Most DeKalb Utility District customers can expect a 42% increase in their water rates thanks to the City of Smithville's hefty rate increase to the utility, according to DUD officials.
In a letter to subscribers Tuesday, January 14, Board of Directors and Management of the DeKalb Utility District have announced that rates to customers who receive water purchased by the DUD from the city will be increased by 42% or $4.30 per thousand gallons effective with the January billing.
DUD officials say the increase is necessary to help offset the 144% rate increase the City imposed on the DUD effective January 1. The DUD must now pay the city $5.00 per thousand gallons, an increase from the rate of $2.05 per thousand gallons the DUD had been paying for the last year until its water purchase agreement with the city expired.
In the letter to subscribers, DUD officials say they are considering options in challenging the city's new rate.
The letter to customers reads as follows:
"The City Council of Smithville has unanimously voted to increase the rate for water sold to DUD from the current rate of $2.05 per thousand gallons to the rate of $5.00 per thousand gallons which equals a 144% increase effective January 1, 2014".
"This increase was imposed even though no additional expense was incurred by the City in producing water and delivering it to DUD. Further, the City indicated that this rate is subject to being increased again in July".
"DUD is now forced, due to the actions of the Smithville City Council, to increase our rates. We therefore provide notice that beginning with the January billing that an increase of $4.30 per thousand gallons (42% increase) will be assessed to our customers who receive water purchased from Smithville. DUD is mindful of the impact an increase has on its customers and is making every effort to keep the increase as minimal as possible. While this increase does not totally cover the increased cost imposed by the City, it should be sufficient while DUD is considering its options to challenge the rate".
"We appreciate your patience and understanding as we make every effort to provide you quality water at a reasonable price. The actions of Smithville provide a prime example why DeKalb Utility customers need their own water treatment plant so that others will not possess such random pricing power. Indeed, DUD continues with plans to construct a water treatment plant in order to permanently avoid this situation in the future".
The Smithville Mayor and Aldermen met in special session Thursday night, December 12 at city hall to set the new rate for the DUD once the old contract expired December 31. The new rate of $5.00 per thousand gallons established for DUD is the same rate that city customers pay for water.
For the last decade, the DUD had been under contract with the city to purchase water at a rate which had increased by five cents per thousand gallons each year starting at $1.60 per thousand gallons in 2004 and ending up at $2.05 per thousand gallons in 2013.
Proposals for a new deal were presented by both sides in the months prior to the expiration of the contract but the parties could not reach an agreement.
In the last proposal, DUD commissioners offered to enter into a new ten year contract with the city and pay $2.67 per thousand gallons for the first five years and $2.80 per thousand gallons for the remaining five years. But they were unwilling to adhere to the city's request to give up plans to build a DUD water treatment plant and agree to minimum purchase amounts from the city for the next ten years. While not taking a vote on the DUD proposal, the aldermen clearly were opposed to it.
Several months ago the city hired Warren and Associates to do a water cost study. Their findings were that it cost the city $2.67 per thousand gallons to produce water. That's the same rate as the DUD proposed to pay in the first five years of a new contract with the city.
However during the December 12 meeting, the city's financial consultant, Janice Plemmons-Jackson advised the aldermen against locking in the rate for five years with costs likely to rise. "Every year your cost is going to continue to go up. To lock in one rate for five years, unless you're getting a high rate on the front end doesn't make sense," she said.
Jackson added that the results of Warren's cost study, done months ago, may already be out of date. "Those were probably 2012 numbers and we're already at the end of 2013 going into 2014. You have had some cost increases so the rate that was good at the time of the cost study is probably not the rate you're now spending to produce the water. That's an old number," she said.
At the December 12th meeting with no new agreement between the city and DUD, all five aldermen voted in favor of a motion to set the new DUD rate at $5.00 per thousand gallons.
The rate took effect January 1 and is be re-evaluated by the mayor and aldermen next summer during budget preparations for the 2014-15 fiscal year, which begins July 1. "The rate will be established in the budget by ordinance and it can be re-evaluated with the new budget July 1. Instead of doing a contract, the rate may now be voted on each year by the board in the budget ordinance," said City Secretary-Treasurer Hunter Hendrixson.