Town council discusses possible rate increase

PLAINS – Water and sewer rates were high on the list of topics during the monthly Plains Town Council meeting. A presentation from Montana Rural Water took up most of the meeting and a combined rate increase of $12 to $14 was discussed.

After looking at the town’s expenditures, receipts and the outlook for the future, John Weikel of Montana Rural Water Systems put together a program for where the water rates should be. According to Weikel, the current rates Plains has are very low for Montana.

“What we see a lot of times is over the years things have not been looked at the way they need to be. There is no analysis done, there is no planning for future growth or even the equipment, assets aren’t being planned for,” Weikel explained.

He said the water rates have to pay for the system and as the rates sit now, there is not enough money to plan for replacements or renovations.

In order to create enough money for any improvements, the rate would need to be increased.

Weikel explained this is important because as of now the city does not have enough money to paint their storage tank – something that is overdue and needs to be completed.

“You have no contingency whatsoever for that. Meaning you have come to the point where that tank needs to be painted and protected but there is no money anywhere to do that with,” Weikel said. “As a business decision it would make much more sense to start proactively looking at your system in a sustainable matter – how do we anticipate?”

He stated the money was not going to come from the water fund because the town does not have it. That means the town needs to start looking at their rates.

He also explained that one of the loan requirements is the town has to be at 125 percent of their debt service, meaning every year the town’s water revenues have to surpass the expenditures by a minimum of 25 percent. Currently with how the system works, it is likely Plains would be audited and receive a letter requiring a change.

The current base rate is $17.04 – a number that was concerning to Weikel.

“We have fixed costs whether we pump water or not. Public water systems have those fixed costs,” Weikel explained.

The fixed costs include insurance, debt service, personnel and administration costs among others.

Overall, the base rates would have to be increased $7 to $8 to meet the target income.

Weikel explained this is the case because the town does not have regular rate increases to combat inflation and the rising cost of living.

“You cannot go five, ten years without having rate increases and expect to be in business. It just won’t work,” Weikel said.

Currently with the base rate, the town of Plains provides 5,000 gallons of water. Weikel saw this as problematic because some users are subsidizing the higher users. Montana Code states that the rates in place have to be fair and equitable. Weikel said that is not the case here.

Out of the 577 connections, 443 use less than 5,000 gallons a month, while 120 of those users use less than 1,000 gallons a month.

“What that means is if you provide everyone 5,000 gallons, you are not using what you are paying for. The people who are not using (the 5,000 gallons) are subsidizing the higher users,” Weikel said.

He said it would be better for the users to pay for how much they were using, just like with gas and electric.

Weikel said by charging $1 per 1,000 gallons the town could bring in revenue they otherwise lose out on.

Currently, the charge is $2 per 1,000 gallons after the 5,000-gallon allotment.

“The water sales – what goes through the meter is revenue we can start managing our systems with,” Weikel explained.

He went on to say that if people paid per gallon, it would give people a conservation mindset.

According to Weikel, the sewer rates are also not up to par. Right now the system revenues $295,000 but the total cost is $293,000.

“You are barely surviving,” Weikel said.

Weikel suggested bumping up the sewer’s base rate an additional four dollars.

“That puts the waste water system in a better position plus you are putting about $5,000 a year into the reserve fund to pay for repairs on the lagoon that you know are coming up,” Weikel said.

After that project was completed, the additional revenue would go towards their next program.

“What does this mean to you for your rates? Bottom line is rates have to go up,” Weikel explained.

Overall, the combined increase is $12 to $14 for both the water and sewer systems.

This would give the town power over their systems and Plains would no longer be getting by day to day.

As for the commercial businesses, Weikel suggested that each business be charged for the current line they have instead of implementing a commercial rate. That way everyone, whether a resident or a business, is paying for the amount of water they use.

This is just the beginning step for the town of Plains. Their next step in the process would be to hold public hearings and later have a vote on an intent to raise rates – if that was what was decided on.

“The public has a right to speak. You guys will have your full time to speak,” Mayor Greg Eitelberg said of the upcoming public hearings.

So far, no meetings have been scheduled.

Montana Rural Water is a non-profit organization that works with all the public water systems in the state. They are a part of National Rural Water, which works within all 50 states.