Higher water rates recommended

McCOOK, Neb. — Water rates for City of McCook residents have been recommended to increase again, this time by 6%, according to the city’s water and sewer financial advisor.

Last year, the McCook Council approved a 3% rate increase for city water users, based on the cash flow analysis prepared annually by PFM Financial Advisors.

The financial advisor also recommended a 3% increase in sewer fees. Last year, a 2% sewer increase was approved by the council.

Via a teleconference call Monday night at the regular council meeting, Owen Gerad of PFM told the council that future water usage is expected to decline by 1% annually. Rate increases are based on yearly cash flow analysis, comparing historical trends of water usage, expenditures and capital improvements. The 6% increase recommended is higher than the 3% initially estimated last year and the result of two years of water usage decline, according to the report.

Asked after the meeting why water usage is declining although the city’s population has remained the same, city utilities director Jesse Dutcher said some of it has to do with more people using water-saving appliances, such as water-efficient toilets, washing machines and dishwashers.

The report states that actual water usage has been volatile year-to-year, but trending downward at about 4% over the past five years.

Revenues were estimated to remain flat from the prior year, decreasing around .5% annually over the past three years. Operating expenditures are expected to grow at 7% yearly.

Gerad commended the $2.7 million in a reserve balance as an “incredible amount set aside.” Dutcher said after the meeting that the account includes $1.3 million needed to replace the media that is ending its lifespan at the water treatment plant. The reserve account also pays for emergency purchases, such as replacing the water department’s back hoe that completely broke down and the council approved Monday night from the consent agenda to replace, at a cost not to exceed $87,000.

For 2020, $1.2 million is budgeted in replacement projects, including the large project replacing the transmission line on West Fifth at $440,000.

For annual surplus and deficit, the water department in 2018 ended with a operating cash surplus of $149,483. With the 3% rate increase last year, the current fiscal year is projected to generate an operating deficit of $73,188.

For cash balance, it’s estimated that at the end of September it will be $1.83 million, representing 149% or 18 months of operating expenditures.

Next year, it’s anticipated that the city will pay off the 2013 Water SRF loan, using cash on hand in the debt fund and operating cash. This will increase annual cash flow by almost $95,000.

On the sewer side, PFM found after a 4% growth in usage in 2018, usage has been on a downward trend and estimated future use as flat at 2019 levels. Revenues, too, are projected to remain flat. On average, operating revenue have been increasing by 1% annually over the past five years, but has had some volatility year to year. Expenditures in 2019 are expected to increase by 5.1% from the prior fiscal year.

There was a operating cash surplus of $262,228 in 2018, and the 2% rate increase in 2019 is projected to generate an operating surplus of $28,308. Ending cash balance at the end of September is estimated to be $826,928, or 12 months of operating expenses. Overall, cash in the Sewer Enterprise Fund is expected to remain flat at $1.5 million in 2019.