Communities across the state of Georgia are turning to rate increases to deal with the crunch of the current economic downturn. Whether the money will be used to improve utility systems for the future or to simply fix longstanding problems, cities are looking to residents to help foot the bill. In some cases the rate increases were scheduled and the impact to residents was minimal. In others, the increase was sudden, severe, and unplanned. Councilman Chuck Trader of St. Mary’s, GA summed up the plight of communities across the state. “We’ve got to take steps to take care of these (water rate) problems,” said Trader. “We knew this was coming.”
Here are a few examples of communities of varying size using rate increases to generate revenue. These have all taken place in just the last 30 days:
Toccoa, GA – Service Population 24,960 – The city is looking to increase the average water and sewer bill by $1.58 a month for minimum-level users, such as single resident homes. Average users, who make up the bulk of the service population would see a hike of $2.58 a month. The largest increase of $5.78 a month would be reserved for high-volume users, a group generally made up of commercial entities. The rate hike would bring in over $336,000 for the City’s water and wastewater budget.
DeKalb County, GA – Population 670,000 – The County has voted to ratchet up rates 16% a year for the next four years. An average user who paid $51 a month in 2009 will now see their bill jump to $107 by the year 2014. The money generated from the increase will eventually help pay for the $1.79 billion upgrade to the County’s water system.
Suwanee, GA – Service Population 788 – The city is raising their rates to cover operating costs and recent improvements to the system. They expect to see a monthly jump of $7.87 for the average customer. In addition the city is implementing a standard 10% rate increase each year for the next three years.
Centerville, GA – Service Population 7,714 – There is a pending 10% water rate increase in store for the city. This increase will simply allow the city to “break even” in water and sewer services according to Councilman Ed Tucker.
Cartersville, GA – Service Population 24,830 – The city is considering a 4.5% rate increase in water and sewer rates to try and cover the costs of operation and maintenance of the city’s water system.
St. Mary’s, GA – Service Population 17,090 - originally had scheduled to increase water rates by 65% but voted to use sales tax income and reserve funds to limit the increase to only 35%. The City has decided to place a base fee of $20 on multi-family dwellings. The revenue from the increase will go towards maintenance of the water system.
In a survey conducted by the Georgia Environmental Facilities Authority (GEFA), it was reported that 23% of systems do not keep a list of assets of their system and only 47% have an estimate of their system’s life expectancy. Although certainly not the only factor in what seems to be a statewide rash of rate hikes, a connection can be drawn between rising rates and undermanaged utility systems.
Every water and wastewater system eventually has a breakdown. Repair, replacement, and improvement are necessary parts of growth, and the residents being served by these systems do have a responsibility to help pay for upkeep. But many communities are raising rates in response to the cost of doing business when they should have been planning for these expenses all along.
As a planning tool, rate studies allow cities to be proactive when it comes time to deal with rate setting. The process can be iterative and can involve public input. These types of studies build equity throughout the system and customer base, aiming to have each user pay their fair share while ensuring the generated revenue has a predetermined final destination.
“Water rate increases are never easy, especially in these stressful economic times, but cities have to run financially efficient,” said Kendall Smith, City Manager in Dallas, GA. “Rate studies allow you to take the data collected and realize your goals. Adjustments then are fair not only to the present and future needs of the city but to the citizens as well.”
Simply adding an extra percent to a customer’s bill when a system needs new pipes or equipment is not the answer. Community leaders must understand where their system is right now to be able to set appropriate rates to pay for future needs.
Contributed by Brent Bridges and the Southeast Municipal Market Team