New rate, old bill

In an effort to address an aging distribution system that on average lost 76 percent of community water to leaks over the past three years, the Absarokee Water & Sewer District Board of Trustees approved new water rates at their Oct. 13 meeting by 4-1.
Trustee Karl Gaustad cast the lone nay vote.
Effective Feb. 1, customers who use less than 4,000 gallons per month, about 63 percent of the district, will continue to pay $34 per month. But the base rate will rise from $17 to $22, the $17 fee to pay off the loan on the new hillside storage tank will disappear, and a new $12 charge will be added to build up a fund for future infrastructure improvement projects.
The net effect is that the bill for most residents will remain the same – $34. The charge for water used over 4,000 gallons will increase from $1.61 per 1,000 gallons to $2.50.
Background
Board president Mike Reynolds explained at an Oct. 6 public hearing that the current $17 base rate raises about $130,000 per year, but operations actually cost about $170,000 last year, a result of inflation, higher electrical costs for pumping water, higher salaries and more expensive parts and supplies.
“Our costs have increased so much that we have no other alternative,” he said. “We no longer have a repair line on the budget – we pay out of savings or another budget line.”
Reynolds said the $12 capital improvement charge could be saved up for a few years and then used to help get the district obtain grants or low-cost loans to pay for replacing Absarokee’s deteriorating and undersized steel mains.
The steel water main leaks are so bad, District Manager Steve Skuhra said, when a pump at the Circle T subdivision went down this past spring, the system couldn’t keep up with demand.
“We find ourselves putting a patch next to a patch,” he said.
Fixing leaks will save money in the long run, Trustee Roger Nummerdor said – less electricity to pump water to the hillside tanks, less chlorine added to the system and less repair costs.
Reynolds said the statewide average monthly bill for 4,000 gallons came to $40.47, but comparisons are difficult as communities assess water usage a wide variety of ways.
“Rate increases are always hard,” Great West Engineering Project Manager Collette Anderson told the board before the public hearing. “I’ve seen that at every community I go to. But I will say one thing – your rates are very low.”
Anderson was hired to complete a preliminary engineering report for the district, which is required before any major water project can take place and which helps communities qualify for grants or low-cost loans.
About a third of Absarokee’s distribution system consists of deteriorating or undersized steel pipes, totaling about 11,000 linear feet. Anderson said the town of Cascade was able to replace 12,000 linear feet of water mains for about $1.5 million, much of which was paid through grants and low-cost loans.
“A lot of that construction took place in downtown areas and included repaving,” she said.
If the Absarokee district borrowed $1.5 million from Montana’s State Revolving Fund, Anderson said, it could qualify for a “forgiveness loan” of up to $500,000, leaving only $1 million in debt, which could be paid off at $11 per customer per month over 20 years.
A major infrastructure improvement project could also be phased in at smaller amounts, Anderson said. Coming up with an improvement project with costs and funding opportunities that will be presented in a public hearing is the next step, she said.
Anderson said she’s gathered information on Absarokee’s water system and put the figures into a software model to sort out priorities. Based on 1 percent future population growth, the district has adequate water supply from wells and adequate storage, and while pressure is good around Absarokee, certain areas experience inadequate flows to fire hydrants. The problem is rusting steel pipes in the ground.
“If a section of main line has been patched over and over and has low fire flows, it’s a good candidate for replacement,” she said.
Opposition
The idea of maintaining the $34 monthly base rate after the new storage tank is paid off in January didn’t sit well with some residents at the Oct. 6 public hearing.
Mike Borseth, a former district board president, said keeping the $34 rate but using the money for higher operating costs and to build up a capital investment fund “was just changing the name.”
In response to Borseth’s comments that the board was not being “transparent” about the way they were handling the rate increase, several board trustees pointed out that all board meetings are open to the public and that the public hearing had been advertised. Tom Degele, who will join the board in November, agreed with the idea of building up funds so the distribution system can be repaired, but he also was concerned that the public might think the $17 tank fee “never went away.”
Degele suggested letting the base rate drop to $17 for a few months before imposing the new rate, but several trustees said that amounted to several months of lost money.
Pete Gaustad, who also will join the board in November, asked about using special equipment to track down leaks. Anderson said her analysis suggests it’s more cost-beneficial to replace entire sections of steel line than to try to track down individual leaks.
Other concerns raised at the public hearing included whether the district was charging enough for water usage above 4,000 gallons and whether the board could guarantee that the $12 fee was used for infrastructure improvements and not something else. One person wanted an “end date” for the capital improvement fund.
“The next board can spend the money however they want,” Reynolds said.
In a meeting held before the public hearing, the board agreed that it needs to convince the public that the rate increase is the right thing to do.
“We need to educate everyone,” Trustee Betsy Steffanich said.
“We’ll need to hold more meetings,” Anderson said.