Amid skyrocketing utility-related debt in Wausau a financial consulting firm is proposing the city increase water rates by 65 percent in 2023, along with a 5 percent hike in sewer rates.
Water bills for city residents are projected to rise about $140 per quarter, up from about $85 and is subject to approval from Wisconsin’s Public Service Commission. The sewer rate falls within the city’s authority.
During a presentation to the Wausau Water Works Commission on Tuesday, Brian Roemer from Ehlers Public Finance Advisors cited the rising costs of operation and maintenance as reasons for the increase and said that the 65% increase is a fiscally sustainable enterprise. Those benchmarks are from Moody’s – the credit rating agency which has questioned the creditworthiness of the utility – as well as from the Wisconsin PSC, the Ehlers consultant said. In November, Moody’s issued a negative outlook for the City of Wausau and its water and sewer utilities.
The next two additional projected increases in water rates are 3% each in 2025 and 2027. The proposed sewer rate increase for 2024 is 10% and thereafter 5% each in 2026, 2029 and 2032.
According to the figures shared by Ehlers Municipal Advisor Roemer, the estimated net operating loss for 2023 is currently pegged at more than $1 million.
Before Tuesday’s meeting, a memo from the city’s Public Works Director Eric Lindman made the rates public.
“The utility is again increasing rates due to additional regulations and increased operating costs,” Lindman wrote in his memo to the Wausau Water Works Commission. “The proposed rate increase on the water side is to implement the remaining increase for the new water treatment facility project, which the PSC did not allow the utility to do in 2020.”
At the meeting, he cited the expenses and state mandates placed on the utility.
Lindman cited inflation and an “ongoing increase in costs not covered by the most recent increase” for the hike in the sewer rate.
The impact will be felt more by the city’s low-income residents and their families. But Commissioner Joe Gehin said the rate hikes are necessary.
The Ehlers advisor said that an estimated 24.2% of residential customers who earn less than $25,000 in annual income will have spent more than 8% of their earnings for an assumed usage of 1,600 cubic feet or 12,000 gallons of water per quarter.
“A lot of times low-income users can be those that are on a single income and therefore use less water,” Roemer added. “So if we are to reduce the usage to about 5,000 gallons per quarter – and this is a standard that is applied by the Public Service Commission for low usage customers – those percentages go down.”
Commissioner Jim Force questioned the possibility of that reduced usage from 12,000 gallons to 5,000. He pointed out that at the standard rate of 100 gallons per day, it would come to 3,000 gallons a month and 12,000 gallons per quarter. “I don’t know where that 5,000 comes from unless those folks are not using water at all or very little,” he said.
Force said that a 65% increase would be a huge burden for lower income households, especially those earning less than $50,000 a year. He added that lower users of water pay more of their income per gallon than higher end users and asked if the city staff ever considered a study to potentially change that ratio.
Public Works Director Lindman said doing so would require another rate case, in addition to other steps like changing the billing cycle from quarterly to monthly, to implement customized rates throughout the city.
Mayor Katie Rosenberg agreed that an extra step would be required but said she is interested in the idea of custom rates if the commission wishes to pursue the idea.
Force suggested the impact could be alleviated through a new water assistance program that is now available in the state but the Wausau utility has to apply for the funding. He also suggested the city should consider some kind of assistance to low-income users.
Wausau’s Finance Director Maryanne Groat said the city has already registered for the program “and we do have homeowners taking advantage of it.” She later said that the assistance program can be improved and marketing can be done to widen impact and awareness.
Commissioner John Robinson also questioned why the water rate is based on a fixed charge instead of on the usage (volume) and asked if that could be changed. Roemer said the utility will have to propose higher and lower fixed charges to the PSC but doing so would entail additional costs to the utility because it will have to conduct a study for those different rates.
Robinson said the proposed new rates would put Wausau among the highest rates for meters in almost every group in the state and could pose a problem for the city as it tries to attract new users and retain existing ones.
Groat said there is danger in tinkering with the proposed rates, saying they have contributed to the city’s current in negative cash positions. Rate hikes are difficult but necessary, she said, adding the city has to take into the utilities’ needs and any unexpected expenditures.
But the two commissioners pushed back on that, with Force saying there will always be some unexpected costs and he wouldn’t want to discuss another rate increase next year.