Ladysmith officials continue to review a planned sewer rate increase to be included in the city’s 2022 budget, hoping to lessen its impact on utility customers by spreading it over several years.
A cash flow requirement for the sewer department showing operations, debt service and replacement of department assets also included $43,000 in recovery funds intended to replace the losses that have occurred over the last few years of operating at a deficit. Total cash requirements for a year’s operations with these assumptions is $959,701. In 2020 revenues from services generated $803,243, and with no significant change in sewer demand, this is expected to remain static.
To cover all assumptions, a 21 percent increase would be needed. Concerns involved the impact of a 21 percent increase on customers. To help lessen the impact, city officials offered the idea of increase by a set percentage over several years.
Earlier, the council’s finance committee reviewed schedules showing three scenarios of sewer rate increases. They showed the net effect of increases of 10 percent, 15 percent and 20 percent in 2022, then small increases in subsequent years through 2026.
The 20 percent and 15 percent increases were deemed too shocking to implement.
It was decided to present the council with two scenarios. The first scenario would show the effect of a 10 percent increase in 2022, a 5 percent increase in 2023, then 3 percent increases for 2024-26. The second scenario would show the effect of a 10 percent increase in 2022, and 3 percent increases for 2023-26.
Last week, the city council received an update.
Ald. Marty Reynolds told the council it took several years for the sewer utility financial problems to develop, so it will take a set percentage over several years to fix.
“One of the ways of recovering from all of the problems we’ve got is a 21 percent increase in the sewer rates,” Reynolds said. “The concerns were we are not going to do a 21 percent increase.”
Reynolds said the council will have to find a way of dealing with the 10 percent increase option with smaller hikes in following years.
“There are reasons we are digging ourselves out of the hole or at least make appearances we are digging ourselves out,” Reynolds said.
Reynolds cited grants the city receives for street projects. The city rebuilds streets through a combination of grants, loans that must be repaid and special assessments on affected property owners.
“We can bring it back up,” Reynolds said. “Ten percent doesn’t quite get us out of the hole in 2022, but that additional 5 percent or 3 percent gets us probably even in 2023. That is when we will start looking at grants again.”
Reynolds told the council nearly every utility passes along annual increases.
In recent years, the city’s water utility has installed a new well, water treatment plant and water mains. The sewer utility has upgraded its wastewater treatment plant, lift stations and sewer mains.
Reynolds said these upgrades have occurred with very little increase, and now the city must consider an increase.
“Nobody is going to run an increase higher than what we absolutely have to in order to get the numbers where they have to be,” Reynolds said. “We have to get out of the negative. We are in the red right now with the sewer, but we can do it with a 10 percent increase.”
City officials called the sewer increase proposal “not a lot of money” and “nominal.”
“If you go back and look at your sewer bill, 10 percent is not a lot of money,” Reynolds said.
Mayor Kalvin Vacho said, “It is very nominal on an average user’s bill. It is a couple of dollars.”
The city council approves sewer rate increases. The Wisconsin Public Service Commission oversees water rate increases.
Last December, the Wisconsin Public Service Commission approved a city request for a water rate increase. The city applied to the PSC on March 9, 2020 for authority to increase water rates. The city filed its rate application after receiving a letter from PSC staff outlining commission staff’s concerns regarding the applicant’s financial integrity.
PSC staff computed some typical water bills for single family residential, multifamily residential, commercial, industrial, and public authority customers to compare present rates with the new rates. The overall increase in annual revenues is 49.53 percent and is comprised of a 53.32 percent increase in general service charges and a 42.03 percent increase in public fire protection charges. A typical residential customer’s bill will rise 51.95 percent, not including public fire protection charges. Rates have risen because of a 99.68 percent increase in gross plant investment and a 64.62 percent increase in operating expenses since the applicant’s last conventional rate case in 2013. The typical bills calculated using the authorized rates are above average when compared with those of similarly sized water utilities in the state.
The general service charges will increase by 53.32 percent, compared to a 42.03 percent increase in the annual public fire protection charge. The larger increase in general service charges results from a greater proportion of the annual operating costs being allocated to general service compared to what was allocated at the time of the applicant’s last rate proceeding and is based on current ratios of maximum general service demand to available system fire protection capacity. The larger increase in general service charges is reasonable, in that it reflects the cost of providing service appropriately.
The council and its finance committee are still reviewing the 2022 municipal budget.