Water Rates

Water Rates

BACKGROUND

As part of ongoing efforts to improve services and in accordance with regulatory and industry standards, the City’s Water Department completed a Water System Master Plan in 2017 that identified and prioritized needed improvements to maintain the water system. Based on the results of the master plan, the recommended sustainable level of water system funding is approximately $1 million/year higher than the current funding level. Therefore, the City has identified critical rate changes needed to support the long-term performance and sustainability of the water system.

WHY ARE WATER RATE CHANGES NEEDED?

There are two principle reasons for changing the City’s current water rate structure: (1) need for additional investment in the water system and (2) improved equity for consumers.

1. Need for Additional Investment

The City’s water rates have not been raised in more than 20 years.  In the early 2000’s, rates were dropped to reflect the retirement of some significant infrastructure bonds, but no other changes have been made since 2006. As a result, little has been done over the past 20 years to address the City’s aging water facilities, which include pipelines, pumps stations, water tanks, and a treatment plant. If the City wants to avoid falling behind and facing much larger costs in the future, it needs to begin reinvesting in the system now.

To address these issues and minimize long-term costs to its customers, the City Council is proposing to increase the level of funding in the water system to the amount recommended in the Master Plan. After looking at several options, the City Council is recommending that this increase be phased in over a period of three years. This phase in period was selected because it maximizes the number of years customers have to adjust to the new funding levels without resulting in deferred projects or additional debt.

FUNDING GAP
Category	Net Additional Annual Revenue Needs
Needed Capital Improvements	$538,000
Reallocation of Resources due to Sewer Annexation	$406,000
Inflation (3.0% per year)	$94,000
Total	$1,038,000

2. Achieving an Equitable and Fair Rate Structure

City water rates consist of a base charge that is the same every month for a given customer, and a volume charge that is assessed based on volume of water used each month.  An analysis of actual water costs to the City has revealed that the City’s current volume charge is significantly lower than the actual cost of providing water.  In addition, the City currently charges the same volume rate regardless of volume used. Because many of the City’s facilities must be sized based on peak summer water demands, this results in customers with lower water use subsidizing those with higher use.

To address these issues, the City is recommending adoption of an increasing Block Rate Structure. This type of structure charges increasing amounts for water as use increases. Under the proposed structure, three blocks would be used:

• Block 1 – 0 to 5,000 gallons per month. This is about the amount of indoor water used by typical residential customers throughout the year.
• Block 2 – 5,000 to 20,000 gallons per month. This is approximately the additional amount of outdoor water used by typical residential customers during peak irrigation season.
• Block 3 – Greater than 20,000 gallons.

For multifamily and non-residential customers, the blocks would be scaled up based on the number of equivalent residential units (ERUs) associated with the connection.

HOW WOULD THE RATE CHANGES AFFECT ME?

The City is proposing that needed rate changes be gradually implemented over several years, beginning in October 2018.  For the first year, changes to base rates will be minimal with the major change being the implementation of a Block Rate Structure for volume charges. For typical year-round residents, the proposed changes are expected to increase their monthly bill by $7.68. However, since most of this increase is associated with the volume charges, customers who use less water than typical will see smaller increases, while those using more water than typical will see greater increases.

PROPOSED RESIDENTIAL* WATER RATES *beginning 10-1-18, all Commercial rates will be the same as residential rates.
	Existing	10-1-18	10-1-19	10-1-20	10-1-21	10-1-22	10-1-23
Monthly Base Rates ($/ERU)	$33.70	$35.92	$41.70	$48.41	$49.61	$50.85	$52.12
Volume Rates ($/kgal)
Block 1	$0.71	$1.11	$1.26	$1.42	$1.45	$1.49	$1.53
Block 2	-	$1.48	$1.69	$1.90	$1.95	$2.00	$2.05
Block 3	-	$1.85	$2.11	$2.38	$2.44	$2.50	$2.57
Typical Residential Bill ($/month)	$40.45	$48.13	$55.61	$64.06	$65.64	$67.30	$69.00
Increase from Previous Year ($/month)	-	$7.68	$7.48	$8.45	$1.58	$1.67	$1.69

After the increasing block rates are implemented the first year to bring rates into better agreement with the actual cost of providing service, proposed changes to the rates in subsequent years will be applied to both base rates and volume charges. Resulting rates are summarized in the table above. As illustrated in the table, the first three years will include larger increases (around $8) to establish sustainable funding levels. After that, annual increases can be much smaller and are only needed to keep pace with inflation.

WHAT COULD MY RATES LOOK LIKE?

A calculator has been produced to make it easier to see an expected change in your current water rate. Please use this calculator to help guide you.  Feel free to contact our office if you need assistance using this tool. City Hall 208-634-7142

FIVE MAIN BENEFITS CUSTOMERS WILL SEE

1. System Reliability

Stable funding helps to ensure that water facilities are maintained in good working order and replaced as needed to continue to provide a safe, clean, and reliable drinking water supply.

2. Lower Long-term Costs

Responsible water system management will maintain compliance with State regulations, avoid emergency projects, and result in lower long-term costs that would otherwise be placed on future generations of McCall residents. Sustainable funding will also eliminate the need to bond for small to mid-sized improvement projects.

3. Improved Service

In areas of town where water lines are old and undersized, there is potential for improved water pressure. As old mains and service lines are replaced, reduction in rusty water and water main outages (due to breaks) are anticipated.

4. Improved Fire Flows

Upgrades to water mains and storage facilities will improve distribution capacity to supply emergency fire flows without compromising service. Old hydrants are being replaced to meet current standards and be compatible with local fire fighting equipment.

5. Greater Customer Control Over Water Costs

Implementing increasing block rates will give customers greater control over their water costs. Customers who conserve water will see a savings. Under the current rate structure, changes in water use patterns have little effect on customers’ total bill. By shifting a much larger percentage of the bill to volume charges, customers’ water use patterns will have a greater effect on their total bill. This allows customers to prioritize water usage based on their individual needs and preferences.

Past Presentations to City Council
 

June McCall Second Rate Presentation - Draft Rate Recommendations.pptx

April McCall Initial Rate Presentation - Revenue Needs and Rate Options.pptx