Gilbert Prepares To Raise Utility Tariffs To Recoup The Cost Of Services

Residents and businesses in Gilbert are expected to see an increase in the city’s utility rates that will likely go into effect on April 1.

City Council approved Dec. 14 that staff issue a notice of intent to increase rates. The Council’s final exam is scheduled for February 22. The proposed increase for residents would be just over 15% or more, depending on household use. Increases in business are more difficult to characterize due to the wide variety of services and uses, city officials said.

The rate hike would be the first since November 2018 and the second since 2009. Even with the increase, Gilbert’s utility rates would be the second lowest among peer towns in the valley, the data shows.

“Comparing costs across Gilbert Valley is still a pretty good deal,” said Kelly Pfost, Gilbert’s budget manager. “We are trying to be fast, efficient and efficient, but we still have to make proper water quality and [meet] the cost of materials and supplies it takes to provide this.

The increases affect two parts of the bill: water and environmental services, which include garbage collection and recycling. The pressures forcing the increases differ, officials said.

For water, this mainly involves rebuilding – at a cost of $ 460 million – the 25-year-old North Water Treatment Plant, which cannot produce enough clean water for a city in growing at a time when the quality of raw water is deteriorating, officials said. noted. In environmental services, increases are linked to the volatility of the recycling market, increased volume and fees and costs over time.

City staff told city council they will need to approve rate hikes in the spring to prevent balances in the city’s water and environment stand-alone funds from violating the council’s policy on reserves. , what the city calls the minimum fund balance.

The plant requires an increase in the water rate

According to the proposal, the basic residential water meter charge for a three-quarter-inch water meter – which city officials said about 90% of residential customers use – would drop from 16, $ 30 to $ 21.13 per month. Larger meters would have similar increases of almost 30%.

Water volume rates would gradually increase to encourage conservation, said deputy director of public works Eric Braun. The minimum increase for residents would be $ 0.22 per 1,000 gallons for customers using 1,000 to 8,000 gallons, which Braun called a basic water use level for health and safety. .

“Once you start using discretionary water, you now have the option of not using that water,” he said. “So you can avoid that extra cost. “

Officials said residents’ uses can vary widely from month to month and depending on their landscaping needs, but a median use would be around 9,000 gallons.

Non-residential users would also see an increase of $ 0.54 per 1,000 gallons for domestic uses and $ 0.72 per 1,000 gallons for landscape uses.

At the heart of the increases is the need to renovate the North Water Treatment Plant near the Guadalupe and Higley Roads, in part to meet the federal government’s higher water quality standards than were in place when the plant opened in 1995 and in part because of the inferior raw water quality. , officials said.

“The change in the conditions of the water quality has been quite dramatic and unlike what we have known historically, and it does not look like it will change for the better in the near future,” said the deputy director. of the city, Leah Rhineheimer. . “And that created a whole new kind of paradigm for how our [operation] must work.

Robert Glennon, a professor emeritus at the University of Arizona with expertise in water, said mature cities in the eastern United States often have higher water costs than those in the dry west due to neglect of processing systems, causing costly problems.

Water quality can also vary due to wildfires and storms, officials said, creating problems for the plant.

“It ranges from very, very clean… to a crazy dirty milkshake,” Jessica Marlow, public works manager, said of the varying water quality. “The ability of this plant to adapt is just not there.”

A review of the plant in 2018 revealed its shortcomings, Marlow said, and further study showed that it would be more cost effective over 40 years to begin parallel construction of a new plant adjacent to the old one than to renovate the existing one. Parts of the existing plant will be redeveloped into the new one.

Project supervisor Jeanne Jensen said the project is expected to start in March and construction will begin in earnest in January 2023. The plant would come into operation in 2025.

The new 60 million gallon per day replacement plant – 15 million more gallons per day than the current plant – would be paid for in two ways. The system development costs charged to developers for the growth projects would cover the enlarged part of the plant, while the replacement part would be financed exclusively from the water fund by the water users.

The bonds will be used to put the money up front, Pfost said, but they will not be voter-approved bonds that will be managed and repaid through property taxes. Instead, it will come from a municipal water resource ownership obligation, which is managed by the water fund over time. A citizens’ council and the city council approve these obligations.

“This is a stand-alone fund,” Pfost said. “None of the money from the water bill goes to pay for other types of services in the city. “

Environmental Services Fund

The last time the city adjusted its rate in 2018, the environmental service charge on bills actually went down despite the increase in the overall utility bill due to the amount of money in the funds, said Pfost.

“Since then, a lot has changed in the recycling market,” she said. “Instead of getting revenue from recycling, we now have to pay for some of it. It has improved over the past couple of months, so hopefully there may be some long-term benefits, but we’ll have to wait and see.

As a result, the tariffs for residential and commercial environmental services will also be increased. For residents, the monthly charge for a resident with the typical 90-gallon containers would drop from $ 14.80 to $ 19.03. This covers waste and recycling collection, use of household hazardous waste facilities, and bulk waste collection 10 times per year. Other container charges and a number of one-off charges for additional services would be increased to cover costs.

Business customers would also see an increase in a number of different services available to them in the city, although these customers can also use private services.

“We just looked at the cost of service for all of these things,” Marlow said. “We have certainly seen increases… in terms of fees for disposing of waste at transfer stations and landfills. But we still think we’ll be very competitive in this market, and we’ll be watching that. “

In the future

At the time of the 2018 increases, city officials said they hoped they wouldn’t have to return to residents and business owners for another rate hike. But officials said a closer examination of the plant’s operating conditions and dramatic changes in the recycling market, as well as economic conditions due to the pandemic, have all affected the accelerating schedule.

Still, increases were delayed last year due to the pandemic, with the council directing part of the city’s aid, relief and economic security fund, or CARES, to be used to support funds from the city ​​business, preventing them from going below their minimum fund balance.

Without the increase, funds for environmental services would all fall below their minimum balance in spring and water next year, Pfost said.

Now officials have said they are looking to balance operating funds as well as possible without touching too frequent or too dramatic rate changes.

“We will seek to bring [Town Council] rate recommendations more often – smaller amounts in shorter intervals, ”Pfost said. “And then we’ll let the board make those decisions if they’re prepared to implement them. “

Glennon said residents of Gilbert pay too little for water.

“Even on the cost of service tariff structure, where you don’t pay for water at all, that bill for almost all Americans is less than what they pay for cell phone service or for cable TV. “said Glennon. “So we Americans are in for a treat. We have the cheapest water available on the planet, and it is an unbearable luxury.

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