The Nevada City Council passed the first reading of an ordinance that would increase water rates 5 percent and sewer rates 2.5 percent each year for the next five years. If the final two readings are approved, the rate increases would take effect July 1. This would mean, based on the median household in Nevada, residential customers could expect to pay approximately $3 more per year for their water and sewer bill.
Tanya Miller, of the HRG Company Sioux Falls, S.D. office, was part of a team who conducted a water and sewer rate study for the city. She presented the study’s findings via speaker phone during the council meeting. Miller said the rate increases are needed to cover inflation costs for operations and maintenance of facilities, and to maintain the city’s reserves for both the water and sewer departments in order to help fund capital improvement projects. These projects include a 2”/4” water main replacement, C Avenue reconstruction, Third Street replacement, rehabilitating manholes and lining the city’s sewers.
Currently, the net income for the water department is negative and will become more negative if rates are not increased. Also, the department’s reserve funds will be depleted within a few years if net income levels continue to decrease.
“The water department is not receiving sufficient revenue from any customer classes to meet expenses,” Miller said.
The sewer department has a positive net income currently, but planned projects are expected to put the net income in the red for three of the next five years. Added to decreasing net income are the equipment and infrastructure improvements that will likely be needed for the aging wastewater treatment facility.
Wastewater Department Superintendent Mike Neal said the treatment facility is starting to fall apart and the city has been “nickel and diming it” to make repairs.
“At some point in the very near future, we’re going to outgrow our facility because of the property it’s located on,” Neal said.
He believes the city needs to plan ahead for what they will do once the aging facility is no longer able to handle all of Nevada’s wastewater. Neal said they have considered two options - either building an entirely new facility at a new location or building a second facility to handle wastewater from the West Industrial Park - but no decisions have been made.
According to Neal, the city is proactively planning for necessary capital projects, including Ultraviolet Disinfection Improvements and Digester Facility Improvements, which will be mandated by the Iowa Department of Natural Resources when the city receives their new permit.
With the proposed rates, the water department will be able to reserve 43 percent of their yearly operating revenue and the wastewater department will reserve 84 percent. Miller said it is recommended that 30-40 percent of a department’s operating revenue is maintained. The significantly higher reserve amount for the wastewater department is needed because of the aging infrastructure.
Miller said additional increases may be needed, beginning in 2018, to keep revenue increasing.
Councilman Brian Hanson said he is typically not in favor of increasing water and sewer rates each year, but he likes the smaller, proposed increase amounts.
Councilman Chris Clark said he does not want to see rates increase, particularly the sewer rates, because of the current positive net income levels, but he could not think of an alternative solution that would increase revenues for the departments without increasing monthly rates.
“I understand the need to change the system, but the conservative side of me wants to build money up and pay for it (capital improvement projects),” Clark said.
In the end, the council approved the first reading of the ordinance 4-1, with Clark in opposition.
Other agenda items included:
2012 Storm and Footing Drain Collector Project - third pay request - Shawn Cole said 23 people (out of approximately 35 homes that qualified for the project) have shown interest in the cost-share program that will get their sump pump lines connected to collector lines Ames Trenching installed last fall. Cole and Ames Trenching employees will be visiting the homes next week. Council approved Cole’s recommendation to hold 5 percent retainage until the individual property owner’s connections are made and submit a payment of the remaining amount of $89,300.
Resolution providing notice of intent to fill council vacancy by appointment - Andy Kelly was sworn in as mayor during the council meeting, vacating his Council Ward 2 seat. Applications for the seat will be taken through May 31, and council is expected to appoint an individual to fill the seat during their June 10 meeting.