City to propose new water rate structure

After months of wrestling with ways to fill a shortfall in the City of Sisters' water fund, the Sisters City Council is set to approve a new water rate structure and water rates at its meeting on Thursday, December 9. The rate structure will require many water consumers to conserve in order to avoid increases or realize potential reductions.

The meeting begins at 7 p.m. at Sisters City Hall. Public comment will be taken before the council votes on the new rates.

Over the past several years, the city has been reviewing and revising its various utility operations, making sure there is adequate revenue to keep city street, water and sewer systems adequately funded to support the significant growth the city has already experienced and to meet future operational needs.

One result of that effort was the creation of a local fuel tax to pay for street maintenance. The tax was approved by the city council in 2009 and upheld by the voters in a March 2010 referendum election. It also resulted in an adjustment of water and sewer rates in 2009.

"Fortunately at that time, financial projections allowed us to decrease the $39 monthly sewer rate to offset a needed increase in monthly water rate, resulting in no net increase in the $55.50 monthly utility bill for the average residential customer," said City Manager Eileen Stein.

The average residential customer has a 3/4-inch water meter. The sewer rate is now $35.70 and the water rate is $19.80 up to the maximum allotment of water of 1,337 cubic feet, or 10,000 gallons, of water. One cubic foot of water equals 7.48 gallons.

In 2010, the city completed an update of its water management and conservation plan. The plan indicates the city will revise its water rate structure to encourage water conservation.

"We found that our base consumption allowance of 13.37 hundred cubic feet (ccf) was significantly out of line with current billing practices in other cities," said Stein.

A survey of water utilities in Oregon found that most bill in the range of 5 to 10 ccf. The average residential customer in Sisters uses between 5 and 6 ccf in the winter. Summer water use varies depending upon irrigation practices.

In June 2010, city staff presented a new water rate structure plan to the city council. The plan recommended phasing in a water rate increase of 15 percent per year over three years, while simultaneously lowering the base allowance from 13.37 to 5 ccf. This would have the gradual effect of shifting the cost responsibility to those who use water thereby having a conservation effect while also providing financial stability for the city's water operations.

"The equity between residential and commercial customer classes is an important issue. Those who use the water should be paying for it," said Councilor Bill Merrill.

For several months now, the city council has been considering the rate plan and alternative options, including reducing expenses in the water department where possible.

"The city council is quite sensitive to the fact that this is a difficult economic climate and many people and businesses are struggling to make ends meet," noted Mayor Lon Kellstrom. "We have asked staff to reduce expenses where possible, including carrying as low of an operating contingency as possible."

The city will have to secure an interfund loan or pull from other reserves in the event of an emergency. Mayor Kellstrom acknowledged this is not an ideal situation, but neither is the economic climate.

At its December 2 workshop, the city council reached agreement on a new rate structure that will begin to introduce a conservation incentive, address the equity concerns and recognize the difficult financial situation that many people and businesses face. The proposed new rate structure will lower the base consumption allowance to 10 ccf, or 7,480 gallons, and increase the rate for water used over that amount.

"The new rate structure means that average residential customer with up to a 3/4-inch water meter will experience a reduction in their monthly water bill of $1.21 or $14.52 over the year if they don't irrigate much," stated Stein.

Reduction in use is key to reduction in payment.

"Medium" residential customers - those who might irrigate in the summertime or otherwise use a higher volume of water - will not experience a significant increase. The rate model shows customers in this category will experience an annual increase of 20 cents. Small retail customers will see an annual increase of $7, small restaurants about $75 and large restaurants about $275 annually.

Actual rates vary depending on the size of a customer's water meter. For customers with a 5/8-inch and 3/4-inch meter, the new base rate will decrease from $19.80 to $18.59 per month. Customers with one-inch and 1-1/2-inch meters will pay a new base rate of $20.59, down from $22.20.

Customers with a two-inch meter will experience an increase from $24.60 to $24.93, or 33 cents. Customers with 3-, 4-, 6- and 8-inch meters will see a decrease from $60 to $56.96. The monthly rate for customers qualifying for the city's low-income assistance program will decrease from $14.85 to $13.94.

The overage rate, or rate per 1,000 gallons of water used over the new consumption allowance of 10 ccf or 7,480 gallons, will increase from $1.32 to $1.64.

This new rate structure is expected to provide an overall 8 percent increase in water receipts revenue, which will keep the water fund in a positive balance through June 2012.

"This is a good first step," noted Stein, "but it is important to remember that future water rate increases will be needed, to make sure that water utility operations are adequately funded over the long term."