Wednesday, April 01, 2009

TOP STORY >> Water-rate increase bigger than expected

Leader staff writer

Jacksonville Water Department rates will jump 51 percent during the next five years if the city council approves it on April 16.

If passed, the increase could take place the next day, Shada Roberts, an engineer with Garver Engineers, told the Jacksonville Rotary Club on Monday in explaining the rate hikes.

Garver Engineers and HDR Engineering of Bellevue, Wash., consultants for Jacksonville Water Works, are recommending a 13 percent increase in 2009, with another 13 percent increase in 2010 as well as in 2011.

Rates in 2012 would increase another 8 percent and then 4 percent more in 2013. Rates will be reviewed again in 2014.

“That’s about a 50 percent increase over the next five years, and I know that is a pretty good hike, but that will equal $24 million, which is half of what we need for improvements,” said Mike Simpson, manager of Jacksonville Water Works, following the meeting.

“These are tentative numbers, but are the closest that we know,” Simpson said. “We don’t want people to say that they didn’t know once it is approved. This is how it is going all across the country – it is costing more and more to produce a gallon of clean water. But it is still a great deal — $2.50 will buy you a thousand gallons of water, but only one gallon of gas.”

The increase would be the same for all customer classes – inside and outside Jacksonville city limits, wholesale, retail, both commercial and residential meters.

For typical household usage – an average of 6,000 gallons per month – the increase the first year would be an estimated $4 per month.

Simpson emphasized that the Jacksonville Water Commission has not voted on the recommended rate increase. That will happen at a special meeting next week.

Existing reserves and the rate increase will provide half of the $48 million needed for system improvements to meet water demand to the year 2050. Between now and 2011, half of that amount is needed to build transmission lines, a meter station and mains to increase the flow of water from CAW sources.

A possible change in the rate structure would give a break to low-use customers, many of them on a limited income.

With the new rate structure, water would get more expensive, the more that is used – which is the reverse of how rates are now structured. At last week’s water commission meeting, members favored that idea, a growing national trend to encourage conservation.

“People need to realize that as they use more water, the rate will go up,” Simpson said. “The 20,000- to 50,000-gallon (per month) users will be paying quite a bit more.”

The rate change has been triggered by two things. The price of water that Jacksonville purchases from Central Arkansas Water went up 1 percent in January, and the utility needs its customers to bear that cost.

Secondly, the increase is based on the findings of a rate study that occurs every five years as part of an update to the Jacksonville Water Works master plan. Conducted by Garver Engineers, the master plan assesses water needs, water sources and system improvements to the year 2050.

“We have been paying for a rate increase without being covered,” said Simpson.

The rate study, which cost $80,000 and is being done by Shawn Koorn of HDR Engineering, has brought the true long-range costs of producing water into focus. Considered were current and projected demand, debt-service obligations, revenues, capital improvements, operating and replacement costs, and the price for water purchased from Central Arkansas Water.

The rest of the $48 million needed for improvements will likely come from a combination of bonds and low- or no-interest loans. Federal stimulus money is also a possible source. Options are being explored now, Simpson said.

Jacksonville currently depends on CAW to meet half of its water demand, which averages 4.9 million gallons per day. The rest of the water comes from well fields located southeast of Jacksonville. By 2050, demand is projected to climb to 12 million gallons per day.

“By 2017, all the wells are expected to be below what can be used,” Roberts said.

Also figured into the rate increase is Jacksonville’s share in construction costs for the Lonoke White County water project.

Last week, the water commissioners voted to go forward with a contract to purchase 1.2 million gallons of water per day from Greers Ferry Lake. The water may not be needed for years, but commissioners favored having an alternate water supply in case of a breakdown with the CAW system.

Not being totally dependent on CAW is a good thing, agreed Rotary member Ben Rice.

“In the event of a terrorist attack on the I-430 bridge, we need a good alternate source of water in the event of that happening,” Rice said. “Also, another water source is good for business – lets you pick and choose” from whom to buy water.

Jacksonville customers’ share of Lonoke White construction costs are built into the proposed rate hike. For the first two years, it would be $2.50 per meter per month. After that, it would be $5 per meter per month for an estimated 20 years.

All of that will pay for a 24-inch transmission line to bring water from Greers Ferry Lake to a distribution point located between Ward and Cabot, as well as a treatment plant.

The project, which will be working in four years, looks like a strong candidate for federal stimulus funds.

“It is one of the big projects in the state that would qualify for the stimulus money,” Simpson said. “When the coins start rolling down hill, we want to be in their path.”