With water systems consolidation off the table, at least momentarily, Douglas County officials are developing new ways to structure rates in the face of aging infrastructure and steepening capital costs.
"We have been looking at rates on a yearly basis," said Public Works Director Carl Ruschmeyer. "It places a big burden on our staff and increases costs to do rate studies every year."
"The other thing we like to have is predictability," added County Manager T. Michael Brown.
The county operates eight water utilities in both the Lake and Valley. On Thursday, two months after approving a batch of protested rate hikes, county commissioners voted unanimously to direct staff to do the following when developing rates for fiscal years 2011-12 and 2012-13:
n Implement two-year rates (July 1 effective date) with projections for an additional three years
n Hire one utility technician for 2011-12 (no rate impact) and an additional technician for the following year (rate impact), while contracting services as needed
n Amend code to allow single service for private fire protection, separating fire and domestic components
n Reclassify multifamily use as commercial, applying a single block volume rate to all usage
n Establish emergency reserve amounts based on average age of each system, ranging from $50,000 to $100,000
n Implement new base model with full cost recovery and cost of service.
Ruschmeyer said his department's "lean, mean" budgets have been too minimalistic. For example, recent leaks in the Zephyr water system depleted the utility's $50,000 emergency reserves.
"Rates have been developed on the budget versus rates developed on the utility," he said. "Subsidies are not sustainable sources of funding for us. Rates are not reflecting the true cost of service."
The challenge, Ruschmeyer said, is getting each utility on a level playing field without subsidies. In September, the Job's Peak utility received a $182,000 subsidy from the county's 210 fund, which lowered water rates to $262 a month, the same rate as Cave Rock, and the highest rate the county charges.
"The issue today is phasing in depreciation," Ruschmeyer said. "It's not a direct increase so much as cost-of-living, and we're also dealing with a lot of capital projects."
Ruschmeyer said the county has great flexibility in designing rates and should make them as equitable as possible, differentiating between residential, commercial and irrigation customers, which is current practice. Subsidies can be granted in the future, if needed, but public works would like to move forward without them.
"The whole idea behind cost of service is to break down the various components to the type of customer putting demand on the system," Ruschmeyer said.
For example, he said, irrigation customers require no fire component, which should be reflected in rates. Because of peaking factors, he said, single-family residential units actually put the most strain on water systems. Brown added that differentiated rates create a more business-friendly environment.
"Otherwise with uniform rates, they would be subsidizing residential," he said.
When it comes to paying for capital projects, from arsenic treatment to new infrastructure, Ruschmeyer said the board can choose to delay projects as long as possible. At some point, though, the problems need to be fixed.
"I think they're necessary," he said. "They're not going to be any less expensive five years from now."
On Thursday, commissioners authorized the issuance of $1 million in general obligation water bonds for improvements to the Zephyr Water Utility District, including new infrastructure and the replacement of an ozone generator.
"We don't have the adequate reserves in the utility to fund these improvements," Ruschmeyer said.
Attorney Kelly Chase, representing the Jobs Peak Homeowners Association, said the biggest problem with rate schedules in the past has been a lack of transparency in the formulation of the rates. He said rate payers should know the details of every expenditure, such as work hours needed for a specific system.
"We can't peel back the hide of this stuff to see what's underneath," Chase said.
Brown said all county salaries are public record. Furthermore, he said staff allocations are based on need.
"If one system is having a lot of challenges, then staff will go to that system," he said.
Commissioner Doug Johnson said there is misconception in the community that employee expenditures belong to one enterprise fund alone. He said the county spreads out full-time-equivalent employees.
"We try to allocate them to all enterprise funds equally," he said.
Although directing Ruschmeyer to move forward with his recommendations, commissioners were nonetheless concerned about the request for new hires.
"At a time when we're laying people off, letting people go and shrinking departments, I need justification for why we should be expanding this department," said Chairman Mike Olson.
Ruschmeyer said he simply does not have enough staff to adequately operate and maintain the county's water utilities.
On Dec. 2, commissioners will consider consolidating the fairgrounds system, which is facing dramatic rate increases to fund arsenic treatment, with the East Valley water system.
In June, commissioners rejected a proposal to consolidate all the county's water utilities.
