During the council’s Oct. 2 meeting, Amy Kaarlela proposed two alternate rate structures – a straight 10-percent increase across the board or the creation of separate rates for residential and commercial customers.
“We collected data from the last five years of water use and income from the funds and expenses,” Kaarlela said. “We were able to project the next five years. We saw the pending shortfall and determined how much money you would have to make up and translated that to how much you would have to collect from your rates.”
The city is projecting a water/wastewater shortfall of approximately $100,000 in 2012.
Interim city administrator and city finance officer Larry Zermeno said he and Kaarlela have been working on the study for six weeks.
“We’ve been losing money out of the enterprise fund the last three years,” Zermeno said.
Kaarlela said the average monthly water usage of a residential customer is 5,000 gallons. With the 10-percent increase, she said monthly rates would go up approximately $4 per household.
“That will cover the next two years,” Kaarlela said. “After that, you’ll need to make smaller increases.”
The second proposal calls for a new commercial rate for usage of 8,000 gallons or more per month.
“Your average commercial water use is between 15,000 and 20,000 gallons a month,” Kaarlela said.
The separate rates for commercial use would necessitate a seven percent increase for residential customers instead of the 10 percent increase in the other proposed option, according to Kaarlela.
“Most cities have separate residential and commercial rates,” Kaarlela said.
Kaarlela recommended the city separate residential and commercial rates for the 2013 fiscal year and implement three -percent increases for 2015 and 2016. She said three-percent increases for 2015 and 2016 would also be necessary for the 10-percent across-the-board increase.
Kaarlela showed a graphic that illustrated Goliad’s water rate would still be lower than neighboring cities with either option.
Freese & Nichols also recommended an expense item for depreciation and reexamination of water and wastewater rates annually to confirm needs for increases in 2015 and later. She also said another formal rate study should be performed in 2015-16.
Zermeno said he will recommend instituting the separate residential and commercial rates.
“Seven percent is a healthy increase for water,” Zermeno said. “I’m sure we will get some pushback from the community. I don’t like to see water rates go up.”
“We can’t continue losing money on that, though,” Mayor Jay Harvey said.
“The idea is to not make money, but break even on water service and recover our costs,” Zermeno said.
“We will probably come back in the second meeting of November to propose the rate change and make it effective in January.”