Janesville water rates could jump 21 percent in plan

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Saturday, October 22, 2011
— The Janesville city water utility is proposing a 21 percent water rate increase that officials say is needed to cover rising costs.

The increase is part of the city’s proposed 2012 budget.

The city council continued to study the budget Thursday night. The next study session is Tuesday, when the water rate increase is expected to be discussed.

Dan Lynch, water utility director, said several factors drove the request for a water rate increase, including:

-- The drop in water use caused by the closure of the General Motors plant.

-- A summer of low water use.

-- Debt payment for capital expenses, such as the new west side water tower, two new pumping stations and water mains.

-- A water utility conservation program that hurts the bottom line.

If approved, the rate increase would be the third in four years. Water rates increase 10 percent in 2009 and 3 percent in 2011. Rates were unchanged in 2010.

Lynch said the utility kept rates down last year because of an increase in wastewater rates.

“We’ve been trying to minimize the impact,” Lynch said. “What’s happening is we’re not covering all of our costs with the current rates.”

Even with the proposed increase, water rates would remain similar to peer cities, Lynch said.

“What’s driving these rate increases are things that are beyond the control of the operation,” Lynch said.

Operating and maintenance expenses went up 3 percent, he said.

Debt payments for capital expenses in recent years include two new pumping stations and a facility to blend water from multiple wells to reduce nitrate levels. The pumping stations alone cost $7 million, Lynch said.

The city this year improved water mains along Black Bridge Road at a cost of $3 million.

As the city’s aging infrastructure fails, costs to improve it will continue, Lynch said.

He cited a major water main break in spring as an example.

“We probably have in the neighborhood of 30 or 40 miles of pipe in the ground put in prior to 1900,” he said.

The utility does not pay taxes to the city but is required to make payments to the city in lieu of taxes based on the value of the utility’s assets. The money goes into the general fund and offsets property taxes.

Those payments have increased because of capital improvements, Lynch said.

“When we put $10 million of assets in the ground, it drives our payment in lieu of taxes,” Lynch said.

Ironically, the utility works against itself when it encourages conversation. The city has implemented a program rewarding people who install water-saving equipment.

The more water the utility sells, the less it must raise rates, Lynch said. Water use this year was less than projected.

The loss of the General Motors plant continues to takes a toll. The plant’s closing resulted in a 10 percent drop in total volume sales, Lynch said. The utility considered that decrease with its last major rate hike in 2009.

“The problem is that there was a whole bunch of other related industries that also shut down or severely curtailed their water use,” Lynch said. “We’ve seen a pretty steady decrease in sales in the commercial and industrial categories. We’re not selling as much water.

“We knew GM was closing, but we didn’t know the related impact,” he said.

The single biggest factor to impact water sales is summer use, Lynch said. This summer, consumers used less water than during other summers. Even though the summer was dry, rains might have come at the right times, he said.

Lynch knew last year’s 3 percent increase wouldn’t be big enough, he said, but it was as much as the administration thought residents could handle.

“If we would have gone after a bigger rate increase in 2009, we would be going after a smaller rate increase right now,” he said.

“We just simply aren’t bringing in enough revenue,” Lynch said.

If the economy picks up, Lynch expects rates to stabilize.

Nationally, water rates are expected to increase 20 percent, Lynch said.

The increase would be implemented as soon as possible in the first quarter of next year. The proposal first must go to the Public Service Commission, which can take up to three months to study the paperwork.

A public hearing would then be held.

Increases detailed

The city of Janesville proposes a 21 percent rate increase in the water utility portion of the municipal services bill.

No rate increase is proposed for the wastewater utility.

The water component of the average residential quarterly bill would increase $8.80.

If adopted as presented, the quarterly water bill for the average residence would be $50.82, comprising of $44.71 for water and $6.11 for public fire protection.

The 2010 average quarterly water bill for Janesville’s peer cities was $79.30, comprising of $69.13 for water and $10.17 for public fire protection.

Last updated: 6:41 pm Thursday, December 13, 2012

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