, but 30-40% of utilities across the United States charge rates that don’t cover costs. Selling a product under cost will cause financial disabilities over a period of time, he explained.
Some of Jackson’s clients have very low water rates while their water infrastructure is falling apart, he said. Cities and town have difficult decisions with the need to keep rates low along with the need to keep their water system operating at a decent level.
“You’re talking about securing your own city’s water resources for the next hundred years,” Jackson said. “There’s a lot of cities that aren’t going to be able to do that.”