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When you want a drink of water…

Although we take it for granted, we expect to turn on the faucet and get fresh, clean water on demand, or jump into a hot shower or bath without concern. To put the importance of a sanitary plumbing system into perspective, an estimated 1.5 million children die each year due to a lack of sanitation, and 10 percent of disease around the world that could be eliminated with improved sanitary conditions.

So, when you want a drink of water, do you prefer cost, convenience or both? You might buy a bottle of water from the grocery store or you could head to the sink for a nice cool cup of water. If a 16 oz. bottle of water from the store costs $1.50, what should the water cost when I turn on the faucet? Have you ever given much thought to where that water comes from?

Public Water Supply ImageYou pay fees to the City, as your Public Water Supplier, based upon how much water you use. Your water use is measured by a water meter located on your property. The City reads your water meter electronically every month to determine how much water you have used since the last reading.

The City’s water source is from ground water. Ground water is located deep underground in veins of water known as aquifers. It must be accessed by drilling a deep well and then pumping it to the surface. The City has six wells to provide 1.5 Million Gallons Daily.

At the Water Treatment Plant, water must be analyzed to ensure it is safe to drink, filter and treat water with certain chemicals to remove impurities and make sure your drinking water is safe to use. Treated water that’s safe to drink is then stored in a reservoir from which it gets pumped through underground water mains to your house.

Water Service Connection Image

There are 276 miles of underground water mains moving water from the treatment plant to over 4,000 houses and businesses in town upon demand. A private water pipe known as a service lateral line connects that city water main to your house plumbing and brings the water right to your faucet when you turn it on.

Public water utilities also keep plenty of water in storage in case of emergencies. You may have noticed water towers located around town and in surrounding communities. In Excelsior Springs there are nine water towers holding 5.8 Million gallons of water that can be used in case of fire and water main leaks.

Utility infrastructure is expensive and represents a current investment of $63 Million in Excelsior Springs; long-term debt will be needed to finance capital improvements periodically, but we also must invest in rehabilitation of our existing infrastructure each and every year. This system is over 80 years old.

The Sewer System is a separate operation from the Water System, in the ideal case, a sewer system is completely gravity-powered. Pipes from each house or building flow to a sewer main that runs, for example, down the middle of the street. The sewer mains flow into progressively larger pipes until they reach the wastewater treatment plant. In order to help gravity do its job, the wastewater treatment plant is usually located in a low-lying area, and sewer mains will often follow creekbeds and streambeds (which flow naturally downhill) to the plant.

Normally, the lay of the land will not completely cooperate, and gravity cannot do all the work. In these cases, the sewer system will include a grinder-pump or a lift station to move the wastewater up over a hill. In Excelsior Springs we have several lift stations to move wastewater from a person’s home to the treatment plant. Once the water reaches the wastewater treatment plant, it goes through stages of treatment designed to remove the solids, organic materials and bacteria from the water. This is done with the help of bacteria — the water flows to large, aerated tanks where bacteria consume everything they can. Our sewer investment includes: 142.8 miles of collection mains and 42 miles of storm sewers.

Annual inflation on construction expenditures is estimated to be 6.5%; so the cost of deferring maintenance, also known as “waiting for it to break” means you will spend more to ultimately make the needed repairs, as well as damage to portions of the system that would not have been affected if properly maintained, loss of reliability and quality of service putting customers at risk and inconvenience.

The rate has a base rate to cover one half of debt payments so all customers equally share in the investment of the infrastructure and a volume rate to cover personnel, daily maintenance, the electricity needed to transport and clean the water. The volume rate also collects funds for future deferred maintenance.

For a system to be sustainable, user fees need to generate funds to fill three buckets of system expenses – daily operations, rehabilitation of existing infrastructure, capital investments and expansion.

A practice of deferring maintenance only keeps rates low in the short term and because you cannot avoid the required maintenance, you eventually pay more to make the improvement.

We are very aware of the difficulty families can have to afford the basic necessities, such as food, medicines and child-care. It is true many families sacrifice to make ends meet.

The city has created a fund which is administered by the Good Samaritan Center to assist families with their utility bills. The Good Samaritan Center is capable of assisting with the needs of the whole family.

No City Council wants to raise rates. However, the goal of every public water system should be to provide customers with an uninterrupted supply of safe, dependable, fairly priced water while operating at breakeven or better financially.

In order to meet these goals, the city water system’s rate structure must produce enough revenue to operate the system in a safe, lawful, and financially sound manner. This will help assure the ability of the water utility to maintain and meet future customer needs. Utilities are largely out-of-sight, but should not be out-of-mind.

✔ Water system revenues should not be used to pay for other municipal services. Using water revenues for other purposes and not maintaining adequate financial reserves for future expenditures, will certainly increase the costs of operation in the long run. It is not the practice of the City of Excelsior Springs to divert revenues to pay for other priorities, but it is not unusual to hear our customers ask if it is done.

✔ Customers should know what the rates are. Your water, sewer and trash rates are posted on the city’s website.

✔ Water rates have a short life span. The existing rate structure should be examined once a year as part of the budget development process to determine if any adjustment should be made.

Components of your water rate

There are 4,024 customers. The current base rate is $12.59 and the proposed increase of $5.03 will increase the base rate to $17.62. There are 523,941,950 gallons of water billed annually. The current volume rate is 5.47 and the proposed increase of $2.02 will increase the volume rate to $7.49. The average water customer uses 3,000 gallons/month.

Proposed Water Rate Table

WHY – A rate study conducted ten years ago did not produce enough revenue to cover the cost of service and we have been losing money every year since 2014 (annual revenues less annual expenses). Because the water fund had a positive cash balance, it was determined that to raise all three utilities at the same time was too difficult for our customers to manage; because we had sufficient cash balance, it was elected to spend down cash balances rather than to raise rates. Now that cash balances are low, we must raise rates to cover the actual cost of service. The historic cash balance of the Water Fund is displayed in the chart below:

 

Water Fund Table

Components of your sewer rate

There are 3,856 sewer customers. The current base rate is $25.00 and the proposed increase of $0.07 will increase the base rate to $25.07. There are 279,476,270 gallons of water used by sewer customers annually. The current volume rate is 10.69 and the proposed increase of $0.71 will increase the volume rate to $11.40. As shown in the chart below, by allowing the sewer department to lose money during the previous six years, the rate includes $8.15 to return cash balances to zero. Cash recovery was estimated to take four years, and after two years, we are on track to recover funds by 2021.

WHY – A rate study conducted ten years ago did not produce enough revenue to cover the cost of service and we have been losing money every year since 2011 (annual revenues less annual expenses). Last year, the sewer rate was increased, but had to also recover a negative fund balance of $1.5 million. Now that the rate is sufficient to cover annual expenses, we need to stay current with annual increases in costs. The historic cash balance of the Sewer Fund is displayed in the chart below:

 

Proposed Sewer Rate Table

Components of your Trash Rates

There are 3,552 residential trash customers. The current base rate is $19.27 and the proposed increase of $4.58 will increase the base rate to $23.85. Over time, we have improved the trash services offered to the community, these represent our most popular services, and have a positive impact on the appearance of our community.

Proposed Trash Rate Table

WHY – Trash rate increases were not passed along to customers during the last two years because the trash fund had a positive cash balance; we preferred to spend down cash balances rather than to raise rates. Now that cash balances are low, we must raise rates to cover the actual cost of service. Recycling services represent a volatile market and will more than likely necessitate changes in the future. Our current hauler agreement will expire next year.

 

To lower the rates in response to price fatigue from the community will require you to eliminate the annual rehabilitation of existing infrastructure, as Daily Operations, Capital Investment or DEBT payments and Rehabilitation Contracts are fixed obligations or continue to operate by borrowing revenue. I have highlighted the Rehabilitation of Existing Infrastructure above in the charts (in red) to illustrate how that impacts the rate as well as trash services that are choices but not obligations.

Analyzing Rates To Plan For And Fund Future Infrastructure Needs – In these times of tightening budgets, increasing regulations and aging infrastructure, a well-crafted plan of a system’s future goals and needs and a user rate structure that aligns with future infrastructure needs are as important now as ever before.

To put the proposed rate increase in perspective, I’d like to compare the cost of city water from your faucet to bottled water you buy at the store. If a 16 oz. bottle of water from the store costs $1.50, the water rate increase of $11.09 is equal to seven and a half bottles of water from the store. The proposed average water bill of $40.09 will provide 3,000 gallons of water from the faucet every month or you can buy 3 gallons of bottled water from the store for the same cost.

Our proposed rate increase for the average user is equal to:
» Water 11.09 vs 7 ½ bottles of water
» Sewer 2.20 vs 1 ½ bottles of water
» Trash 4.58 vs 3 bottles of water