Peshtigo Seeks 18 % Hike In Water Rates

The City of Peshtigo water utility has kept costs pretty much even over the past several years, but due to a drop in usage, returns are declining to near zero for this year and a hefty projected loss for 2012 if nothing is done. As a result, after thorough discussion Monday, Dec. 12 with Dave Maccoux, a Schenck CPA, the Water and Sewer Committee agreed unanimously to ask Wisconsin Public Service Commission to approve a rate increase that equates to approximately 11 cents per day, or $15 per quarter, for small residential customers.

The increase is designed to bring the utility a two percent rate of return on investment and allow some money to be set aside each year for future improvements. This equates to about an 18 percent hike in the average water bill in the city, and will be in addition to whatever sewer rate increases is needed after all expenses of the wastewater treatment plant renovation are known.

The current rate was aimed at a 1 percent return on investment, but has fallen below that.

Projections by Maccoux showed if there is no change the utility will have a $55,305 operating loss in 2012. Revenues are projected at $689,460 and operating and maintenance expense at $745,305 including depreciation. With the increase to a 2 percent rate of return the projection is for $190,789 of operating income, or $191,018 of net cash flow available for future capital improvements. Without the rate hike, there would be only $229 of cash flow available in 2012 for future utility infrastructure, and a loss of $630,217 from operations shows in 2011. The TIF District is financing approximately 46.1 percent of the water system improvements, which accounts for a large share of the operation and maintenance expense overrun.

Maintenance expense includes painting the water towers that was required by the PSC. The committee also agreed to look at the possibility of routinely increasing the rate by 3 per cent per year or approximately the rate of inflation, which is allowed without going through the somewhat costly process of applying to WPSC for a greater rate hike. No action was taken on that idea, but the feeling seemed to be that slight rate increases occurring regularly are preferable to larger jumps all at one time.

Decision to have Schenck do the water rate study was made in June after the committee learned that the rate of return on water plant operations had dropped to one quarter of a percent. They already knew the wastewater treatment utility had operated at a loss for several years.

Plans for renovation of the wastewater treatment plant were well underway when the committee learned a few months ago that a promised $477,000 grant awarded several years ago by former Congressman Steve Kagen through the Federal Clean Water Fund has been rescinded due to federal budget cuts. Decision on new sewer rates will not be made until all costs and financing are known.

Committee Chair Fred Meintz said at Monday’s meeting that the possibility of resurrecting the original grant seems to be dead, but there is the possibility of a Clean Drinking Water loan with forgiveness of up to $300,000, which would act quite similar to a grant.

Much of the meeting involved a detailed technical discussion of wastewater treatment plant improvement plans and options with engineer Chris Kaempfer of Kaempfer & Associates. The work will include a new cement block building to house some of the equipment, renovation of aeration blowers, installation/modification of an engine generator, modification of a switch gear, motor control centers and the 700 square foot cement block electric service building.

Included in information presented by Maccoux was a comparison sheet showing average quarterly water bills in Peshtigo range from $81.57 to $103.50. This is approximately the same as the City of Niagara and the Village of Pound, and compares with a range of $66.70 to $81,56 in Marinette, Crivitz and Wausaukee; $54.22 to $66.69 in Wabeno and Coleman; lows of $24.65 to $54.21 in Lena and Laona, and highs of $103.51 to $337.50 in Goodman and Suring.

“The utility has been doing a good job of keeping expenses constant, but the reduction in use causes the need for an increase in water rates,” Maccoux said.

Mayor Al Krizenesky wondered if the 1 percent increase in rate of return was enough, considering it costs $1,200 to $1,500 just to go through the application process. Maccoux said it is enough for now, but suggested they consider the annual 3 percent increases for the future.

Committee member Dale Berman, a former city mayor, was concerned about the impact of too high a rate increase on city residents and businesses, and asked if they hadn’t done a 1 percent rate increase a few years ago. Maccoux told him it was a 1 percent rate of return hike, “a much larger increase to cover the cost of new equipment and debt service.”

“What kicked us in the head was that radium thing,” Berman declared. “There was the cost of equipment, increasing the need to depreciate, plus the higher operating costs,” he recalled.

Construction discussions with Kaempfer included indications that the committee would like to have local contractors do the work when possible, but decision was to have them come on as sub contractors, with the project otherwise most likely to be split between one contractor for general construction and one for mechanical work.

Kaempfer said when advertising for bids he will make the major contractors identify their subcontractors “so they can’t shop around later.” He noted state law prohibits giving preference to local contractors, and because of the magnitude of the work state and federal prevailing wage rates must be met.

Some of the renovation/upgrade work will be done in-house by either Badger or city personnel, which can be handled by “force accounts”, Kaempfer explained. He will bring several bidding scenarios to the committee for consideration at their next meeting, on Monday, Jan. 9. Plans are to bring the bidding documents to the City Council for approval in February, then let the bids in March and have work start in March or April, weather permitting.

City Engineer George Cowell and the committee as a whole expressed thanks to Kaempfer for giving them the opportunity to have input to the design and construction options as the plans progress, rather than coming to them with a take it or leave it finished project.

Cowell noted they will need to work on lift stations in a couple of years, and wondered if financing for that can be tied tothe state loan for the current project. Kaempfer felt it cannot. Cowell also said the lift station warning radios need upgrading also and suggested that could be part of the lift station upgrade work, but possibly should be done soon. He said parts for some of them are becoming hard to get. These are the radios that contact the city crew if the lift station fails.

“It’s kind of a poor time to talk about a total system upgrade,” commented Berman. “We’re hitting the people awfully hard.”

There was no action.

Cowell said during the last power outage the radios were down for 10 to 12 hours. As backup, there’s a lift on the building that police check when they drive by on patrol. He suggested they might consider battery backup for the radios.

Cowell reported finding an unknown sewer coming off Maple Street when it collapsed. It wasn’t shown on any city charts. He said they have the system open now for the residents it serves and will fully redo it later.

Copper test results are back, and they are fine.

There have been problems with postal delivery service, Cowell said. The samples go out of Peshtigo on time, but sometimes aren’t delivered at Madison for several days. The lab will not test samples more than 48 hours old, so then new ones must be sent. He felt the city should look into other delivery options. Having tests done onsite by a private lab costs about $20 per sample, and shipping costs $6.80 each, he said.

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