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Loyal water rate hike large, but needed

In a public hearing on Tuesday before the state Public Service Commission (PSC), the city of Loyal took the first offi cial step toward a sizeable water rate hike to be implemented in 2020. Now, before you start griping about what at first blush appears to be an outrageous increase, consider some of the factors that led to it. Not everything is as bad as it first seems.

The most obvious reason for what could be an increase of about 55 percent is the fact that the city has not raised water rates at all in nine years. That’s right, nine years, a span during which almost everything else you buy regularly has changed in price a dozen times. Perhaps it wasn’t a wise move on the city’s part to wait that long because regular smaller rate increases are barely noticed, but the city was also going through a period when its charges for wastewater service were rapidly climbing. In the city’s defense, it was helping citizens avoid an expensive double whammy of utility increases.

The wastewater charges had to go up when they did because of a city decision years ago not to build a new treatment plant to replace one that no longer met Department of Natural Resources muster. Rather than spend a few million dollars on a plant of its own, the city instead contracted with Greenwood to send wastewater seven miles across country for treatment at its neighbors newer, larger plant. That made sense, and still does, but it also cost cents.

When Greenwood raised its rates years ago to cover the cost of treating Loyal’s wastewater, the city had to pass that increase on to residents. In effect, the city pays Greenwood monthly what it would have been forking out in loan repayments had it chosen to build its own plant. And that’s a pretty good deal for Loyal, actually. Residents here now pay the same rate as do those in Greenwood, yet Greenwood holds all the risk. If the plant needs repairs or upgrades or does not meet DNR effluent limits, Greenwood is on the hook to fix it. Loyal basically flushes and forgets it.

Keep in mind, though, that Greenwood’s plant won’t last forever, and when it comes time to replace or improve it, Loyal will be paying part of the cost.

Back to water. The PSC will ultimately tell Loyal exactly what it will charge to raise enough revenue to operate its tower, transmission lines, wells, pumps, etc., and how much it must set aside to pay for future upgrades and maintenance. If the increase goes through as initially proposed, a household in the city that uses 15,000 gallons per quarter will see its water bill jump from about $90 to approximately $140. And keep in mind, that’s just the water portion of the bill that arrives every three months.

That increase is needed, in part, because the city spent a lot of money two years ago to replace all of its water lines under Main Street as it was being reconstructed. The city borrowed $852,000 over 40 years in a low-interest federal government loan to pay for replacement of decades-old lines. While the annual repayment on that loan is only a bit more than $20,000, that money has to come from somewhere. In a city that does not have any large-volume water customers -- such as a dairy processing plant -- to boost the revenue account, it is residential and small business users that must foot the bill.

While no one wants to see a large increase in any of their regular bills, there is something you can do to alleviate this one -- use less water. One typical result of a rate increase is a general drop in water consumption, and while that can have a negative impact in that the increase generates less revenue than expected, it can help ease the pressure on the water utility. Loyal operates a series of older wells that are adequate, but not overly productive, so decreased water usage may be a good thing. Shorter showers, less lawn sprinkling, leak fixing, etc. may all take on more importance now.

One more thought -- Loyal’s water utility is reliable with a quality product. Even at the higher rates, what you get when you turn on your faucet is still a pretty good deal.