Marana Water customers will likely see a small increase in their water rates next year, as costs for services and resources continue to grow.
The water utility conducted a study on Marana’s future water usage, and then created a rate system based off those projections. They worked with the town manager’s office, the finance department and Raftelis, a national utility consulting firm, to figure out the details.
The last water rate study was completed in 2013 and included four scheduled rate increases. In April 2014 and January 2015, users saw a 6.5 percent increase. In January 2016 and January 2017, there were 4.7 percent increases. There hasn’t been another increase in over two years.
“As we know, water resources are on the slim side and moving forward, costs of CAP water, costs of new resources are continually on the rise,” Scott Schladweiler, Marana Water’s new interim director, said at the June 18 council meeting.
“We want to make sure we have this available and funded in order to continue to allow the town to grow.”
Marana officials expect a continued need for funding water system improvements. Schladweiler said there’s lots of new water infrastructure within the town, but there’s also some older equipment that needs replacement within the next five years.
Most of these costs are covered by impact fees, but the rate increase helps pay for operations and maintenance. Schladweiler said most of the improvements are needed in small sections within neighborhoods where the water systems are old and not up to today’s standards.
In 2017, there were several main breaks in the Marana Estates neighborhood due to aging water infrastructure that was costly to fix. Marana Water had to replace the entire system.
“Doing things on an emergency basis is always not as cost-effective and puts more of a burden on the customers, too,” Schladweiler said. “So we’d rather plan these things ahead of time.”
he new water study covers fiscal years 2020 through 2024. Schladweiler said they used billing data from 2017 and 2018 to inform their work.
The study proposes a 5.5 percent increase beginning in 2020 that will compound annually and reach a 27.6 percent increase by 2024. For a single-family home with average water usage, this will equate to a couple extra dollars each month next year, and about $10 more each month in five years.
When setting rates, Todd Cristiano with Raftelis said the town must ask three questions: How much revenue is needed to provide water services? Is each customer class paying their equitable share? How should those costs be obtained?
“The challenge here is balancing, minimizing the revenue adjustments, whether you want to issue debt and how you want to fund capital projects,” Cristiano said at the council meeting. “So it’s these bouncing balls in the air. We try to optimize that for the best financial plan.”
Commercial versus residential water customers have different uses, and therefore create different demands on the water service. As of May, the water utility has over 8,000 accounts, the majority of which are residential customers in single or multi-family units.
The town has to cover annual operations and maintenance costs, debt service, transfers to the capital fund and its 90 day reserve policy, which ensures that water can still be distributed under a minimum of 90 days without revenue.
To meet these demands, water officials look at daily, average and peak demands of their customers, the number of customers per meter size and other types of data to determine how much each group should pay, based on how much demand they place on the system.
Raftelis estimated it will cost the town just under $3.4 million to provide water service to single-family residential homes. But the revenue from those homes with current year rates is projected to be $3.6 million. Whereas providing standpipe water service costs the town about $36,000, but the revenue collected from that is only about $7,500.
“We’re just realigning the cost based on how customers are using the system, and those who cause the cost, pay the cost,” Cristiano said.
The new rates also come with a “philosophical” policy change, according to Schladweiler, where the rates become more equitable to who is using what services. One of these initiatives is a new fire service fee. Cristiano said this fee will be applied to any customer who has a private fire hydrant, standpipe or sprinkler system and is based on the cost to the town to provide that service.
“Those who have that service are paying for that service, and those who do not have that service don’t pay for that service,” Cristiano said.
Also included is an increase to the groundwater resource fee from $0.50 to $1.13 for every 1,000 gallons, based on expenses related to the Central Arizona Project, withdrawal fees and long-term storage credits.
He calls this an “indirect form” of conservation, because customers will know that the more water they use, the more it will cost them.
“They know that ‘Hey, if I leave that faucet running while I’m brushing my teeth, that’s money going down the drain and it’s a resource going down the drain,” Schladweiler said.
With the proposed increases, Cristiano estimates that by 2024 the town could have slightly more revenues than expenses, which would alleviate the town’s reliability on reserves.
“It’s a good spot to be in because you can start to build reserves for the next five years and the next round of major capital improvements that are going to be happening,” Cristiano said. “The whole idea is to set you up for the next five years.”
On Tuesday, August 6, the town will issue a public notice of intent to raise the water rates. On October 15, the town council will hold a public hearing on the water rates and will have the opportunity to formally adopt them. If approved, the new rates will go into effect beginning January 1, 2020.