New Mexico water authorities underwater: Too-low rates prevent needed repairs, report says

Sep. 21—Chris Sisney doesn't bother washing his car anymore. He lives off a dirt road; a water leak two blocks away rushes down the road, keeping it constantly muddy.

"I can't even get out ... without driving through a puddle," Sisney said.

Sisney is a recent addition to the public utility advisory board in Truth or Consequences, where the aging, leaky water system has been losing about a quarter of the city's water supply every month. In a nine-month period, hundreds of leaks were documented — more than one per day.

The water utility in Truth or Consequences was one of three case studies in a recent legislative report on state-funded water projects, which found more than a third of public water systems don't have enough revenue to cover normal operating expenses, let alone proactive infrastructure projects.

Needs are concentrated in rural parts of the state, the Legislative Finance Committee said in the report, but the city of Santa Fe was also singled out.

In 2018, the State Engineer's Office estimated there were $2.7 billion in water infrastructure needs around the state. This year, when public water systems reported their capital outlay plans, the total was closer to $5.7 billion.

Just three water utilities — Truth or Consequences, Camino Real Regional Utility Authority and Santa Fe — requested a total of $123 million, which the report attributes to insufficient water rates.

"When water systems set rates artificially low, it is a short-term saving for local ratepayers but a long-term cost in terms of more expensive fixes," the report said.

That leaves utilities requesting millions of dollars in "limited" state capital outlay to tackle everything from leaks and aging pipes to environmental violations.

But raising rates isn't always simple, and some local officials and residents say rate increases are insufficient to cover the needs.

Santa Fe rate increases in the works

City of Santa Fe Public Utilities Director John Dupuis said he agreed with many of the conclusions in the Legislative Finance Committee report, but said from the perspective of a local government, it makes sense to apply for as much grant money as possible before moving on to loans or rate increases.

"Could you imagine if there was grant money and people didn't take it?" he said. "I think our ratepayers would expect something different."

Santa Fe requested $88 million in capital outlay from the state last year to repair or replace its aging wastewater treatment plant. It received about $1 million.

The 61-year-old wastewater plant has regularly been out of compliance with its state and federal water discharge permits following a series of maintenance problems, and the city has spent millions of dollars on repairs.

The city is on track to spend over $100 million on a range of water infrastructure projects over the next several years, including upgrades to the Canyon Road Water Treatment Plant, repairs to the Nichols and McClure dams in the Santa Fe Municipal Watershed and work on a pipeline stretching from the south-side wastewater treatment plant to the Rio Grande at the Buckman Direct Diversion to carry treated effluent back to the river. The project aims to build a bank of "water credits" from the San Juan-Chama Project for future supplies.

Officials with the city's water and wastewater divisions announced plans earlier this year to raise their rates but have yet to deliver proposals to the City Council, which would have the final say.

Water Division Director Jesse Roach said putting together a rate hike proposal has taken longer than he expected.

"It's pretty much top of my list to work through because we can't ignore it forever," he said.

The water and wastewater rates were last increased in 2013 and 2014, respectively. Roach said ensuing inflation has decreased the amount the city can do with utility payments.

"Our rates are much smaller relative to our spending power than they were 10 years ago," he said.

Santa Fe water customers who use 6,000 gallons in a month pay almost $55 — more than double the bill for the same water usage in Albuquerque and Las Cruces, according to the Legislative Finance Committee's report. City residents pay about 37% more than the state average for water use and 60% more than the national average, according to EPA data cited in the report.

In a July Public Works and Utilities Committee meeting, a consultant said city of Santa Fe wastewater rates would need to increase by about 4% a year for the next four years to help pay for a new wastewater treatment plant and support increased operating costs. The department also has received a $151 million loan from the New Mexico Environment Department's Clean Water State Revolving Fund — with $90 million for the wastewater treatment plant.

Dupuis said staff is assessing how the loan will affect the needed rate increase before presenting a request to the City Council, a process he said should be finished soon.

He reiterated the need for a hike at Monday's Public Works and Utilities Committee meeting.

"Our budget needs an increase in our rates to have recurring revenue that matches our expenses," he said.

The Legislative Finance Committee report chided the city for not raising rates earlier and also suggested it could partner with Santa Fe County on wastewater initiatives to save money.

"If Santa Fe had gradually raised its rates over time to plan and save for a new wastewater treatment plant, then the city would not need to borrow and request as much state funding or raise its rates by 16 percent in four years," the report said.

The city works with consultants to assess the need for rate increases to its three utility funds on a three-year cycle.

Dupuis said he's not aware of a time when the utility requested a rate increase and was denied, but said there's a "chicken and the egg" scenario in which city budget officers can deny expenses before a rate increase is set to be considered, and then say a rate increase isn't needed because the prior expense wasn't approved.

"Ultimately, if you get into that circle, you can defer something," he said at Monday's meeting. "We've gotten to the point where we've deferred too long, and we don't have that ability anymore."

Roach said elected officials "don't want to raise rates if they can help it" — but the city needs more money from somewhere.

"We're looking at the necessity to have additional revenues to support what we need to do; finding the balance there is what we're working on," he said. "I think we'll get there."

Troubles lead to contamination

"Chronically low" water revenue has brought a litany of problems to the Camino Real Regional Utility Authority in Doña Ana County, the legislative report said. The water source for the utility, which serves more than 19,000 people, has to be treated for naturally occurring arsenic, exposure to which can cause several health problems in the long term.

To treat the water, the utility uses four arsenic treatment plants. In December, the New Mexico Environment Department found three of them were offline and had been "intentionally bypassed for over a year, allowing untreated water to reach the public," according to the report.

The most recent test of arsenic levels was under the maximum contaminant limit set by the U.S. Environmental Protection Agency for three of the facilities. The fourth was excluded from the Sept. 9 test due to "continued meeting" of Environment Department standards. The utility also reported five instances of discolored water in August.

The Camino Real Regional Utility Authority is not alone. In July, the Environment Department sent out letters to more than 100 drinking water systems, warning of penalties for serving water with contaminants like arsenic and uranium. More than 40% of drinking water systems in the state had failed at least one state health standard, the Environment Department announced in late July.

A rate increase for Camino Real was approved in 2019, but the administration didn't put it into effect until July 1, 2024. Residential rates for the first 3,000 gallons increased from $15 to $17.83; the minimum rate on the first 7,000 gallons increased from $20.62 to $27.

"CRRUA's infrastructure has a total replacement cost of $81.5 million," Executive Director Juan Carlos Crosby said in a customer notice. "The additional revenue received from the rate correction will be used to help ensure the health, safety, and welfare of customers."

Crosby did not respond to a request for comment.

Doña Ana County Commissioner and Camino Real board member Shannon Reynolds said water issues in the county make it more difficult to attract businesses and new residents.

"People deserve safe water delivery to their home," Reynolds said. "They shouldn't be subjected to what they have been for the last two years."

Just because recent arsenic tests have come back clean, Reynolds said, doesn't mean the infrastructure is now problem free. But mapping the infrastructure shortcomings is beyond the time and money available.

The water system also has faced staffing shortages.

Reynolds, who joined the board in May, said the utility has struggled to hire employees with the right certifications and experience, in part because of a lack of in-state applicants.

Although there are more qualified employees out of state, he said, the utility can't attract them with the current pay scale.

"I'm not sure that we can do that alone in any of the smaller counties," Reynolds said. "We're the second-largest county, and we don't have revenue to do all of it that we need to do."

José Saldaña Jr. of Sunland Park drives to El Paso to buy water almost every week. He spends about $100 every month on water, for both himself and his mother, for cooking, watering plants and providing drinking water to his dogs. He still uses the water system for his outdoor plants, but his bill is higher now.

In December, Saldaña heard about the water's arsenic contamination on the news. It wasn't the first time he's heard of such issues.

"My mother's been a resident here in Sunland Park for over 40 years," Saldaña said. "It's always had the reputation."

For Saldaña, the situation is an emergency, requiring emergency funding, potable water deliveries and testing residents for arsenic levels. He said Sunland Park's infrastructure wasn't prepared for the growth in the area.

The community has lost trust in the water authority, Saldaña said, and despite rate increases, issues persist.

"It's sad for people who can't afford it," Saldaña said. "... Then we still have to go buy [water]."

A system plagued with leaks

When Jeff Dornbusch joined the Public Utility Advisory Board in Truth or Consequences about a decade ago, he was told about 60% of the pipes in the city were due to fail at any moment.

That moment, he said, is now. Leaks plague the aging system; last Dornbusch heard, there were 66. Running water is causing potholes to open on the roads, he said.

"This summer was just horrendous, with every fourth block having a water leak," Dornbusch said. "Water is very expensive to pull out of the ground. It takes a lot of electrons to lift a gallon of water. And they're just letting this resource just go down the streets, unabated."

For the past 25 to 30 years, the problem has been "kicked down the road," Dornbusch said.

Replacing just a fifth of the leaky system is expected to cost around $20 million, according to contractor quotes in the Legislative Finance Committee report.

The city of Albuquerque, with the largest number of residential water connections, has lower rates than many water utilities across the state. Rural water systems might have higher rates, but they have to cover maintenance costs with fewer ratepayers supporting the effort. The rates in Truth or Consequences are on a sliding scale based on gallons used, ranging from $3.21 to $4.59 per 1,000 gallons, plus a base rate of $18.36 for the first 2,000 gallons.

For people living on Social Security payments, like Dornbusch, a rate increase can be difficult to swallow — especially when problems are ongoing.

"I think the state should be stepping the hell up and helping us out as much as possible," Dornbusch said.

Sisney said he thinks Sierra County and the Governor's Office need to work together better. Some of the infrastructure is around 60 years old, he added, and requires a proactive, large-scale approach to maintenance rather than quick fixes.

A December 2022 report by the New Mexico Water Policy and Infrastructure task force identified several challenges to fixing water infrastructure statewide, including unpredictable funding, challenges coordinating efforts between state, local and tribal agencies, and gaps in research.

The report's authors recommended better guidance from the state on how to access capital outlay, a process for helping financially underwater water systems pay back debts and more effective efforts to leverage federal funds.

"They should have fixed this a long time ago," Sisney said. "... It's all patching. There's no debate about that."

The situation is frustrating now, Sisney said, but he worries that soon people will be without water. And he doesn't think rate increases alone will be able to solve the problem.

"There's no way this town is going to be able to fix this problem on its own," he said.