Water Works approves 10 percent rate hike
Timothy Meinch
tmeinch@dmreg.com
The Des Moines Water Works board approved a 10 percent across-the-board rate hike Tuesday that will impact all individual ratepayers and wholesale customers.
The increase will hit Des Moines and Polk County households on April 1 and likely drive up rates in many neighboring suburbs, like Ankeny, Urbandale and West Des Moines, that purchase most of their water supply from Water Works.
CEO of Water Works Bill Stowe said Tuesday that the substantial bump in rates, which covers the annual operating budget at the public utility, follows a national trend. Water use is decreasing with more-efficient appliances and conservation efforts, while aging infrastructure drives up costs for maintenance and service delivery, he said.
"The reality is, we built under different assumptions 50 years ago than we're operating under now," Stowe said, adding that a cool, wet year further decreased usage last year.
Next month, the Water Works board will vote on a 2016 operating budget of $40.6 million, a 10.5 percent increase (or $3.9 million) over the budget in 2015. The total 2016 budget exceeds $60 million, with $22 million in capital improvements planned.
Water works staff members attribute added operational costs to an engineering study for treatment and distribution systems and higher costs associated with energy use in the treatment process, residual removal and plant maintenance.
Less than 1 percent of the total 2016 budget, $500,000, is designated to litigation fees associated with the federal lawsuit Water Works filed earlier this year against drainage districts in three northwestern Iowa counties.
Iowa counties: Water Works lawsuit is all wet
Graham Gillette, chair of the Water Works board, on Tuesday referred to the lawsuit as a long-term "investment" that he believes will save ratepayers money.
"I carefully choose the word investment because, in the long-term, the cost of pollution in our rivers is extensive to our customers," he said. "Hopefully we can begin to get our arms around this problem in Iowa, which should cost our ratepayers less money down the road."
Stowe and Gillette say the threat of nitrates in source water – particularly the Raccoon and Des Moines rivers – could require replacing nitrate removal equipment at a cost exceeding $100 million.
The foreboding expense pales in comparison to $750,000 – one-third of that spent this year – for a lawsuit, Stowe argues.
"Even if you lose, it's still a smart business decision because it's going to impact behavior. It has impacted behavior," Stowe said.
After the 10 percent rate increase, Water Works will still bite into more than 30 percent of its $9 million reserve fund to cover all capital improvements scheduled for next year, according to the budget proposal.
Gillette said he supports the decision to dip into reserves rather than putting off important improvement projects that could become more expensive if delayed.
"While it bothers me greatly, it's really in the best interest," Gillette said. "They're things that need to be done now."
One of those projects, with a $2 million price tag, aims to dispose of nitrates that the public utility removes from drinking water into the city's sanitary sewer system.
Water Works currently reintroduces nitrates in the river after removing them for clean drinking water – a practice approved with a permit, though harshly criticized by many following the pending federal lawsuit.
One opponent to the rate increase, Rex Watson, a manager at the Bridgestone tire plant in Polk County, spoke at a hearing before the vote Tuesday.
"We are concerned," Watson said, noting that Bridgestone is paying $244,000 more for the same quantity of water that they used in 2013.
He presented a thorough analysis of the numbers and argued that rate increases should target specific areas where maintenance and capital improvements are needed most.
The unanimous vote for the 10 percent rate increase also included a $1.50 per 1,000 gallons capital improvement fee only for users in unincorporated Polk County.
When contacted Tuesday, Dale Acheson, general manager with Urbandale Water Utility, said the rate bump for wholesale users will trickle down to all suburban residents differently.
"It will effect obviously our expenses, which will be passed onto our customers," Acheson said, noting Urbandale's water budget for 2016 will be assessed next month.
Urbandale is Water Works' biggest wholesale customer, with Ankeny a close second and West Des Moines behind that, according to Water Works officials.
"For any (city) it could be different, depending on expenses," he said of the Water Works rate hike.
"But they're indicating this may be something we'll see next year, as well."