LAS CRUCES – Las Cruces Utilities (LCU) will be presenting a resolution to City Council to vote on the Utilities Board of Commissioner (Board) recommendation for a water rate increase providing $3.8 million per year more to LCU’s Water Utility.
The Board recommended a three-year rate phased-in plan (increasing the first year’s average residential bill by $2.25 (15%) per month, then $1.78 (4%) per month the second year, and then $1.97 (4%) per month per month the third year).
LCU provides four utilities to residents and businesses in Las Cruces, and funds its operations with the revenue from rates and fees charged to customers for the utilities and services they use.
LCU has not raised water rates for the past 9 years. Why? The previous process, based on quasi-judicial procedures for reviewing and setting rates was cumbersome, expensive, and time consuming (a 3-year duration for the last water rate review).
After establishing a new process, it has still required more than a year of evaluating the revenue requirement, allocating the cost to serve the city’s water customer classes of service, and rate design.
This also includes the consultant, Stantec Consulting Services, Inc., presenting the results to the Utility Customer Advisory Group (UCAG). UCAG reached the unanimous conclusion that LCU must increase water rates by $3.8 million to meet the current costs of providing water service to customers.
UCAG, an ad-hoc committee of five ratepaying volunteers, then was tasked with presenting the two options for increasing rates via public meetings and public outreach. UCAG has now moved on from reviewing water rates to reviewing wastewater rates. Over the next two to three years, UCAG will review rates for all four utilities (gas, water, wastewater, and solid waste).
Still, some are asking, “Where does all the money go? Why is a water utility rate hike necessary?” It might help to understand one of the LCU major costs: the $41,281,721 budget for Water Capital Improvements Projects from Fiscal Year 2017 – 2022.
Four of the largest capital projects are:
1. Underground utility upgrade with public works: $9.95 million to replace aged utility infrastructure during roadway rehabilitation,
2. Redeveloping wells 29, 31, and 32: $2.48 million to increase water system capacity,
3. Zone 1 water supply: $6.32 million to increase water capacity and efficiency, and
4. Water Quality Lab at Jacob A. Hands Wastewater Treatment Facility: $5.18 million to replace aged infrastructure, and build separate water and wastewater laboratories.
While rates of water service had not changed in about 10 years, operating costs such as; wages, salaries and benefits, construction and maintenance materials, vehicles, debt service, etc. have increased over this same time outpacing the revenue collected under current rates.
A letter published in a Las Cruces publication highlighted what a complex issue this is. The author asked if development impact fees (DIFs) of approximately $1,000 per new home for residential water and wastewater connections – totaling $559,498 in Fiscal Year 2017 – didn’t somehow benefit Las Cruces Utilities. The answer is no.
The water rate increase for water utility operations is separate from DIFs. The cost of new infrastructure to serve future customers is paid by DIFs. It is accurate that current water and wastewater customers do pay a portion of the residential impact fee (22% for water and 30% wastewater), approximately $1,100. This is a City Council policy that was approved on June 30, 1995 that allocates the current DIF. For a typical new water, residential connection this allocation is as follows; $1,210 paid by the developer, $678 paid by the customer, and $532 paid by rate base or current customers.
Furthermore, although LCU is a city department, it does not benefit in any way from any permitting fees or taxes paid to the City General Fund. LCU operates as a stand-alone and self-sufficient enterprise fund and is not tied into the City General Fund budget. LCU can only recover the costs of providing gas, water, wastewater, and solid waste utility services through monthly billings for the services provided to residents and businesses.
You can reach Las Cruces Utilities at 528-3500 from 8 a.m. – 5 p.m. Monday through Friday. Las Cruces Utilities provides gas, water, wastewater and solid waste services to approximately 100,000 Las Cruces residents and businesses.