Massive rate hikes may have been averted by the city staff’s hard work in seeking grants and diligently communicating with federal and state officials during the year the rate study was conducted.
Truth or Consequences City Manager Gary Whitehead concluded the March 25 public session on the water and wastewater rate study with the assuring statement that “We [city staff] will not be recommending a 15 to 20 percent increase” to those rates.
“We might survive on 5 percent [yearly rate increase for sewer already in effect] and 3 percent [yearly rate increase for water tied to fluctuating Cost of Living figure, which the study projected will average 3 percent a year],” Whitehead said.
The city may institute a few of the study’s suggestions that will bring in more revenue, Whitehead said. Currently the same rate is charged no matter what the water meter size. It’s common practice to charge more for larger meters, since it costs the city more to create the pressure to deliver larger volumes of water on demand to commercial taps.
The city may also do away with the 2,000 gallons of water that is included in the base water rate “in a couple of years,” Whitehead said. Residents would then pay for each 1,000 gallons used, which is about $3.50 currently.
Grants may save us from 15 to 20 percent rate hikes, which Whitehead is confident the city will receive.
What is driving a need for rate hikes, Whitehead said, is a $5 million or so fix to the wastewater treatment plant, which was under a New Mexico Environment Department administrative order when Whitehead first came on board a year ago.
That prompted Whitehead to redefine the NewGen study scope of work. The city has to fix the WWTP soon, which will cost about $5 million. If the city doesn’t get grants, the study estimated a yearly loan payment would require about $250,000 more in yearly revenue.
The current debt carried by both the water and wastewater departments is nearly $500,000 and a $5-million loan would bring it up to $750,000.
The NMED recently lifted the administrative order because the city has developed plans to fix the WWTP, submitted grant applications and done this rate study, which demonstrates the city’s good faith efforts to resolve the problems as fast as possible.
I asked Whitehead if the city could present an overview of the amount of work done and work that still needs to be done to fix the water and sewer systems in order to give the people a sense of what they are facing in future capital-projects expenses that drive rate increases.
The city’s 2019 water preliminary engineering report or PER by Wilson & Co. was the “city’s blueprint” for addressing necessary repairs to the water system, said then-City Manager Bruce Swingle about five or so years ago. The 2019 study estimated the cost would be $120 million, which Whitehead said is probably $150 million in today’s dollars.
Whitehead confirmed that the city is following that blueprint and will go through the PER and “check off what has been done so far,” and present it to the public.
He estimates the city will have completed about 50 percent of the 2019 study’s repairs when the $43.3 million or so in water projects that are on the books are done over the next four years.
Whitehead gave his reasoning for the 50 percent estimate.
The $17 million Critical Water Line project will replace water meters, water lines, “extension lines” and fire hydrants “from veterans’ hill to Williamsburg,” Whitehead said.
“The other projects are bringing in main trunk lines and putting in pressure relief valves everywhere else throughout the system,” he said.
“If you look at the map [under the projects tab on the city’s website] and see the streets that don’t have a water extension running through them, you can pretty much come up with a reasonable ballpark percentage where I can say we’ve probably got 50 percent of the city covered,” Whitehead said.
“The other 50 percent we’ve not looked at for doing a waterline extension,” Whitehead said, “but the work we’re doing is creating a new main foundation system that we can start connecting to and building projects off of.”
I asked if a similar overview could be given for the wastewater system. Wasn’t an overall preliminary engineering report or PER in the works?
Whitehead confirmed an overview PER for the wastewater system would go out to bid “pretty soon,” funded by a $200,000 grant awarded last year.
Keeping rates at a certain level and doing rate studies are required by federal and state granting agencies, Whitehead said, and the people should be aware that any city seeking such grants, not just T or C, “won’t get their help unless we show we are willing to help ourselves.”
Spare cash in the water and wastewater funds are also examined by granting agencies, many of which are overseen by the New Mexico Finance Authority. Whitehead estimated that 50 percent of the yearly revenue should be kept in cash reserves. The water utility takes in “about $1.7 million,” Whitehead said, and the wastewater utility “about $1.4 million” a year. He estimated $2 million in cash reserves will be left at the end of this fiscal year, June 30.
The city will probably have one more public session on the rate study, Whitehead said, before deciding what rate hikes will be enacted.