WILLMAR
— The
Willmar City Council
unanimously approved a water rate increase as requested by
Willmar Municipal Utilities,
as well as approved in a split 6-1 vote an increase in electric rates. Councilor Tom Butterfield was the lone no vote for the electric rate increase and Councilor Michael O’Brien was absent from the meeting.
The 20% increase in water rates for 2024 as approved by the council Nov. 6 is to cover the costs of water main replacements in the city’s
aggressive 10-year street improvement plan.
The
water rate ordinance approved by the council in December of 2022
called for an increase of 5% in 2024, but that was based on a cost of approximately $1.25 million per year in water main replacements.
In July of this year, however, the council approved the 10-year street improvement plan with approximately $1.5 million per year in water main replacements. Willmar Municipal Utilities then informed the council that a greater increase in the water rates in 2024 would be necessary to cover the increased costs associated with the water main replacements.
Willmar Municipal Utilities Director of Administration Janell Johnson explained all this to the council during the public hearing before the council on Nov. 6, stating that without the adjustment, “Additional water main replacements for the city projects will result in about a $400,000 shortfall for WMU’s budget.”
It is policy for Willmar Municipal Utilities to have a reserve of 50% of its operating costs, Johnson added, noting that with the adjustment, the budget falls below that threshold only in 2027.
The new water rate ordinance also includes increases of 4% in 2025 and 3% in 2026 to cover the costs associated with the construction of the northeast water treatment plant. Those figures are the same as those in the water rate ordinance approved by the council in December of 2022.
The new rates are still better than the proposed water rate increases suggested by a
water rate study report the Willmar Municipal Utilities Commission heard in July of 2022,
which called for a 20% increase in water rates each year through 2025 and an additional 5% in 2026 in order to pay for the treatment plant and water main replacements.
Willmar Municipal Utilities was able to
scale back those increases due to the bid for construction of the water treatment plant coming in $3.5 million lower
than what the engineer estimated and being able to finance the construction in-house rather than bonding for it.
Four residents voiced their concerns during the public comment portion of the Nov. 6 public hearing for the water rate increases — one in person and three sent written comments. Their concerns centered around how residents are being billed for their utilities and confusion about the fees being charged, how apartment complexes are billed for water and sewer and a concern that residents could not afford rate increases along with inflation and increases in taxes.
Councilor Audrey Nelsen asked Johnson about the billing and how that works in order to try to answer those questions, one of which was what the utility improvement charge is for wastewater and where that money goes.
Contributed / City of Willmar
Johnson explained that Willmar Municipal Utilities tries to be as transparent as possible for its portion of the bill, which includes water and electricity.
“On the wastewater side … we just bill that on behalf of the city. We use the verbiage that the city has in the ordinance, so that would need to be corrected by the ordinance from the city side,” she added.
She could not explain what the utility improvement charge is or where the money goes and nobody from the city offered an explanation.
As for how apartment complexes are billed, Johnson explained that a multi-unit rate was created during the 2022 rate study. Apartment buildings are paying a fixed cost per unit, which is lower than the fixed rate per residential home. “We feel it is much fairer how we are doing it, so everybody pays their fair share and what it costs for the infrastructure,” she said.
Nelsen also noted that the city frequently has to delay street improvement projects due to not being able to fund them, asking if that would affect the need for an increase.
Johnson acknowledged that water rates could be decreased if the city does not move forward with its 10-year plan as approved, but at this time Willmar Municipal Utilities has to plan as if the city is moving forward with its plan.
She reminded the council that the ordinance sets the water rates through 2026, at which time another water rate study will be conducted. If the city is not moving forward with its street improvement plans, that will be taken into account.
“I think we need to circle back and realize the need for this rate increase,” Johnson said. “The reason we are requesting this rate increase is because of the 10-year plan that the city has put together for their street capital improvement plan. We have to make sure that our share of that cost is going to be covered — that’s why we came forward with this rate increase. This is not based on our plan, this is based on your plans.”
Johnson noted that the last increase to electric rates was in 2015, so it’s been almost nine years without a rate increase.
“Due to operating and capital improvement costs to keep the system reliable, an adjustment to the rates is required and we’re proposing an adjustment in 2024 of 5% with a rate study that will be under consideration in 2024 to identify future needs and rate structures,” she said.
Councilor Tom Butterfield asked what happened to the $2 million that Willmar Municipal Utilities was supposed to save when the power plant was demolished.
Contributed / City of Willmar
Johnson explained that
Willmar Municipal Utilities has invested significantly in transmission in recent years,
noting that $5 million was invested in the Priam substation, a substantial amount was invested in the Willmar substation and the power plant substation was built when the power plant was torn down.
“We have improved the reliability of power to this community by having power come in from different directions,” she added.
Butterfield continued to press Johnson about the $2 million and where it went.
“We have reinvested that. We built the $5 million Priam substation, we didn’t bond for it,” Johnson said. “We have no outstanding bonds at this time, so that money is being reinvested in transmission. … We own the transmission line, we are paid by other utilities to use the line, also. It reduces our costs for the power that this community has to pay. … It is being reinvested back into the utility for reliability purposes. If we still had the power plant up and running, I’d probably be standing here asking for a 20% electric rate increase.”
Butterfield then asked how much of the electric rate increase is going to go toward new facilities that Willmar Municipal Utilities is planning on building.
“We’ve been planning and budgeting money over the years, so we do have retained earnings set aside and the Commission has designated that money in different funds,” Johnson said. “So this money would not go towards a new building.”
It should be noted that, as reported by the West Central Tribune in July,
Willmar Municipal Utilities currently has 80% of the estimated costs to construct a new facility
in reserves.
