Rates to be increased for water service

A revised water rate study recently completed by the city’s engineering firm Schmueser Gordon Meyer (SGM) is now available for review.

The draft study, which was made available on March 1st, indicated rates are well below the required level to pay for the cost of the plant and water system. Alternatives for increasing rates will be considered by the council at the regular meeting scheduled on March 15. No public comment was received during the first reading of the rate change ordinance.  The official public hearing will be held as part of the March 15 meeting.  

For well over a year now, city staff and elected officials have discussed the need to increase water rates to keep up with costs. The fund is not breaking even and reserves are depleted.

Water service is provided to residents and property owners in Salida through an enterprise fund. This accounting structure is used for business-type activities. Water operations are not operated as a governmental fund supported by tax dollars. Revenue generated from the business activity (providing water) needs to be sufficient to pay for that activity.

The City has followed a revenue model whereby quarterly fees paid for operations and routine maintenance or upgrades. Development fees paid for capital improvements and debt service on those improvements.  In recent years, revenue has not kept pace with the capital needs and debt service requirements. The City made substantial investments in capital infrastructure including the high zone water tank, new transmission lines, upgrades to the treatment plant, purchase and installation of radio-read meters and acquisition of water rights. Strong development activity in the mid 2000’s paid for a substantial portion of the capital improvements; however, it was not sufficient to fully pay for all such improvements. In addition, aging facilities are continuing to require upgrades and maintenance to extend their service period. Development has now slowed substantially and is not sufficient to pay existing debt service or cover capital requirements. In 2010, we used up capital reserves and obtained a commitment for additional debt to pay for capital improvements of the galleries water tank. Future capital requirements need to be paid by fees for water service.

Last year we contacted our engineering firm, Schmueser Gordon Meyer (SGM), about completing an assessment of future capital needs and a rate study. The capital improvement plan is still being finalized and will be incorporated into the final draft of the rate study.