City Responds to Water Bill Questions

A group of citizens attended the May 1st City Council meeting and brought with them a list of questions about Salida’s water bills and funds. We are posting these questions along with the City’s responses for all members of the community to read in an effort toward greater transparency about the billing methodology. In addition, we posted a sample bill with brief explanations for each line item included on a residential bill to help illustrate the charges and what each represents.

The first question concerns the parts of the water bills that reference maintenance and service.

Question #1:  What are they for and how are they different? 

Answer:  The charges were determined based upon rate studies conducted by the City’s engineering firm. The studies take into consideration all operating and capital costs of the water plant and distribution system.

  • A water maintenance fee for residential customers is charged to cover costs incurred each year to maintain the distribution system throughout the city. Specifically, the water maintenance fee pays costs within the public works organization. Equipment and personnel are necessary to maintain the water distribution system and read meters. Every year, lines are flushed, leaks need to be fixed and some frozen meters need to be repaired. The maintenance fee is based on historical costs divided by number of customers.
  • A water service fee is charged to pay for salaries, supplies, outside services and capital improvements along with general and administrative expenses associated with operating each plant.
  • Until the new rates were implemented in April 2011, the City had 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, development related revenue has not kept pace with the capital needs and debt service requirements.  The City had to increase quarterly service fee to cover debt service obligations, capital projects and begin to rebuild some reserves.
  • In summary, “maintenance” and “service” are different in that they are based on different components of the total cost of providing water service.

Question #2: Where did these words come from (i.e. the process from which they were derived)? 

Answer:  The terms “Maintenance” and “Service” have been used on the bills longer than our current staff members have worked for the City, so we’re not certain of the exact history of the words. However, they would have been derived through staff proposal and deliberation several years ago.

We are limited in the number of characters that can be printed on the bill.  However, we believe these terms briefly describe the nature of the charges.

Starting last year, we began showing more detail on the bills for greater transparency about the rates. Previously, the service fee and usage charges were combined on one line, rather than shown on separate lines of the bill. No new charges were added.

Question #3: How much money from each fund has been collected since these terms on the bill first appeared?

Answer:  Each line item on the bill does not represent a separate “fund” for accounting purposes.  All money collected for the water and sewer bills are used to operate the water and sewer systems, respectively.  The City has one “enterprise fund” for water and sewer services but manages them as separate businesses.

Although the money associated with each line item of the water bill is not tracked separately, all money collected from water bills is used exclusively for costs associated with the water system.  Likewise, all money collected from sewer bills is used exclusively for costs associated with the sewer system.

Question #4: How did the City use each of these funds?

Answer:  Please see the answer to Question #3 for a general answer about the funds. For details about all the uses of the money collected over the past few years, please see the City’s past annual budgets and audited financial statements. A substantial amount of money has been spent in recent years for water rights and capital projects including the high zone water tank and pump station, new transmission lines, radio-read meters and numerous other system improvements.

Likewise, a substantial investment is currently being made to the City’s sewer system to bring it into regulatory compliance. Effluent from the plant is discharged into the Arkansas River and must meet standards set by the state.

The City Council established a Water and Wastewater Enterprise, meaning these city-owned utilities are operated as a business. The Water and Wastewater plants are both operated as independent enterprise funds or companies. All funds billed and collected are retained in the respective “company” and exclusively for water or sewer business activity.

Question #5: How are the winter water rates estimated? 

Answer:  Winter water rates are not estimated.  The amount billed for water usage is determined by actual meter readings each quarter. The maintenance and service fees are the same each quarter.

Summer sewer usage for residential customers, however, is calculated by using an average of the “winter months” water usage.  The assumption behind this methodology is that customers are watering outside lawns and gardens during the summer and that water is not flowing through the sewer system.

Question #6: Are you planning any more water hikes in the very near future? 

Answer:  Barring any unforeseen contingencies, water and sewer rates will remain constant until the first of next year.

The charges are based on rate studies completed by our engineering firm. The studies anticipated annual increases of approximately 5%. We will evaluate future rates annually as part of the budget process. At that time, operating costs and various economic factors will be evaluated to determine rates for 2013. Should we be able to identify cost savings or should development activity improve, it is possible that our customers could see less of an increase in 2013. However, you should plan for moderate increases at the beginning of each year. The costs paid by the City for various chemicals, supplies, energy costs, etc. that are necessary to operate the plants generally increase each year. In order to keep pace with inflation in costs to operate the plant and maintain infrastructure, we anticipate the necessity to increase rates annually.