Whitefish facing 'significant' water rate hikes

If Whitefish implements new water and sewer rates, as recommended in a new study, users could see significant increases on their monthly bill over the next decade.

Standard residential water users could see rates go up by 3.6 percent over next five years, while wastewater rates could increase by as much as 95 percent over the next 10 years. Irrigation rates also could increase for a standard meter by 35 percent over five years.

Engineering firm AE2S is recommending the increases in a recently completed water and wastewater rate study.

“This is a pretty significant change,” City Manager Chuck Stearns said. “Over 10 years, many people’s rates for wastewater could double.”

Residents with the most common standard residential wastewater service, which generally includes the downtown area, could see their monthly bill increase from $31.82 currently to $62.10 by 2026.

Stearns said the large rate increase is recommended largely as a way for the city to pay for a new wastewater treatment plant that is estimated to cost up to $20 million. The increase in irrigation-only rates is recommended as a way to end subsidization of those rates by other users.

Standard residential water users could see a slight increase from the current monthly bill of $40.53 to $41.98 in 2021.

City Council will vote on any rate changes before they would go into effect.

“We will have to hold public hearings on rate changes, but this is sort of early notification that many people’s sewer rates would go up 95 percent over 10 years and irrigation watering would go up 34 percent over five years,” Stearns noted. “It could be higher is some cases, for some customers.”

The city contracted with AE2S last spring to begin the study, which includes a rate structure analysis including the review for compliance with state law, capital project financing analysis and recommendations for the city moving forward. The last time the city conducted a water rate study was 1998. A wastewater rate study was done in 2009.

Shawn Gaddie, with AE2S, said the cost of service analysis looks at whether the revenue being collected by the city is in line with current expenses, while also allowing the city to save for capital projects.

“We’re looking to determine fair and equitable rates for users,” Gaddie said. “We also need to set the utility up for success.”

Gaddie noted that increases were mainly focused on the volumetric rate, or the amount used, rather than increasing base rates.

“We kept affordability in mind,” Shawn said. “We put the effect on the usage and not the base rate. We want people to have some ability to control how it effects them.”

The study is designed to help prepare the city for new regulatory standards expected to be implemented by the Montana Department of Environmental Quality. The city’s existing wastewater treatment plant is not expected to meet the new standards. A new wastewater treatment plant is estimated to cost $15 million to $20 million.

Public Works Director Craig Workman noted that the study assumes no grant money being used for construction of the treatment plant, but the city is currently pursuing state and federal grants that may assist with funding.

“The federal grant could pay for 30 percent of the cost,” Workman said. “We’re very aggressively working on the funding to help with that cost.”

The study notes that by making adjustments to the rates, it will prepare the city for debt associated with the new treatment plant and address cost of service inequities.

“By gradually increasing revenue requirements with the goal of generating adequate revenue to meet debt service and coverage requirements by 2020, the city can show a proactive approach to managing utility finances,” the report notes. “In the interim, reserve funds can be built that can potentially minimize necessary future rate increases provided that coverage can be met at that time.”

Water irrigation rates are currently subsidized by about 36 percent and the study recommended ending that subsidy. It notes that the irrigation users are not “generating revenue in line with the cost of service associated with irrigation water use” and as a result the other users are footing the bill.

“Our rates have possibly encouraged over consumption of irrigation,” Stearns said. “Irrigation to many people is a necessity, but if you’re low income or on a fixed income and you’re trying to pay taxes and put food on the table, one of the things you care less about is irrigation. Changing our rates so we stop subsidizing it would be good.”

Council has expressed early support of increasing irrigation rates, in part, as a way to encourage water conservation in the city.

Whitefish customers receive a reduced charge for water used on lawns, gardens and landscaping and an averaged sewer charge during the five monthly billing periods from June through October. Residential customers can also purchase a separate irrigation meter.

The most common irrigation customer with a 5/8-inch meter, according to Stearns, would see an increase of about 35 percent over five years. The current monthly bill for that irrigation customer is $35.48, and if the new rates are approved, at the end of the five-year increase in 2021 the monthly bill would be $47.76

A customer who has a 5/8-inch meter but is within a pumping zone, meaning the elevation of their home compared to the city’s water reservoir requires pumping, could see their rates almost double over the five years. The current monthly bill is $49.76 and could increase to $100.52 in 2021.

The study notes that users in the high pressure zone portions of the system are “not providing revenue in alignment with the amount of cost associated with service to the high pressure zones.”

A second issue pointed out by AE2S is how the city handles low income water and wastewater rates. Currently, senior citizens age 65 and older can qualify for Whitefish’s reduced rates regardless of income. However, AE2S is recommending the city modify its policy so that customers qualify for the discount based on income.

The city provides water service to about 3,250 residential customers and 320 commercial customers within the city limits, as well as 68 residential and seven commercial customers located outside city limits.

The city provides wastewater service for about 3,530 customers within the city and 106 customers outside of the city limits.