Most water, wastewater and public works superintendents attest to the fact that no one likes to hear their water and sewer rates are going up, but everyone likes clean water coming into their homes on a consistent basis paired with an operational sewer system.

Since most municipalities’ water and wastewater systems receive funding from user fees, it’s inevitable that rates will need to be adjusted to meet the needs. Some city officials put off raising rates to keep constituents happy, but that usually results in the need for a larger rate increase in the future. Others bite the bullet and have regular annual rate increases.

One city that’s chosen that route is Edmond, Okla. Kris Neifing, director of water resources for the city of Edmond, said, “We’ve been raising rates for over a decade now, doing it incrementally rather than one large rate increase.”

This approach started around 2010 with a 3%-10% annual increase for water and wastewater to fund capital improvements, plus operations and maintenance. He shared they did a water and wastewater master plan in 2013 to look at infrastructure to determine what’s required for current and future needs of the city.

The first large project is a wastewater plant expansion. One component of the project focuses on growth while the other is primarily regulatory in order to meet the new permit, according to Neifing. Construction cost is $171 million, and it started in 2017. Also included in the project were large-diameter sewer lines and rehabilitating other sewer lines.

On the water side, the city looked at future water supply, determining where it would come from before developing that plan and implementing it over the past 10 years. This included uncovering how to get the water out of the lake. The planned water plant expansion and upgrades cost $450 million.

Neifing said the current water plant was built in the 1980s and went online in 1987. The wastewater plant was built in 1972 and expanded in 1986 and in 1994, “so it’s had three phases of expansion.” Some of the sewer lines date back to the 1900s — especially in the older parts of town.

“That’s where we concentrated our efforts because if it’s wastewater, it could be a problem with overflows, and with water, it’s unknown materials — it could be lead or cast iron with lead joints,” he said.

It’s something the city has been working on for years. Neifing shared that there was a building boom in the 1940s and 1950s, and a lot of the old infrastructure was replaced at that time, especially in the downtown area.

Neifing said the city spends “a good amount of time educating people about what’s going on with projects, but it’s still a challenge — even when they have information — to get people to look at it and understand it, but they understand rates!”

In the ʼ90s, prior to Neifing’s start, city officials chose not to raise rates for decades and problems were hidden, but they have to be dealt with at some point, so the city has to ramp up efforts to repair lines. To do so, it started increasing rates.

“We’ve kept that approach ever since: slowly increasing rates to a point where it’s affordable — which can be an issue for some.”

Neifing said the city has tried to keep the base rate as low as possible and has the volume used at a tiered rate.

“This gives customers the most control of their bill,” he said. “The toughest call to get is from an 85-year-old lady on social security who doesn’t have the money versus someone working with a professional lifestyle who uses a higher amount of water than others. It’s a choice to have a pool or to irrigate the yard versus needing water to live. It’s trying to balance that discretionary use versus what’s needed to live.”

He said anytime the city gets ready to do a big project it updates the rate study to make sure its finances are in order and it also updates annually “to make sure we’re still on track and still in line with what our consultants expect.”

The biggest challenge to Edmond’s system is “the cost of the projects and how much they’ve increased over even five years ago. Through COVID and with all the infrastructure money out there, prices have risen way past inflationary numbers. We’re looking at 30-40% increases on projects so the challenge is keeping costs in control and still building good projects,” he said. “We don’t want to build half a project — we want to build it right and to be able to maintain it. We don’t want to leave any hidden problems for the next person.”

Lead time for materials has been another challenge, and not just pipes, which have been a big one, but also for valves. Some small components, like gears, generators and electrical components, have had a two-year lead time.

To deal with that, he said, “When we bid a project, we offer flexibility to the contractors and offer time extensions, so they have time to get the materials in. We’ve awarded contracts and then delayed the start of construction, especially pipeline projects, and have waited as long as six months in order to give them time to get the materials.”

Residents receptivity to rates

Neifing said people are generally supportive of building plans, but not the increases that go with them.

“I’ve yet to have someone upset about the planning and why we’re doing building projects, but nobody likes rate increases. I tell them, ‘I agree with you, but we all like to have water.’ People can budget for a 3-10% increase, but it’s hard to budget for 50% — that’s such a shock.”

So, he said in reality, “We still get a lot of pushback. Our mayor and council members get a lot of complaints over it. When we talk to people, we tell the story of why we’re doing it. They like the projects, not the rates.”

However, he said small percentage increases are more acceptable.

“If we were asking for 25%, there’d be an uproar. So we’ve tried to avoid that by planning out.”

He said when there’s a public hearing on rate increases, no one from the public shows up, but they reach out to the mayor and the council members for their districts.

Edmond has typically done five-year rate plans, but the most recent was for four years because of all the unknowns on a couple of large projects, and he said if need be, his department would go back to the council.

“But we’ve told people to expect a 2% to 3% increase from now on — it’s the only way we can fund our operations,” he said.

And that, he believes, is what makes Edmond unique. “The fact that we’re tackling the problem and haven’t shied away from it; we’re doing the right thing and not leaving problems for the next generation,” he said.

Neifing noted Edmond city officials are “taking the heat, but they also know we’re not kicking the can down the road. It’s tough politically, but our mayor and council are standing up and saying, ‘We’re doing the right thing.’ They all believe in the projects and the needs and believe we’re being good stewards, so they’re staying on board. It’s not easy. They get a lot of heat, but they keep charging forward.”

Sonoma, Calif.

In Sonoma, the recently passed rate increase wasn’t met with much resistance, according to the city’s project manager and administrator of public works, Oriana Hart. When asked if the city got pushback from the recently passed rate increase, she responded, “Less so than other places. We didn’t really hear that. Folks understand where we’re coming from and the need to have a fund — we didn’t get a lot of pushback.”

Hart said the city received maybe 50 negative comments out of 5,000 to 6,000 residents.

In January, Sonoma City Council approved a contract with Raftelis Financial Consultants to review the city’s water rates. The consultants were tasked to assess the water department’s budget, maintenance and capital improvement projects. They began in March by assessing the future revenue requirements that will be needed to fund operations and maintenance, capital replacements and refurbishment programs. They also factored in debt service obligations and reserve funding and conducted a cost-of-service analysis and updated the rate structure.

Theresa Jurotich of Raftelis gave a presentation to the council in July. She told the council they were setting rates for 2024-2028, and if they did nothing, in the fifth year, they’d drop below the target and be out of money and the debt service would be in default.

She was recommending a steady adjustment of 4% beginning on Dec. 1, 2023. By doing so, the city would be at target by the 10th year. If they did nothing now, they’d need to enact a larger increase in five years.

Hart said the council approved the 4% annual increase, which will take effect Dec. 1, and added, “With inflation, the 4% didn’t seem so onerous.”

The cost of Sonoma’s water is influenced by where the city gets it. “Eighty percent of our water is imported, so we don’t have a lot of control over it,” Hart said.

The last rate study was done in 2018, and rates were raised at that time with the council’s discretion.

“In the middle of the process, the council paused the rate increases during COVID,” she explained.

The capital improvement project the city is working on now is upgrading its metering system to an advanced metering system, which is ultrasonic and uses cellular service to provide real-time data every 15 seconds. Customers will also have the ability to log into a portal and see real time usage, which Hart said should help with conservation efforts and help identify leaks.

She said the meter system is “pretty old.” The city went to an automated regulatory meter 20 years ago, where the technician can get a reading just by traveling past the meter, but it only transmits if you’re nearby.

“In light of state regulations, providing better data of where the system is losing water will help guide other capital improvement projects,” she said.

Other than the meters, Hart thinks the system is in good shape. “We have an asset management program that we regularly update.”

Currently, the city has in the budget to do one capital improvement project upgrade on a section of the pipeline system.

When asked if she believed consumers were more cognizant of the value of water versus other areas of the country. She replied that’s what the city is trying to raise awareness of with its water conservation programs.

“Locally, we don’t have the capacity to support our system, so we’re buying our water from another watershed — it’s a valuable resource and we’re protective of our groundwater.”

One piece of advice that Hart offered was something the city didn’t do, but heard another city had: building in a pass-through for inflation.

“We built in a pass-through for unknown increases in our water purchase cost. If it goes over a certain amount, we can adjust our rates — but we didn’t think to do that for inflation.”

Maintaining water systems while keeping rates affordable is a balancing act, especially with recent supply shortages, and one that more and more communities will deal with as growth continues and infrastructure ages.

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