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Fri, Dec. 06

Water and wastewater rate hikes before council

The Chino Valley Town Council will look at implementing some all of the recommendations in consultant Economists.com's 2010 Water/Wastewater Rate Study no later than its first meeting in April.

Dan Jackson, Economists.com's managing director and chief executive, Tuesday reminded the council that Chino Valley has seen a lot of changes in the past decade.

"It is a high-growth town. As such, you've got to be flexible to meet the demands of the economy," said Jackson, who stressed that Chino Valley will not see 2004 and 2005 growth rates again.

According to figures from the Arizona Department of Commerce, Chino Valley gained 380 people in 2003, 2,880 in 2004, 375 in 2005, and 398 in 2006.

"Chino Valley is a very attractive area for retirees and working families, so will continue to be a high-growth town once the economy turns around, " Jackson said.

Chino Valley, he said, needs to acquire water and develop a long-range financial plan. "I hope in the rate study to provide you the information you need to make a proper decision," Jackson said.

Surveys that Economists.com has done show the average water and wastewater utilities rates across the country increased 5 percent to 6 percent a year during the past decade. Jackson expects that trend to continue.

He said rate adjustments result primarily from factors beyond a utility's control, such as the rate of inflation, the nation's environmental policy or system replacement. For example, he said, a utility has no way to regulate the cost of electricity, and so must pass it on to its customers.

A national survey by the U.S. General Accounting Office shows that 30 percent to 40 percent of the nation's utilities charge rates that don't cover their costs, Jackson said.

He said the general rule is that a utility can have low rates or high-quality service, but not both.

Chino Valley's minimum charge for water users on a three-quarter-inch meter of $4.84 a month is "very cheap" compared to other bills people face, Jackson said.

The town's rate per 1,000 gallons of water encourages conservation. "It is definitely effective in cutting usage," he said.

In working up a long-term forecast for the town's wastewater rates, Jackson said the firm made five account growth assumptions. They include: growth forecast to be moderate in the town's existing water use area; adding three improvement districts in 2011; connecting the existing homes and businesses in the improvement districts in the first two years, with the remaining accounts to be hooked up within 10 years; and the districts will finance all the capital costs in each district.

Jackson projects the water utility will grow from 536 customers to 1,199 by 2020. That growth does not include the town buying the City of Prescott, Wilhoit and CMII water systems. The town's wastewater accounts will grow from 1,653 to 3,059 in that same period.

Jackson reminded the council that the Red Oak consulting firm prepared a wastewater rate plan in 2007 that will cover the new Water Infrastructure and Finance Authority of Arizona loan. Conditions affecting this plan include a decline in revenues and buy-in fees because new accounts aren't meeting Red Oak's forecast. Also, current budgets contain greater amounts of contingencies and reserve financing requirements.

He said the town's ultimate water and rate plan will depend on policy decisions the council makes. Among these issues are questions about the town's potential purchase of the Fann wastewater system, how aggressively should the town finance its contingencies and reserves, and whether the town should treat water and wastewater as a separate fund or one fund.

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