The City of Winfield is looking at ways to increase revenue for its water utility fund, and higher rates for water customer could be on the horizon.
City commissioners and staff will discuss the issue at their Thursday work session.
According to a memo from Winfield City Manager Jeremy Willmoth, the current water fund does not bring in enough revenue to keep up with expenses and growing capital concerns.
Water utility revenues are mostly a combination of meter charges and volume, or usage, charges. For expenses, 70 percent goes to salaries, benefits and other fixed costs. Costs that fluctuate with demands make up the other 30 percent.
Total revenues in 2016 were $2.3 million, with expenses of $2.5 million, leaving a deficit of a little less than $200,000. Figures provided for 2015 and 2014 show similar revenues, expenses and deficits in those years.
While the city sells roughly the same amount of water today as it did in 2008, the costs to produce and distribute the water have gone up considerably, leading to the revenue shortage.
The city is now trying to resolve the revenue shortage, while also addressing the fixed cost/variable costs dilemma.
“To be clear — we will never develop a rate structure that produces 70 percent of the revenues on fixed cost, as that would unfairly burden those on a fixed income,” Willmoth’s memo states. “However, staff believes we do need to make adjustments to ensure that a larger portion of our revenue is fixed from year to year, rather than solely dependent on volume of sales.”
Based on current revenue and expense projections, the city is around 17 percent short on water revenue. The hole has been plugged through transfers from other utility funds and depleting fund balances for some time now, Willmoth said, but it is now time for corrective action.
“Quite simply, we must either increase our revenues to keep up with expenses or cut our expenses,” said Willmoth.
Current increases set to go into effect in the coming years, per city ordinance, will not be enough to fill the revenue gap or provide money for capital improvements.
Currently, meter rates are expected to increase by 11 percent in 2018, 10 percent in 2019 and 9 percent in 2020.
Volume rates are set to go up by .9 percent in 2018, another .9 percent in 2019, and 1 percent in 2020. These increases were passed by the commission on March 18, 2013.
Staff recommends a 10-percent increase in revenues in 2018 and a 5-percent increase in 2019, with potential increases to be recommended past this time if needed.
Staff also recommends the majority of the increase be done to the meter rate; that the base rate include 1,000 gallons of water usage each month so that the variable rate does not apply until the customer uses 2,000 gallons of water or more; and that the discount applied to customers who use the most water be removed, with all customers paying the same per gallon rate for all gallons over 1,000.
The city believes staff reductions aren’t a good option because staff are needed to keep the water safe and delivered to customers. Reductions in staff would mean either taking a risk in compromising the safety of the water or adding to down time caused by water main breaks and disruptions.
No immediate action is expected on any water rate changes.