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City discusses water rate adjustment; Presents Board of Directors with options

4 · 06 · 22

The City of Arkadelphia anticipates a rate adjustment to its monthly water fees starting in June 2022.

City Manager Gary Brinkley made the announcement Tuesday during a workshop with the Board of Directors.

“The last time we adjusted our water rates was in 2013,” Brinkley said. “That’s a year shy of a decade.”

A lot has changed in the past nine years for the city’s Water Department. From a new water treatment facility, annual pipe repairs and increasing inflation rates, the Water Department is no longer operating at a sustainable rate.

“The cost of proper and necessary maintenance has risen considerably in the last few years but our rates have remained the same since 2013,” Utilities Manager David Green said. “We’re at a point now where have more needs than we have cash to spend on projects that have to be completed in the next five years.”

To combat this problem, city officials worked with Crist Engineers to complete a water rate study. The study resulted in three scenarios which would allow the Water Department to operate at point of financial buoyancy within the next five years.

CALCULATING WATER RATES

In order to understand how each scenario works, it is important to understand how water rates are calculated.

Water rates are calculated using the following formula:

(Base Rate) + (Unit Rate) = Monthly Cost

The base rate includes up to the first 2,000 gallons of usage per month.

The average user falls into the next category, using up to 4,000 gallons per month. 60% of Arkadelphia’s residential customers fall into this category.

THE BOTTOM 2%

For the past nine years, Arkadelphia’s base rate has been set at $8.30. Therefore, the average residential customer has been paying $12.61 per month for water. This falls in the bottom 2% of all water rates in the state of Arkansas. Residents see a larger number on their monthly statements due to the addition of a wastewater (sewage) fee and a Sanitation Department fee (trash/recycling pickup).

THE THREE SCENARIOS

Each scenario is a combination of a base rate increase, a unit rate increase and an annual percentage increase.

Scenario one proposes an increase in the base rate by $6.00 starting in June 2022. The unit rate would remain the same for the remainder of the year. Both the base rate and the unit rate would increase by 10% annually from 2023 to 2026.

Scenario two proposes an increase in the base rate by $12.00 starting in June 2022. The unit rate would remain the same for the remainder of the year. Both the base rate and the unit rate would increase by 6% annually from 2023 to 2026.

Scenario three proposes an increase in the base rate by $15.50 starting in June 2022. The unit rate would remain the same for the remainder of the year. Both the base rate and the unit rate would increase by 4% annually from 2023 to 2026.

STAFF RECOMMENDATION

During his workshop with the Board of Directors, Brinkley recommended the board move forward with scenario two.

“It’s the most balanced option, it’s predictable modeling for revenue and it still gives our residents the ability to control their monthly total,” Brinkley said.

According to Brinkley, scenario two features predictable modeling and is less dependent on weather patterns for revenue. Scenario one is too weather dependent, and too dependent on wholesale customers. Scenario three is the most predictable modeling, but is the least fair to customers who fall in the 2,000 gallon per month usage category, who are typically age 65 and older.

“While we recommend the Board of Directors move forward with scenario two, any of these options will get us where we need to be by 2026,” Brinkley said. “This adjustment will allow us to build back up our reserve fund, have the money we need to keep up with routine maintenance of our systems and continue to provide our residents with the high-quality water they expect and deserve.”

BOARD REACTION

Following Brinkley’s presentation, the Board of Directors asked if they could see a fourth scenario which would propose a base rate increase of $9.00. The unit rate would remain the same for the remainder of the year. Both the base rate and the unit rate would increase by 8% annually from 2023 to 2026.

The Board of Directors also suggested waiting until October 2022 to implement a scenario, rather than June.

The Board of Directors were in agreement a water rate adjustment is needed by the end of the year. They are scheduled to vote on a scenario at their April 19 meeting.

 

Click here to view the presentation from Tuesday’s workshop. 

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