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PRWID Panel Continues to Explore Raising Water, Sewer Rates

Sun Advocate reporter

After hearing recommendation to raise water and sewer rates from financial advisers and auditors at two prior meetings, the Price River Water Improvement District board discussed the need for the increases on Tuesday.

In addition to raising rates, board members discussed a variety of options to curb expenses and increase revenues at the Sept. 5 meeting.

At the two prior meetings of the board, financial advisers and auditors presented the annual audit and a financial review of the district.

Both of the presentations suggested that, unless the board approved a rate increase, the district would be unable to meet its financial obligations in the long term.

Triggered by the recommendations from financial advisers three weeks ago, the board is looking at measures it can take to keep the district from operating in the red and to meet the financial obligations to various agencies with which the district has bonding agreements.

The first action which the board is considering was suggested by advisers, who recommended a stepped rate increase, with both sewer and water rates going up once before the end of 2006 and again at the start of 2008.

After hearing advice to raise rates, the board requested that the district staff prepare a rate increase proposal.

Jeff Richens, assistant district manager, presented a proposed rate increase for sewer.

The suggested increase affects all connects which are serviced by PRWID - whether directly, as in the case of unincorporated county areas near Price, Wellington and Helper, or indirectly, with a municipality acting as an agent between customers and the district.

Currently, residents in Wellington pay the lowest amount per hookup into PRWID sewer lines at $17.25, with $14.67 going to the district.

Helper residents pay $18.50, with $14.33 going to PRWID.

In Price, residents pay $22, with the district receiving $15.73 per connection.

Customers serviced directly by PRWID pay $25.50, all of which is collected by the district.

As the rates stand, the district collects more than $1.7 million in revenue from sewer customers.

The proposal presented to the board on Tuesday suggested raising all of the rates $3.25 before the end of the year.

In the proposal, Wellington's rates would go up to $20.50, Helper rates would go up to $21.75, with rates in Price rising to $25.50 and PRWID rates climbing to $28.75.

Beyond the initial rate increase, the staff recommended that an additional increase of $1.25 per connection be added in 2008.

The 2006 rate increase could generate as much as $78,000 before the end of the year, and would continue to generate funds into 2007.

With the second increase in 2008, the district would see revenues rise from their current level of $1.7 million to more than $2.1 million by the end of 2008, an 18 percent increase.

In the end, customers in Wellington would wind up paying $21.75 in sewer rates, 26.1 percent more than current rates.

Helper residents would see a 24.3 percent increase to $23, with a 20.5 percent increase to $26.50 in Price.

PRWID customers would see an increase to $30, a 17.6 percent increase.

District staff has yet to present a proposal to increase water rates, but that proposal will be part of the recommendation from staff, said Richens.

Raising rates is only part of the recommendation for the board to consider.

Richens presented a letter from the district's financial advisers, Lewis, Young Robertson & Burningham, which outlined a plan to consolidate its loans from the Utah Permanent Community Impact Board.

The letter explained that cause the district has multiple loans, with a significant total amount from the CIB, the district would see considerable savings if it consolidated its bonds.

At the same time, Richens pointed out that the rate increases proposed or in the works for sewer and water have been formulated with loan consolidation in mind. He explained that if the board chooses not to consolidate its bonds, rates will likely need to be increased further.

In looking at the bonds to consolidate, financial advisers looked at the 1993B and 1994B series bonds, two of the district's larger bonds. Combined, the two bonds represent more than $7 million of the district's $20 million of total debt. Tow other bonds could possibly be added to the consolidation of two more bonds established in 2000 and 2004, totaling more than $1.9 million.

In order to restructure the bonds, the district board would need to approve a new bond which would be used to pay off previously issued bonds. At the time the bond is issued, the CIB and the district can renegotiate the terms of the new loan, possibly lengthening the term of the loan and reducing annual payments.

The district would likely need to approve a rate increase before approaching the CIB regarding restructuring. The CIB generally requires that such steps be taken by government agencies prior to considering changes to the terms of a bond.

In restructuring the bonds, the district is looking at a cost for refunding the bonds estimated between $55,000 and $65,000.

While the district could look into restructuring other bonds, the restructuring would carry similar costs, and any savings would be marginal at best.

Bond consolidation alone is not enough to set the district on a fiscally conservative course. The letter from financial advisers stated, "[Restructuring the bonds] along with user rate increases ... would allow PRWID more flexibility in meeting debt service requirements and on-going maintenance and operational costs."

However, the bond restructuring and rate increase proposed by financial advisers and recommended by staff met with opposition from the board.

"I have a problem with raising rates without justification," said board member Karl Houskeeper, who was absent for the presentation from financial advisers three weeks ago.

At a previous meeting, financial advisers for the district siad that cutting operational costs would likely result in only nominal savings. Further, in spending time analyzing budgets and asking for a more detailed breakdown may results in increased costs to the district.

Still, Houskeeper insisted that a detailed breakdown of budgets be performed. He said he was uncomfortable voting for a rate increase before seeing if there were ways to cut operational costs.

Houskeeper also pointed out that there is no clear separation between sewer and water budgets. Specifically, the administration of the district, the fleet department and the maintenance department work in both the water and sewer areas, but no determination is made as to how much time or materials is used for each. With that information available, the board may discover that rates should be applied somewhat different from how it was proposed.

And while board members agreed that three of the five departments were not broken out into sewer and water, they also agreed that breaking those figures down would take months or years - time that the district may not have before it is forced to take action on rates.

District Manager Phil Palmer pointed out that the breakdown in the three departments which cross between sewer and water may vary from year to year. In some years, the district may do more with sewer. In others, it may do more with water.

Those variances would be represented in a breakdown of not only the sewer and water departments, but in the other three. Palmer noted that up to this point, the 2006 fiscal year is probably a good year to look at, since no major projects have distracted time and resources from one area or the other.

Richens pointed out that rate increases in the past few years have been only instituted when bonding required it. Keith Cox, who sits as chair of the board, noted that operational and maintenance costs have gone up in recent years, while no rate increases have been passed to cover increased costs in labor, insurance, fuel, steel, concrete and other expenses.

Board members also agreed that they should look at the budgets and see if there are areas that can be cut. By looking at the current budgets and determining where revenue is coming from and where that money is going, the board may have a better picture of the overall financial picture for the district.

"We had better be able to justify it," said board member Mike Dalpiaz. "We had better have it in black and white when the public is sitting there asking questions."

The board scheduled a work meeting to discuss the overall finances for the district. That meeting will be on Monday, Sept. 11 at 7 p.m. in the PRWID board room. At that meeting, board members said they hope to discover by how much and for how long it has been cutting into reserves to cover debt service and operational costs. Further, they hope to see how much is spent in each department and where cuts can be made.

"If we need a rate increase, we need to be educated, so we can educate the public," said board member Tom Matthews.

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