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The Winslow City Council approved a wastewater usage rate at the last council meeting. The increase will take effect in July of 2019 and span the entire fiscal year. The decision to increase rates followed a public hearing and a presentation by Dan Jackson of Willdan Financial Services, the city’s water and wastewater rate consultants.
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Jackson said, “Water and wastewater rates are a very hot button issue for cities and towns all over Arizona and all over the United States. As we enter the 21st century, we are still going to have access to the service of water, but we will see increases. As a matter of fact, that trend is expected to continue in the future.”
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Water costs have increased as any other commodity, according to Jackson. “Water is a business. It is like any other business where you produce a product. When costs go up, you have no choice but to pass that cost to the ultimate rate payer.”
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He did explain that the City of Winslow has their rates set for both water and wastewater in such a way that their operating costs are covered. “They are both in very sound financial condition right now. The reason why is that you as a community have made decisions to set your rate at a level that will cover your costs. Thirty to 40 percent of utilities in the United States don’t charge rates that cover their costs. You even have a solid reserve fund. That is like money in the bank for unexpected things.”
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Jackson spoke about the recent loan awarded to the City of Winslow by the Water Infrastructure Finance Authority. “When you borrow money, you have to meet what is known as debt coverage levels. You are able to meet that too. You are in sound financial condition right now, but sound can become unsound very quickly if you don’t continue to stay on top of these quickly increasing costs.”
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Wastewater customers in Winslow pay a base rate of $13.31 and a volumetric charge of $4.74 for every thousand gallons of usage. Jackson explained, “Winslow is right about the state average for wastewater rates.
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“We have done a long-term financial forecast for you of both the water and the wastewater utility. The study showed that you have about 3,000 water accounts and that is expected to grow nominally over the next 10 years.”
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He explained that the long-term financial forecast extends from five to 10 years, with the assumption that costs will go up by about three percent a year. “However, the most significant assumption is the capital improvements that you are going to have to invest in your system to ensure that it is operating properly at a consistently high and reliable level for your customers.”
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In Winslow, it’s been determined that about $5 million in improvements is needed to the system. About $1 million of that will be grant funded. The other $4 million will be provided by the WIFA loan at an interest rate of 2.8 percent over the next 30 years. “That more than anything is what is driving your long-term rate plan,” said Jackson.
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Willdan Financial Services proposed a five-year rate increase. The plan increases the wastewater usage rates around 2.5 percent each year for five years. According to Jackson, “This is the money that is going to go directly into Winslow. Your streets, your infrastructure, your alley ways, it is important to keep that in mind.”
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He explained that if Winslow does not show viability, they could lose the loan awarded to them by WIFA. “If you don’t do your share, Uncle Sam is going to rescind that $1 million grant as well.”
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City Attorney Nichole Harris addressed the council stating, “I want to clarify, we are talking about a one year increase here, for fiscal year 2019. They proposed a long-term plan, but this is only for a one-year increase. This is related to the WIFA loan, which we have already approved, and documents have been signed. We can talk later about moving forward with the long-term proposal.” Jackson said, “What I would tell you is if you don’t adopt all of the rate adjustments for the next five years, you will not be able to meet your WIFA loan requirements.”
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Harris responded, “It’s my understanding that our bond counselor, Tim Stratton, met with WIFA and everyone was okay with the one-year increase for now. I have not heard about defaulting.”
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Mayor Tom McCauley said, “So when we come back and consider this a year from now, we will know what the revenues are from the new water meters. We have to realize that in Winslow, we live in an antiquated system. Our system is failing all over town. We need to be prepared, we need to set ourselves some goals and some plans to improve and maintain our system.”
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The presentation was followed by a public hearing as required by law before increasing rates. Winslow resident Brandon O’Laughlin stepped to the podium to ask questions of the council. “I noticed in the presentation, it references Arizona Revised Statutes (ARS) as requirements for a wastewater rate increase. The ARS requires the availability of the city revenues and cash flows from wastewater. I don’t know if that is available but further subsections say that a rate increase must be reasonable and just.”
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McCauley answered, “In our financial status report earlier tonight, you heard about our enterprise funds and revenues from wastewater. Not only that, but we are also finishing up our audit for the end of the year.”
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O’Laughlin’s question concluded the public hearing and action was taken on the item. With all council members present, the ordinance passed unanimously approving a one-year rate increase in wastewater usage.
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“I would like to remind the public to conserve water in December, January and February. Your water usage in those months determines your rates on wastewater for the rest of the year, so do your best to cut back in those winter months. Also, the rates proposed tonight are nothing more than cost of living, it’s less than three percent for a five-year period. If we are going to keep laying the ground work for development, we need to have the systems in place.”
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