By MARK CHESNEY
CNHI
TAHLEQUAH —
Water rates became front and center for discussion in the March board meeting of Tahlequah Public Works Authority.
It followed the 2010 engagement of an outside rate consultant. After that meeting, it was accurately reported in the newspaper a contemplated increase may affect the average water user by approximately 30 percent. This may be true even if the increase was phased in incrementally. To better understand the need for an increase, some history might be helpful.
TPWA commissioned a rate study in 2004. The board raised water rates in that calendar year in response to the consultant’s presentation, with the intent of allowing the water department to achieve financial independence from any other department, which the consultant was also recommending.
It’s believed that increase was quite adequate to recover recurring operating expenses as they existed seven years ago. It’s now known those expenses, as well as capital expenses, proved to be a rapidly moving target. Cost movement in the ensuing years forced TPWA into using a portion of electric revenues to help cover water department expenses.
Operating an internal department to make it “financially independent” is not only a sensible idea, but also the growing insistence of the U.S. Environmental Protection Agency and Oklahoma Water Resources Board. It’s desirable to tally and report expenses so everyone knows what it truly costs to provide water service. Rates should be established accordingly.
There’s more. As would be expected, regulatory influences and operating costs have continued to increase since 2004, and our water system, service lines, meters and data collection system have aged. In some cases, planning for replacements is vital.
Due to population growth, we embarked on a construction project at Lake Tenkiller to install another water treatment facility and a water transmission line into town. As a result, a two-step increase in the water rate was instituted two years ago, but it addressed only the new water plant and associated expenses and hasn’t proven to adequately address the “moving target” of operating costs and other capital expenses from recent years. It also hasn’t offset the conscious decision to commence a depletion of cash reserves beginning upwards of eight or 10 years ago.
Out of necessity, rate increases are being contemplated. No one likes cost increases, whether in gasoline, clothing or any other domestic expense. As for cost of utilities, we recognize any decision we make will be based on an accumulation of data and an analysis of our financial statements.
Inevitably, there will be another ice storm or tornado or major disruption in services requiring expensive capital outlay. On the presumption that borrowing money is not the preferred method of covering those costs, TPWA should set rates so as to also prepare for future eventualities. We believe the citizenry of Tahlequah would expect that.
As for waste water rates, it’s anticipated that increases in sewer rates may approach 80 percent for the average user. That number is not arrived at hastily, and actually, the need for such an increase was suspected even before the study was commenced. Let me explain. Many Tahlequah residents know the water discharged back into the Illinois River by TPWA is cleaner than the water taken out of the river for treatment and distribution around town. This is both encouraging and discouraging. We’re part of a conscientious effort to preserve the river’s beauty and its legal status as a “scenic river,” but, Tahlequah citizens must pay for it. The intent is to get the condition of the river back to what it was 50 or 60 years ago.
There is some public debate as to whether that is even practical, given the best available technology and the substantial development along the river in more recent years. As an institutional citizen, TPWA is supportive of the effort, but doing so is costly, and the standards are expected to become even more stringent in the near future.
The regulatory standards required of Tahlequah citizens are clearly the most stringent of any city in Oklahoma. As for the expense, the standards are possibly as stringent as any city in the U.S.
Let’s take a harder look. Some years ago, TPWA set out to invest around $1 million to refurbish its waste water treatment plant. Intervening comments were received from other interested parties – “stakeholders” is the term of choice used nowadays. What was once a million-dollar project grew in cost many times that. Subsequent investments have been made in the plant – up to approximately $13 million as well as the rising, recurring operating costs – in order to achieve continually elevating standards. The reality is, sewer rates haven’t kept pace with those escalating costs.
Sometimes, rate-making bodies, such as a past TPWA board, make conscious decisions over time to minimize the pain felt among customers by deferring what would otherwise be a needed and timely rate increase; in fact, TPWA has done that. It’s not a criticism, but rather a compliment. When operating and capital expenses continue to increase, a point in time is eventually arrived at when a top-to-bottom rate review must occur, and now we’ve done that.
We anticipate increases, but we pledge to be responsible. This pledge extends also to our decisions on things like new lines needed, equipment upgrades, salaries, and the cash reserves we build up in anticipation of catastrophic events requiring replacements. We want to deliver a high-quality service to the customer while showing restraint in the cost we incur to do so. It’s a balancing act we take seriously.
Mark Chesney is general manager of the Tahlequah Public Works Authority.
