Iola city council members are considering a hefty increase in the city’s water rates.
In a report about the state of the water fund, City Administrator Judy Brigham asked council members for what would amount to a 30-percent increase in water usage rates for large-scale industrial customers, 25 percent for other commercial users and 24 percent for private residents.
“It is a big increase, but we can’t keep our rates artificially low,” Brigham said.
The city last adjusted its water rates in 2005. And unlike Iola’s gas and electric rates, the city has no cost adjustment mechanism that increases rates for its customers if the cost to treat and distribute water goes up.
In 2010, Iola brought in about $1.4 million in water sales, while incurring about $1.441 million in expenses.
Roughly half of those expenses goes to the city’s annual loan payment from constructing its new water treatment plant west of town. The other $735,000 or so goes for salaries and supplies in the water plant and regular upkeep.
Brigham provided council members with a number of scenarios affecting both water rates and base meter charges.
The scenario Brigham favored included raising base charges from $15 to $19.50 for each customer, while raising industrial water rates from $2.17 to $2.32 per unit (1,000 cubic feet or 748 gallons); from $2.58 to $3.23 for commercial customers and $2.66 to $3.31 for residential customers.
Such a proposal would mean residential customers would spend about $12.30 more per month if they use 12 units of water, Brigham said.
Council members queried Brigham on a number of issues, including whether the city’s expenses could be cut.
“At some point we’re going to have to look at cuts,” council member Kendall Callahan said. “We can’t continue to increase costs for the same product.”
Council member Ken Rowe agreed, saying he would be uncomfortable asking residents to pay more without first being assured the city has done everything in its power to cut costs.
Jim Kilby offered a counterpoint, noting that Iola’s department heads already have cut their budgets “to the bone.”
Council members also asked Brigham to consider increasing rates charged to customers outside Iola’s city limits, weighing those hikes against potentially losing those customers to rural water districts.
Unlike Iola’s gas and electric rates, which stack up favorably against other neighboring communities, Iola’s water rates are significantly higher than some in southeast Kansas.
A chart provided by Brigham illustrated that a residential customer would spend $41.61 for 5,000 gallons of water a month, while spending $20.12 for the same amount in Chanute. Iola’s was the fifth highest of 18 cities listed in the chart.
Brigham said a more detailed breakdown would be needed to get a fairer representation. Chanute, for example, has a 60-year-old water treatment plant, and thus does not have annual loan payments for construction to account for, like Iola does.
Iola is five years into its 20-year mortgage to pay off the water treatment plant. Iola owes $7.77 million on the original $10 million loan. The city will pay off the loan in 2025.
IN A RELATED matter, Scott Shreve, the city’s energy consultant, spoke with council members about the city’s affiliation with the Kansas Power Pool.
Iola has a rolling two-year contract with KPP to purchase electricity, Shreve said.
In a breakdown of the city’s KPP agreement, Shreve pointed out that the city may soon need to explore other options to purchase electricity.
Iola joined KPP a few years back after ending a decades-long pact with Westar, the state’s largest utility provider.
“Back then, we had two options: Westar and KPP,” Shreve said. “We have more options now.”
Council members also renewed a natural gas contract with N&B Enterprises to purchase a portion of its natural gas from the local provider.
A bulk of Iola’s natural gas is purchased from Constellation Energy, while the rest is provided by N&B at the same rate.
Council members approved a five-year contract with N&B.
