On Monday, the Cassville City Council called a special meeting to hear the results of a water and wastewater rate analysis conducted by the Missouri Rural Water Association (MRWA).
"I know you are asking yourselves, 'Is it a good time to increase rates in a down economy?'" said Larry VanGilder, of MRWA. "You can't afford not to when you look at the big picture.
"Your system is aging and needs updates that are dictated by the EPA (Environmental Protection Agency)," said VanGilder. "Failure to respond can result in notices of violation, fines and mandates by the federal government."
VanGilder presented a report that was composed by Elizabeth Grove, MRWA management circuit rider. Grove met with members of the city staff and reviewed the 2011 budget, utility usage numbers and other information in order to compile the analysis report.
A replacement schedule, detailing all of the equipment and maintenance projects that will need to be replaced or completed over the next 20 years was not provided with the rate analysis report.
The city's current minimum water rate is $10.27 for the first 1,000 gallons of water used. Residents pay $1.80 for each additional 1,000 gallons of water. The average residence uses around 5,000 gallons of water each month, which costs $17.47.
The basic wastewater rate, which includes the first 1,000 gallons, is $8.09. Residents also pay a $2.92 per 1,000 gallons usage charge. Average monthly sewer costs are $19.77.
According to Grove's report, the current rates are not sustainable. Revenue received does not cover operation costs or provide additional funds for future major maintenance or capital projects.
The rate analysis report provided three scenarios for proposed water and wastewater rate increases.
The first water rate scenario would increase the current basic rate $4.08 per month. The usage rate would increase $1.95 per 1,000 gallons of water. An average 5,000-gallon water bill will be $29.36, which is a monthly increase of $11.89.
Water rate scenario one would generate $610,207 annually. This would cover current operation costs and provide $70,000 for a tower maintenance contract and a meter replacement program. The scenario does not include monies for a major maintenance reserve fund or capital projects.
The first wastewater rate scenario would increase the current basic wastewater rate to $13.09. The usage rate would increase to $6.29. An average wastewater bill will be $38.25, which is a monthly increase of $18.48.
The scenario would generate $656,029 annually. This would cover current operations and provide $70,000 for equipment replacements. The scenario does not include funds for major maintenance or the debt service on the system, which is currently paid with sales tax revenue.
The total average bill for scenario one will be $67.61, which is $30.37 more than the average resident is currently paying.
The second water rate scenario proposes a $6.85 increase to the basic rate and a $4.72 increase to the usage rate. The new minimum rate would be $17.12 and the usage rate would be $6.52 for each additional 1,000 gallons of water. An average monthly water bill will be $43.20, which is an increase of $25.73.
Scenario two would generate $908,898 annually. This would cover current operation costs and provide monies for the replacement of equipment and $298,691 each year for major maintenance. This scenario does not provide funds for major capital improvement projects, such as expansion of the water system or drilling a new well.
Scenario two for wastewater rates proposes a $7.55 increase to the basic rate and a $5.92 increase to the usage rate. The new minimum rate would be $15.64 and the usage rate would be $8.84 for each additional 1,000 gallons. An average monthly wastewater bill will be $51, which is an increase of $31.23.
Wastewater rate scenario two would generate $878,716 annually. This would cover current operation costs and provide monies for the replacement of equipment and $222,687 each year for major maintenance, which could include repairs to lift stations and interceptor sewer lines.
The total bill for the second scenario will be $94.20, which is $56.96 more than the average resident is currently charged.
The third water rate scenario calls for increasing the basic rate to $20.97, which is $10.70 more than the current rate. The usage rate would increase to $6.75, which is $4.95 more than the current water fee. An average water bill will increase $30.50 to $47.97.
Scenario three for wastewater rates calls for increasing the basic rate to $14.97, which is $6.88 more than the current rate. The usage rate would increase to $8.25, which is $5.33 more than the current wastewater fee. An average wastewater bill will increase $28.20 to $47.97.
Scenario three for both water and wastewater reflects the rates recommended to quality for federal and state grant funding. According to the report, federal and state funding agencies consider rates are affordable up to the point that they reach 2 percent of the community's median household income for 5,000 gallons of usage. The report also states that municipalities with rates below this level are not likely to be considered for grants.
MRWA used the median household income figures obtained from 2009 Census information to arrive at the $28,780 income figure used for the rate analysis. The report points out that economic data for the 2010 Census is not yet available.
The total monthly bill for scenario three will be $95.94, which is nearly three times the amount the average resident is currently paying.
"In light of the current economy, should we really be concerned about the 2 percent?" asked Alderman Darrell Ledenham. "Are there grants floating around right now?"
"This is to gauge affordability not to know if you will receive grants," said VanGilder. "If there is an application process going on, and you are at that threshold, you are ready to stand in line, but where you fall at in that line I have no idea."
Eugene Dilbeck, city administrator, stated that if the city is generating the revenue proposed in scenario two the council can use that money to borrow low-interest or no-interest loans from the state revolving fund.
If the city decides to borrow funds from the state revolving fund to complete larger projects, annual revenues generated by the rate increases will be used to make the loan payments over a period of time.
"Scenario one gets us to the point where we can cover our day to day operations, which is critical," said Dilbeck. "If we want to have the money for major improvements we will have to go to scenario two.
"The problem is two fold," said Dilbeck. "Right now we are subsidizing our water and sewer systems with general sales tax revenue, which is taking money away from roads and parks."
Dilbeck said that the city is also facing a situation where many pieces of equipment need to be replaced. The city has spent around $336,000 in repairs and replacements this year.
The city will need to complete a major wastewater improvement project to correct inflow and infiltration issues over the next five to 10 years. The project will require the repair or replacement of many of the city's manholes and will likely cost over $500,000.
"Cassville is in good shape," said Dilbeck. "We are not in a financial crisis, but we are headed there if we don't correct some of these problems.
"I think that the citizens will take all of this into consideration and understand," said Dilbeck. "This should show you what the tolerance level is in the community."
Dilbeck plans to contact members of the city's infrastructure task force to discuss the proposed rate increase scenarios. An open public hearing could be scheduled by the council in the future.
"The whole growth and economic future of Cassville depends on how we support and maintain our infrastructure," said Dilbeck. "If the survey results are still true, and I think they are, people want to see the city grow. This is part of the whole scenario, and I think the people will support it."
The aldermen requested sample statements showing how the proposed rate increase scenarios will impact their monthly utility bills.
Cassville's water rate was last increased in 2002. The city's sewer rate has not increased since 2007.