During their regularly scheduled meeting on May 15, the city council heard from Derrick Whitehead of Municipal Consulting Group, which was contracted to analyze the existing water and sewer rate structures in the city of Colusa.
The City Council adopted two separate resolutions approving the Water and Sewer Rate Analyses and beginning the Proposition 218 process – which stipulates that any new taxes are subject to voter approval – for the rate changes. Public hearings for both were scheduled for July 17, when the council will hear public testimony and receive written protest on the proposed water and sewer rate changes.
Water rate changes
According to the report from Municipal Consulting Group, the City of Colusa currently provides water service for about 2,175 customers, 1,749 of which are residential and 426 of which are non-residential customers. The city requested that Municipal Consulting Group analyze the existing water rate structure for compliance with a recent lawsuit, recommend modifications to the rate structure as needed, and then deterimne if the revenue stream is adequate to meet both Colusa’s annual operating needs, as well as support the utility’s long-term capital improvement program.
Whitehead suggested that the city move away from a tiered water rate in order to comply with what he described as the San Juan Capistrano suit, which questioned the ability of a water purveyor to use such a rate structure in their service charges, unless there is an additional cost associated with the tier. Rather than a multi-tiered rate structure, Whitehead proposed that the city move to a two-level fee, which is comprised of a base rate and a single-tiered usage rate.
“We’re not proposing an increase, but a modification of the rate structure,” Whitehead said.
Base rates are determined by the size of the water meter, while a universal usage rate of $0.37 per hundred cubic feet of water used.
“There are 1,698 customers with a 3/4 inch meter,” Whitehead said, adding that 92 percent of those customers will be at or lower than their existing bill, under the new billing structure. “There’s a benefit to your residents as a whole.”
Whitehead suggested that the city come back and reevaluate their rates in two years and adjust accordingly.
Sewer rate changes
Colusa provides sewer collection and treatment for about 2,417 customers, including 2,250 residential customers and 167 non-residential customers. Nexgen Utility Management, in conjunction with Municipal Consulting Group, analyzed the existing rates and recommended modifications to support the city’s captial improvement program, while maintaining sufficient operation and maintenance revenue for the city’s wastewater utility operations.
The report suggested moving the city’s residential sewer rate to a flat fee, with some large rate increases planned over the first few years of the new rate structure. The initial flat rate would start at $76.38, which Whitehead said was about what the average customer is currently paying in Colusa. There would be a 12.5 percent increase in 2019, a 9 percent increase in 2020, a 6 percent increase in 2021, and a 3 percent cost of living increase every year thereafter. Non-residential accounts would have a modified base fee, along with new block amounts.
The consultants determined that Colusa’s wastewater utility is meeting their operating expenses by augmenting annual revenues with funds designated as reserve funds. If a course correction is not made soon, the wastewater utility’s reserves will be rapidly depleted, the report said. For that reason, it was strongly suggested that the City implement a rate increase. They suggested a larger rate increase that would allow the city to change the type of discharge the wastewater treatment plant has, switching to a land discharge through developing a recycled water supply, which could be marketed or used to irrigate City owned property, and even grow crops like alfalfa. The rate analysis incorporated changes and system upgrades necessary to make that happen. There would be savings in the disposal of biosolids as well, in addition to establishing a source of ag-revenue. Passing a rate modification will also open up some additional funding for the city – both in the form of grants and low interest loans.
“While there is a significant upfront cost for the City, the City has been assured that they will receive an additional $2 million grant from the SRF (State Revolving Fund) and upon enacting the the Prop 218 (rate modification) and is elibible for another $4.1 million low interest loan from the SRF,” the report stated.