Geneva examines fixed costs of supplying water, sewer service
When it comes to the fixed costs of providing water and sewer service to buildings in Geneva, it looks like the various classes of users are being billed for their fair shares.
But the city isn’t allocating enough of its water and sewer revenue, overall, to those fixed costs, according to a report presented Monday to the city council by David Hyder, vice president of Municipal and Financial Services Group. The city hired the Annapolis, Md.-based firm to study its water rates.
The fixed service costs — administrative, chemicals, supplies, pipes and the like — account for about 20 percent of the non-debt costs. They are called fixed costs because they are incurred to make water and sewer service available to customers, regardless if the customer ever uses them. Right now, about 3.3 percent of the revenue goes to those costs.
That means the rests of those costs are being paid for out of water and sewer sales, a more volatile revenue stream. Sales are influenced by several factors that can increase or reduce demand, including water conservation efforts, rainy weather and economic downturns that depress business activity.
The firm recommends that in the next three years, Geneva shift more of the burden on to the fixed monthly rate charges, so that those charges come up to the 20 percent mark. Doing that, while allotting enough money for fluctuating operating costs, debt repayment and a 90-day operating reserve, likely would require also raising the consumption charges, according to the consultant.
If the city council were to approve any one of the recommended plans, users would see their rates go up for the second time in a year. Water and sewer charges increased May 1.
The scenarios include raising the fixed monthly charge, regardless of the amount of water a customer users; raising the fixed monthly charge and including the first 100 cubic feet of water in that charge, which would be beneficial to smaller customers; and a rate structure that would encourage water conservation, but leave the water and sewer fund subject to volatility.
Water and sewer charges vary depending on whether the customer is residential, industrial, commercial or governmental, plus the size of the line the customer uses.
It was the second of three reports the firm is giving to the council. The next will be on June 25, when it answers aldermen’s remaining questions and recommends changes to the rate structure and rates charged.