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Wed, Nov. 13

Council hesitant to raise water, wastewater rates

Will Chino Valley raise its water and wastewater buy-in fees? That is one of assumptions included in the four water and wastewater rate plan scenarios Economists.com prepared for the town in its 2010 Water/Wastewater Rate Study. The Chino Valley Town Council will look at implementing parts or all of the recommendations no later than its first meeting in April. After an initial presentation March 2, both the mayor and vice mayor said they were hesitant to increase rates.

Mayor Jim Bunker said, "It would be nice to not raise rates now with the economy as it is."

Vice Mayor Ron Romley said Scenario 3 best fits the economy, which involves no increases.

Dan Jackson, Economists.com's managing director and chief executive March 2 reminded the council that there have been lots of changes in Chino Valley 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," he said.

One of the things that are different in Chino Valley, he said, is that the town needs to acquire water.

He told the council it is prudent for the town to 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.

The average water and wastewater utilities rates across the country are increasing 5-6 percent a year. Jackson expects that trend to continue.

He said rate adjustments are primarily due to reasons beyond a utility's control, like the rate of inflation, the nation's environmental policy or system replacement.

Thirty to 40 percent of 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," 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 they 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, connect 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 fund all the capital costs in each district.

Jackson stressed that Chino Valley will not see 2004 and 2005 growth rates again.

He 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 Red Oak prepared a wastewater rate plan in 2007 that will cover the new Water Infrastructure and Finance Authority of Arizona loan.

Developments impacting this plan are: revenues and buy-in fees are down because new accounts aren't meeting Red Oak's forecast, and current budgets contain greater amounts of contingencies and reserve funding requirements.

He said the town's ultimate water and rate plan will depend on policy decisions the council makes regarding: should the town buy the Fann wastewater system, how aggressively should the town fund its contingencies and reserves, and should water and wastewater be treated as a separate fund or one fund?

Jackson said they used some primary assumptions for all four rate plan scenarios. They include: personnel and operating costs increasing 3-5 percent a year; costs of chemicals, electricity, insurance, etc. to increase at higher rates; the rates for the next decade include no cost for significant capital improvements; and buy-in fees to cover annual operating costs for water will increase to $4,000, while wastewater fees will increase to $6,000.

He said the new buy-in fees to both systems are essential to make the four rate plan scenarios work.

The first three scenarios show the town buying out Fann Enviornmentals's interest in the town's wastewater treatment plant, while the fourth one doesn't. Currently, the town pays Fann Environmental $21 per wastewater account per month and $4,000 of each wastewater buy-in fee for constructing and operating the wastewater system.

Jackson estimates the town can buy the Fann system for about $5.5 million with an additional $2 million to expand the wastewater treatment plant from 500,000 gallons per day to 1 million gpd. This would result in an annual payment of $525,703, he said.

Scenario 1 for residential water rates calls for the current minimum charge for a three-quarters-inch meter to increase this year from $4.84 to $7.84. The residential wastewater rates would increase this year from $48.40 to $55.66.

Scenario 2 for residential water rates calls for the current minimum charge for a three-quarters-inch meter to increase this year from $4.84 to $7.84. The residential wastewater rates would increase this year from $48.40 to $50.34.

Scenario 3 for residential water rates calls for the current minimum charge for a three-quarters-inch meter to remain at $4.84 through 2011. The residential wastewater rates also stay at $48.40 through 2011.

Ron Grittman, town engineer and public works director, said under this scenario the town can complete the Fann buyout without any rate increase. However, Jackson said it would require the adoption of the new water and wastewater buy-in fees.

Scenario 4 for residential water rates calls for the current minimum charge for a three-quarters-inch meter to remain the same through 2011 at $4.84. The residential wastewater rates increase from $48.40 to $51.35 this year.

Vice Mayor Ron Romley said Scenario 3 best fits the economy.

Mayor Jim Bunker said, "It would be nice to not raise rates now with the economy as it is."

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