Council opts for 6% water rate hike

McCOOK, Neb. — After debating whether water rates for City of McCook customers should increase by 6% or 4.5%, the McCook City Council voted unanimously to go with the higher increase.

For some councilmen, going with the higher rate appeared to be a struggle. “I don’t know…I still have my mom’s voice in my ear telling me she’s on a fixed income, that her Social Security hasn’t increased by 6%,” City Councilman Jerry Calvin said about his late mother during the discussion. Still, he justified the 6% increase later in the meeting and said the city can’t operate on a deficit. “I don’t like the 6%, but anything less would be irresponsible,” Calvin said.

Before voting, the council reviewed via Zoom two separate spreadsheets using both rate options with a financial analyst from PFM Financial Advisors LLC. The 6% increase was recommended by PFM, higher than the 3.5% increase originally projected last year, due to additional capital projects and higher-than-budgeted operating expenses. The 4.5% increase was offered as an alternative, but higher increases would then be needed in future years.

Annual surplus/deficit in cash flow after debt was cited by the PFM analyst as the “driver” behind rates. For both the 6% and 4.5% increases, the deficit numbers remain relatively the same, although the deficit using the 4.5 % rate is about $30,000 higher until 2027. By 2027, the city is projected to have no deficit using either of the rate increases, with $13,358 in surplus with the 6% increase and a $5,567 surplus with the 4.5% increase.

As Mayor Mike Gonzales put it, “It’s pay me now or pay me later.” City Clerk Lea Ann Doak added that city staff recommended the 6% increase due to not knowing what inflation would do in the future.

The 6% increase would apply to both the ready-to-serve fee, increasing it by $1.29, and to the amount of water used, with the first 5,000 cubic feet increasing by 11.5 cents and the usage above that, at 8.5%. The fees are the same for residential and commercial use, with rates diminishing with more water used above 5,000 cubic feet. Councilman Gene Weedin commented that the diminishing rate meant those who used more, such as motels, were getting a good deal and that changing the rate is something the council could look at in the future. People have to realize that water is getting expensive, he said, especially in the current conditions, referencing the ongoing drought.

City of McCook Utilities Director Jesse Dutcher said the diminishing rate is being used less and less by communities due to the cost of water, but added that one of the biggest commercial users in the city also has an industrial well for water.

The 6% increase in water rates will collect $2.4 million in revenue for the water department. Total water sales increased by 7.55% in 2021 after increasing by 22.5% in 2020, although actual usage fluctuates, according to the PFM report presented to the council Monday night.

The city is in the final stages of securing an NDES loan for $1.2 million to fund several larger capital projects. The loan has a 0% interest and is expected to have annual payments of $102,000.

Capital expenditures for this year will be $2.4 million. This will be funded with loan proceeds and $550,00 from the capital replacement fund. Expenditures include operating and maintenance, $84,200; replacement items, $368,458; water projects using the State Revolving Fund loan, at $1.35 million; and water treatment plant equipment replacement, at $701,000.

The $1.2 million in water projects, using the loan, will replace the 12-inch main on South Street, from the city’s water shop across the railroad to U.S. Highway 83, south to A Street. This will include replacing mains on South U.S. Highway 83.

Expenditures scheduled this year at the water treatment plant, at $701,000, will use reserves to cover costs. The most expensive outlay is the $555,000, to replace half of the cation and anion at the plant. That process is part of the ion exchange technology at the plant, where raw water is blended with treated water.

Dutcher told the council that in recent discussions with City Clerk Lea Ann Doak, previous water rate increases were mentioned, including the 45% rate increase when the new water treatment plant was completed in 2006. That was followed by another 12% increase.

Under terms of a consent decree in 2005 with the EPA and the State of Nebraska, the city built a new water treatment plant in 2006 for around $13 million, to ensure compliance with contaminant levels of nitrate, uranium and arsenic. The consent decree was the result of the city’s water and wastewater violations of the Clean Water Act over a five-year period. The wastewater plant was also upgraded as part of the settlement, for about $1 million, to lower ammonia level violations.