Janesville Water Utility customers will pay higher water bills by the end of the year so the city can slowly replace its water mains, some of which are more than 100 years old.
City officials say the rate hike will save residents money in the long run while addressing aging infrastructure.
The state Public Service Commission on Thursday gave the city the go-ahead to collect 53% more in revenue from water utility customers.
Janesville is the first municipality in the state to propose paying for water main replacement in cash instead of borrowing, city Finance Director Max Gagin said Friday.
Marshfield uses a similar process to pay for water main replacement but on a smaller scale, and it was recommended by the Public Service Commission rather than proposed by the city, Gagin said.
After the state issues an order for the rate increase, the average city resident will pay about $22.45 more per quarter for water, Gagin said.
When the city applied for the rate increase, Janesville had the third-lowest water rate of the 83 cities in its class, Gagin said.
With the increase, the average annual water bill will be about $276—still below the state median of $291.
The increase will net about $3.5 million per year, enabling the city to replace water mains at a rate of 1% per year, Gagin said. The state requires that the money collected be used only for water main replacement.
The city will continue to borrow for large capital projects as needed, Gagin said.
Members of the commission lauded Janesville for its new approach, suggesting other cities should follow its lead, according to a Wisconsin State Journal article.
“They are really showing leadership by taking their medicine,” Chairwoman Rebecca Valcq is quoted as saying. “Deferred maintenance over time adds up.”
The state order for the increase could take 30 to 60 days, Gagin said. Residents likely will see the effects of the increase at the end of the year.
If the city had continued to borrow for water main projects, water rates would have continued to rise incrementally over time. Under the new system, rates will shoot up and then level off, Gagin said.
After 2039, the average water bill will cost less than it would have under the old rate system, he said.
The new approach means that after 2020, the city will pay thousands of dollars less in debt service, Gagin said. Its reserves will increase and remain positive, and debt service payments will be nearly eliminated by 2037, he said.
Under the borrowing system, reserves were projected to be $11.3 million in the red by 2043, Gagin said.
Janesville has been taking a more aggressive approach to water main replacement in the last couple of years to make up for years of inadequate attention, Utility Director David Botts said.
He said city officials realized it was not financially viable to continue borrowing money to replace 1% of mains each year.
Last summer, the city council approved City Manager Mark Freitag’s plan to submit an application to increase water rates to pay for water main replacement.
In 2017, Trilogy Consulting told the city it should be replacing about 14 miles of water main per year, which Botts said is not possible.
Of the city’s 370 miles of water mains, 42% were installed before 1971, according to the state commission’s agenda. The oldest mains in the city are more than 100 years old, which is about how long such infrastructure usually lasts.
Better maintenance of water mains means clean drinking water and fewer main breaks, Botts said.
The city evaluates water mains using a numbered scale, and the public works department pairs the work with street repairs to avoid tearing up streets unnecessarily, Botts said.