Ottumwa water rates to increase in January; board cites increased chemical costs
OTTUMWA — No one felt good about the decision, but it was the only one that could be made.
During Tuesday's meeting, the Ottumwa Water Works board approved dual 5% rate increases to water bills in Ottumwa, the first to take effect in January and the second in July. The increases will affect both residents and businesses, making them across-the-board hikes.
Water Works general manager Tim Albert pointed to increased costs of chemicals, specifically chlorine, used by his facility as a result of inflation. He had budgeted $700,000 for chemicals, but that number is expected to surpass $800,000 this year.
"Industrial supplies are continuing to increase in price, and just all of our supplies and costs keep going up. That's what a majority of these rate increases are," he said. "We're trying to get caught back up, and then we'll obviously have to make a decision about if we rehab the hydro dam or not.
"Either of those start out with these two rate increases."
Albert said that the current average rate for water is $40.19 per month. The first 5% increase, which would start Jan. 1, would bump that to $42.18. The second increase, targeted for July 1, would bump it to $44.31.
Ottumwa's water billing structure is what Albert called a "decreasing block rate," meaning the more water used, the lower the rate. He compared other communities' rates, but they have different structures, so "it's not a straight apples-to-apples comparison."
"This is just something that's just unfortunate. I wish we had some massive revenue stream that we could subsidize some of this," he said. "But the only sources of income that we currently have are hydro sales, billing and water rates."
Albert said Water Works has done dual-rate billing in the past and that it's not uncommon.
"There were quite a few years where they were flat. Our goal is to make sure we're producing a good project," he said. "If we don't do this, if hampers our ability to do that.
"We've stayed on top of it, and I prefer to try to keep these rates smaller," Albert said. "Since we're a municipality, we can't have discriminatory rates by class."
Board member Mary Stewart asked Albert if there was a scarcity of something that led to the increase.
"There had been a moratorium on an environmental charge on chlorine gas, and that was taken away and passed on to us. So there were quite a few things — trucking costs go up, and there's been a strain on delivery."
Board member Bud Kelley asked if the rate increases will address the gap in the budget for chemicals. Albert said it tied into the two options for the dam.
"Regardless of what choice we make, this is just the beginning," he said. "This the first step in both of those paths."
In other business:
— Albert showed an eight-minute video regarding two options for the dam, and presented draft budgets for both keeping the dam and decommissioning it. Either option will cost millions of dollars, and they must make a decision by Dec. 31.
Albert was seeking guidance from the board in how to address the dam. No votes were taken, but a consensus seemed more inclined to see what could be done to keep it. However, financial pressures may not make that feasible.
Albert and the board are also at the mercy of the Federal Energy Regulatory Commission (FERC), and whether it will allow Water Works to take a phased approach — one project per year — over 15 years to rehabilitate the dam, similar to what the City of Ottumwa is doing with its ongoing sewer-separation project. However, FERC has asked Water Works to make a decision before meetings begin.
If Water Works is allowed to take a phased approach, almost every part of the process will require a loan and debt service, and dual-rate rate increases will continue into the foreseeable future. However, there are still numbers to be worked out to determined what a complete rehabilitation will cost.
If the dam is decommissioned, Water Works is looking at about an $8 million project — $5 million in a 'worst-case scenario' for intake modifications and $3 million for gate removal, though the main structure would stay intact. Normal operating revenues and expenditures would continue, but there would be no hydro revenue.
"Neither option is great," he said. "When I interviewed for this job, this was what I saw coming, but not the position I wanted to be in."
