Update on Ashland’s Proposed Increase in Water Rates
Annual 10% Water Rate Increases Proposed
By David Runkel
Ashland water rates, already among the highest in the state and nearly double those of surrounding communities, need to be increased 10 percent annually for the next six years primarily to pay for construction of a new water treatment plant, consultants have concluded.
The cost of the proposed new plant has increased sharply, from a low estimate of $55 million to a high of $70 million. The high figure is double the cost estimate made several years ago when the size of the plant was scaled back. City Councilors are due to discuss the proposed increases at a study session Monday evening.
A chart prepared by Hanford Economic Consultants of Truckee, CA, showed that only Albany and the Tualatin Valley Water District have higher monthly water rates than Ashland. Ashland’s current average rate of $61.71 would go up to $67.89 with January’s proposed 10% increase. Medford’s monthly rate is $32.13.
In a memo to Council, Public Works Director Scott Fleury reported that “the Water Fund along with other enterprise funds have seen significant cost increases in goods and services, construction and personal costs since 2019. The construction cost using Portland indexing has increased 31.7% from quarter 1 of 2019 to quarter 3 of 2023.
“Audited personal (cq) expenses have increased 5.7% from 2019 through 2022 and staff expects this to significantly increase moving forward as the Water Divisions, specifically distribution, have suffered from staffing shortages over the past few years and currently all divisions are fully staffed.
“The City is making a large capital investment in the treatment plant that will ensure a sustainable and secure water supply into the long term, which shows forward planning at a time when many communities are not investing in their water infrastructure,” Fleury told Council. “In addition, the City is working with (Talent, Ashland, Phoenix) TAP partners to ensure the secondary resilient source of water for emergencies and drought-year water supplies, and investing in infrastructure that will allow the sale of Ashland’s water to TAP partners during the winter when Ashland has an excess of water supplies.”
The major findings of the latest study are: “The water utility fund is in a strong financial position, but to remain fiscally healthy, rates will need to continue to be increased due to major infrastructure costs, most notably the construction of the new water treatment plant, as well as typical annual inflationary pressures on operations costs. The analysis projects that six 10% increases will be needed, beginning January 2024, followed by five increases each July, beginning July 2024.
“The water fund needs to maintain a high cash balance until the new water treatment plant project is completed. Actual costs may be greater than estimated, and the project may take longer to complete than anticipated.
“In addition, the City has several other high-cost capital projects taking place over the same timeframe that require reimbursement from other parties: (a) The Talent-Ashland-Phoenix Water System (TAP) partners and (b) an American Rescue Plan Act (ARPA) grant. Strong reserves are necessary for cash flow purposes when capital outlay is made on a reimbursement basis.”
Hanford also provided the following information on monthly water bills for a typical residence in Oregon:
Klamath Falls $27.36
Central Point $30.43
Eagle Point $46.11
Ashland (current) $61.71
Ashland (proposed) $67.89
Tualatin Valley $82.01
Source: Rate schedule for each water purveyor, July 2023
The consulting firm also recommended that Ashland conduct a cost-of-service study “to ensure customer groups are paying for their share of water service costs, and to ensure a rate design that reflects customer use characteristics and administrative goals of the water fund.”
Another financial analysis presented to Council found that Ashland’s water rates were within the ability of city residents to pay.