City users headed for higher water and sewer rates

By Scott Aust, Journal staff | Thursday, September 18, 2008

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Hold onto your wallet.

Rapid City water customers could face five to seven years, at least, of potential double-digit rate increases to pay for $135 million project to build two water treatment plants and make upgrades to the water distribution system.

On the sewer side, rates are proposed to rise about 10 percent next year, followed by about 4 percent annual increases through 2013.

During a special meeting Wednesday, Steve Burian, chief executive officer of North Dakota-based Advanced Engineering and Environmental Services, led the Rapid City Council through preliminary recommendations of a rate study and two potential funding scenarios.

The consultant indicated the city could either use a mix of the state revolving loan fund and revenue bonds with a 20-year payback, or use revenue bonds exclusively with a 30-year payback.

The mixed financing would mean faster payback and lower interest, but water customers would pay higher rates over the next several years compared to costs of repaying bonds. However, rates using bonding would be no slouch, coming in about 10 percent per year. 

The city has been considering the oncoming $135 million mega-project for a few years. The project will replace the city's aging water treatment plant on Mountain View Road and bring the Jackson Springs water gallery back on line, a source that historically provided about half of the city's water supply before it was shut down in 2006 because of potential contaminants in surface water mixing with ground water.

The goal is to build the Jackson Springs plant first. The Mountain View plant would be designed and construction bids sought when the Jackson Springs facility nears completion. Jackson Springs can support the city's average water needs while Mountain View is under construction.

The city continues to look for additional funding sources to help pay for the project, but the consultant's study assumed users would pay for all of the project's costs.

Current water rates vary according to the size of water meter and type of user, and are billed based on "water units." A unit of water equals 100 cubic feet. Generally, the more water used, the higher the rate paid.

Residential users are now billed $1.66 per unit, up to 40 units. When usage exceeds 40 units, the rate climbs to $2.18 per unit.

The consultant recommends a four-tier system for residential users at 10 units, 40 units, 75 units and in excess of 75 units. The tiers for larger meters would be higher.

Currently, a typical residential water bill, based on using 10 units of water, amounts to $24.10 per month. Under the study's recommendations, that same residential customer would pay $29.19 per month in 2009, using the 20-year state revolving fund option, or $27.06 per month next year under the 30-year bond scenario.

Rates are also recommended to increase annually for the next five to seven years, about 15 percent under the revolving fund or 9.5 percent for the 30-year bonds.

The council asked Advanced Engineering and Environmental Services to prepare additional spreadsheets showing proposed compounded increases on residential rates for both financing models. The city also asked for the ability to plug in other funding sources, such as federal funds, into the spreadsheet to see the impact on proposed rate increases.

Another meeting with the consultant will be scheduled in the next two to three weeks.

Contact Scott Aust at 394-8415 or scott.aust@rapidcityjournal.com