Durango city councilors want more information from city staff about how utility funds are spent before committing to changing water and sewer rates.
The city is exploring ways to raise money to build another water treatment plant, make infrastructure improvements and pay down tens of millions of dollars in debt.
The City Council may decide sometime next month to accept, modify or reject proposals from a utility consulting group to restructure water and sewer rates. The proposals presented Tuesday to City Council suggest increasing water revenue by 2% each year for the next five years and sewer revenue by 3% annually over the same period.
But increasing revenue doesn’t correlate with raising rates: Consultants say a new rate structure for water and sewer customers could raise or lower rates for users depending on several factors, including how much water or wastewater they use, whether they are inside or outside the city and whether they are residential or commercial customers.
The new fee structure would fund what city staff say is a growing need for a redundant water supply at Lake Nighthorse. City Operations Director Levi Lloyd told City Council on Tuesday that sewer rate changes would address “critical needs in this (water and sewer) system, and we can’t ignore them or put them off.”
The sewer rate changes will also help pay for more than $50 million in debt accrued for the construction of the Santa Rita Water Reclamation facility, the city’s largest-ever construction project, staff said.
City Council wants more information about how a flat monthly charge affects the usage costs for customers, what might happen if the city got more of its utility revenue through base rates and how to ensure everyone pays their fair share for the utilities they use.
Residents are scheduled to have an opportunity weigh in Oct. 1 and Oct. 15, when city staff brings the requested information to the council for review.
Water rate changesWater revenues are projected to fall about 2% – or $142,555 – short of expenses for 2020 under the current rate structure, according to city staff. With the new proposal, water revenues would increase 12.6% by 2025.
The proposal calls for eliminating seasonal rates and instead charging customers more or less based on whether they live in or outside city limits. Customers outside the city would pay more than people inside city limits.
Consultants suggest charging customers outside city limits 1.15 times the base rate that people inside city limits pay. The base water rate for county residents may increase by less than $1 per month if the proposal is approved, and the new structure would decrease the base rate for city users by more than $1 per month.
The city also proposes raising water usage rates for all users, regardless of where they live.
The net impact would result in additional revenue, which, according to city staff, is needed to build a new water treatment plant at Lake Nighthorse. Durango resident John Simpson said Tuesday the city has plenty of money in the water capital fund – about $17 million – that hasn’t been spent.
Most of the money is appropriated, but staff said it doesn’t have the workforce to complete all the approved projects. It could be three to five years before the appropriated utility projects are designed and constructed, Lloyd said.
Mayor Melissa Youssef said she “struggled” with the amount of unspent money sitting in the water fund’s coffers.
“We have $17 million set aside. Can you work with that for a while?” she asked city staff. “At what point do we start spending what we save?”
City Council plans to continue the discussion Oct. 15, after city staff presents a proposed 2020 budget.
Wastewater rate changesWastewater revenues are projected to fall about 3% – or $239,827 – short of expenditures for 2020 under the current rate structure, according to city staff. But under the new proposal, wastewater revenues will be 19.4% higher than they are now by 2025.
Consultants suggest the city reduce the base and usage rates for wastewater customers who live outside city limits and increase how much in-town residents pay to make up for the lost revenue – and raise additional revenue.
As it is now, the city’s rate structure for wastewater charges users outside city limits twice the base rate city customers pay. County customers also pay about twice what city residents pay for every 1,000 gallons of wastewater.
County residents who rely on city services have complained for years that they are billed at double the rate of in-town users.
The new model suggests county residents pay 1.15 times what in-town residents pay for a base rate. For example, the base fee for customers who live outside city limits and produce the least amount of wastewater will decrease from $38.42 a month to $24.71 a month – a difference of $13.71. In-town customers who use a similar amount now pay $19.21 each month for wastewater; the proposal suggests in-town users pay $21.49, an increase of $2.28.
Consultants suggest the cost for 1,000 gallons of wastewater should cost the same regardless of where customers live.
City councilors asked staff to investigate if a higher base rate, which is the same for customers inside and outside the city limits, would recover the cost increase to in-town users before it would approve an ordinance.
Why rate increases keep happeningWater and sewer rates for Durango utility customers did not keep pace with inflation from 1997 to 2013, city records show. Critical infrastructure, like water and sewer pipes, were not upgraded or maintained to the point that many are now antiquated.
City councilors increased the cost of sewer services by 64% – from $21.39 to $35.13 per month – and raised water rates by 37% – from $24.23 per month to an estimated $33.13 – in 2014. The increase went into effect Jan. 1, 2015, and fell short of what consultants said the city needed to make up for decades of underfunding.
Water and sewer rates for city utility customers have risen every year since, except in 2018. In the past four years, water and sewer rates have outpaced the rate of inflation.
The water base charge in 2014 for a residential water meter was $12.46. In 2019, the base rate for the majority of rate-payers was $16.23, an increase of more than 30% in half a decade. Inflation increased 8% during those five years.
The council also seeks more information about the $17 million in unspent funds in the water department. Much of the money is appropriated for ongoing projects that will take years to complete, staff said.
City Council also inquired about how to make part-time residents pay their fair share. The city sets its water usage rates based on January, February and March usage, but many part-time residents leave during the winter, so aren’t using water during those months, and therefore are billed less year-round.
Some councilors said the city should go to a vote about whether to invest in a new water treatment facility. But city staff suggested the cost could be covered by fees alone.