LITTLE ROCK — A two-part water-rate increase starting March 1 has caused concern among Little Rock city officials about whether Central Arkansas Water’s overall rate structure is unfairly burdening Little Rock and North Little Rock ratepayers.
The first of Central Arkansas Water’s two-part rate increase will cost residential ratepayers in Little Rock and North Little Rock an extra 47 cents per month starting March 1. The second bump will add 48 cents in 2014. Rates are to hold steady in 2015.
The rate increases are to pay off bond debt the utility issued to meet federal Environmental Protection Agency requirements to bring its two treatment plants up to new Clean Water Act standards, Graham Rich, the utility’s chief executive officer, has told the governing bodies of the two cities.
Little Rock and North Little Rock merged their water utilities in 2001 to form Central Arkansas Water, and water commissioners are from those two cities only. The utility also provides water to other parts of Pulaski County, including Sherwood and Cammack Village, and sells water wholesale to cities in surrounding counties.
To keep the new rates from going into effect, the Little Rock Board of Directors and the North Little Rock City Council would both have to decide to oppose the action by Feb. 11. The deadline is a required 90 days past the Central Arkansas Water Board of Commissioners’ approval of the rate plan in November.
Since the 2001 merger, no rate adjustment has been opposed. Neither body has indicated opposition to the increases.
Little Rock Mayor Mark Stodola and some city directors, though, did question Rich last week about the utility’s rate structure that includes the price it sells water wholesale to cities outside Pulaski County.
“Outside city” customers are those not inside the utility’s core service area of Little Rock and North Little Rock, according to utility terminology. Those customers pay a lesser charge for water use in excess of the standard minimum 200 cubic feet than in-city ratepayers, including households, commercial and large-volume users, such as hospitals.
All customers inside Little Rock and North Little Rock are considered retail, Rich said. Wholesale meter customers purchase water within those two municipal boundaries to transport outside the cities for use or resale.
Stodola asked Rich whether the two cities’ ratepayers - who some directors implied should be the utility’s priority - were subsidizing the growth of other cities.
“I don’t believe they are being subsidized,” Rich said in an interview the next day. “The bigger question I think is, should we be charging a little bit more on [wholesale rates] and what is the break point? That’s a very valid question.”
Little Rock directors issued a plea to the utility to look out for its primary cities when setting charges to outside customers.
Rich said that he would take responsibility to “get the two city boards and our board together periodically to talk about these very broad, high policy decisions.”
“The takeaway I had from that meeting was we should be getting more for the water we are selling,” he said. “That’s a true policy question. We have not changed the methodology we use to calculate rates since the merger.”
Central Arkansas Water serves a populated area of 400,000 residents in central Arkansas, with 98,663 metered accounts inside Little Rock and North Little Rock and 24,940 outside, said Gary Pittman, the utility’s chief financial officer.
Ratepayers pay different amounts depending on the size of a meter and whether a meter is for home, yard, business or industrial complex. Whether a customer is inside or outside city limits also plays a role.
The average residential customer within Little Rock and North Little Rock pays $12.15 per month, Pittman said. The figure is based on use of 6.5 Ccf (hundred cubic feet), or about 4,875 gallons. The 47-cent increase March 1, a 3.9 percent rise, will take that cost to $12.62 cents.
The 48-cent increase next year, a 3.8 percent increase, will bump the typical rate to $13.10 monthly.
About 60 percent of Central Arkansas Water’s residential meters use the 6.5 Ccf amount monthly, Pittman said.
The utility’s residential rate for a minimum usage of 200 cubic feet of water or less is $5.35 monthly inside Little Rock and North Little Rock and $7 a month for those outside the two cities. The two increases will add 50 cents to those rates inside the two cities and 66 cents for those outside.
Sherwood city officials recently questioned the fairness of its rates, which are among higher rates paid by customers outside of Little Rock and North Little Rock. The two increases will raise the average residential water bill in Sherwood and other parts of Pulaski County from $17.89 monthly to $18.58 in March then to $19.27 per month in 2014, Pittman said.
In contrast, there have been few, if any, complaints heard from the general public about the water increase inside Little Rock and North Little Rock, some city government watchers said.
“I haven’t heard a word about it,” said Jim Lynch, co-founder of the Coalition of Little Rock Neighborhoods. “As far as I’m concerned, this doesn’t sound like an onerous increase to me.”
Neil Sealy of Arkansas Community Organizations in Little Rock, a group that advocates on behalf of lower-income residents, said the water-rate increase hasn’t caused as much concern as other issues.
“I’ve not heard the concern yet,” Sealy said. “That’s not as painful as the sewer increases and some of the sales-tax increases that we’ve had. For us, the big issue was protecting the quality of the water, and we are concerned about the direction that is going.”
Sewer and solid-waste charges, both of which increased in Little Rock beginning in January, are also part of Central Arkansas Water bills. The typical residential bill in the capital city including those costs will be $65.53 monthly, not counting fees and taxes. That’s $2.81 more per month.
Even so, the usual “water bill” is often the least expensive monthly cost for residences, Rich said.
“Even with the combination of the three services, it is still the lowest bill we pay in our household,” Rich said in a recent interview. “It’s less than cable TV, certainly less than my cell-phone plan, and it is less than the gas and electric bills.
“Look at the other expenses a household has that we did not have in 1986,” he said. “Internet, cell phones, cable TV, bottled water, Starbucks. Those have become accepted household expenses today. In some cases, that can be several hundreds dollars in additional monthly expenses.
“The contrast to that is, water has remained at a very modest price,” he added.
Meeting the new federal water-quality mandates has to do with the EPA’s Stage 2 Disinfectants and Disinfection Byproducts regulations that the utility must meet by Jan. 1, 2014. The EPA requirements mandate that water providers change how they calculate and report the levels of byproducts from disinfectants used to clean the water that makes it to taps.
“This is an unfunded government mandate that we have to follow,” water Commissioner Eddie Powell of North Little Rock said. “We’ve known about it for a number of years. The time is here where we either have to do it or the federal government sues us for being out of compliance.”
Ratepayers, however, should pay attention and not just take such increases at face value, Lynch said.
“When I hear something is going up to meet EPA standards, sometimes I think the local bureaucrats use that as an excuse, to blame the EPA,”Lynch said. “But for half a dollar a month, if they’re telling the truth and that’s what it takes to meet EPA standards, that’s fine with me.”
The utility borrowed $18 million in bonds in 2011 for the needed upgrades and other safety improvements.
“We looked at 10 different strategies” to meet the new compliance levels, Rich said. “This strategy chosen has the most effective and most cost-effective way to be compliant.
“We are having to add equipment ... not only equipment but structures to house it and the chemicals,” he added.
In December, commissioners approved a $12 million low-bid contract for construction of the required water treatment plant improvements. It is the largest single-construction contract approved by the utility since the 2001 merger.
Construction will last through the spring of next year, Rich said, but enough will be complete to meet the Jan. 1 compliance deadline.
To meet its added costs, the utility’s debt service will increase by 30 percent this year, going up from just more than $6 million last year to $7.9 million. Operating expenses are also increasing from $36.98 million in 2012 to $37.17 million this year. Those expenses will grow to $38.8 million in 2014.
Between 1985 and 2000, Little Rock ratepayers never experienced an increase.
One factor that has kept bills from going even higher is the utility recalculating water consumption as customers have added more economical faucets, toilets, dishwashers, washing machines and shower heads in their homes in recent years.
“Those are much more efficient today than they were 10, 15, 20 years ago,” Rich said of household appliances. “We’re seeing a graded redirection of consumption because of more effective appliances.” Residences were billed at a water-consumption rate based on almost 6,000 gallons monthly prior to 2008, when that was lowered to about 5,250 gallons. The rate fell to the current 4,875 gallons in 2011.
The last water increase for Little Rock customers was in 2010 and remained at that level in 2011. The adjustment in 2010 achieved an equalizing of water rates paid by customers in Little Rock and North Little Rock.
North Little Rock’s rates had been higher than its larger neighbor. The 2001 agreement that merged separate water utilities in the two cities required rates to be equal within 10 years.
“North Little Rock was at a pretty good disadvantage when consolidation came about,” said Powell, one of two water commissioners who remain since the merger. “That was one of the reasons [former North Little Rock] Mayor [Patrick] Hays wanted to work on the consolidation because our rate structure, in his mind, was not the fairest that it could be.”
Regionally, Central Arkansas Water rates are lower than Nashville, Tenn., ($13.62),Shreveport ($17.75) and Tulsa ($18.25) among others, using the same 6.5 Ccf per month average consumption. Memphis water rates are lower ($8.94), but Pittman said Memphis’ supply is from wells and its water, electricity and gas utilities are consolidated, saving on costs.
Little Rock residential sewer rates went up by about 5 percent in 2012 and 4.5 percent this year. Those rates will increase by 2.5 percent in 2014 and 4.75 percent in 2016. The city’s solid waste charge rose from 20.99 to $22.02 in January, for a resident with one trash can and one recycling bin.
In North Little Rock, sewer rates increased for the average residential customer to $23.24 per month beginning in January. Another 9.5 percent increase to $25.48 monthly will hit in 2014.
North Little Rock’s City Council also approved passing along an added 56 cents monthly charge per bin last spring for an expanded recycling program.
Powell said he believes ratepayers understand Central Arkansas Water’s rates increases are to safeguard the safety of their drinking water while staying affordable.
“I think people realize the quality of the water they’re getting is excellent compared to the price they pay,” Powell said.
Front Section, Pages 1 on 02/04/2013