Should the billing rates for sewer and water be revamped?

Published 10:20 pm Saturday, December 26, 2009

Residential and commercial

Basic service charges


Email newsletter signup

Size Rate

5/8-in. meter $7.30

3/4-in. meter $7.30

1-in. meter $26.00

1 1/2-in. meter $31.25

2-in. meter $31.25

3-in. meter $36.50

4-in. meter $62.50

6-in meter $93.50

Dwelling units 2-3 $7.30

Dwelling units 4 & up $2.85

Admin fee .25


Size # of users Rate Factor

5/8-in. meter 6,328 $8 1

3/4-in. meter 172 $12 1.5

1-in. meter 80 $20 2.5

1 1/2-in. meter 92 $40 5

2-in. meter 61 $64 8

3-in. meter 26 $128 16

4-in. meter 8 $200 25

6-in meter 4 $400 50

Dwelling units 2-4 — $0

Dwelling units 5 & up — $0

Residential and commercial

Basic service charges


Size Rate

5/8-in. meter $11.35

3/4-in. meter $11.35

1-in. meter $41.25

1 1/2-in. meter $51.50

2-in. meter $67

3-in. meter $77.25

4-in. meter $205

6-in meter $205

Dwelling units 2-3 $11.35

Dwelling units 4 & up $4.90

Admin fee .25


Size # of users Rate Factor

5/8-in. meter 6,302 $15.30 1

3/4-in. meter 165 $22.95 1.5

1-in. meter 72 $38.25 2.5

1 1/2-in. meter 92 $76.50 5

2-in. meter 59 $122.40 8

3-in. meter 24 $244.80 16

4-in. meter 7 $382.50 25

6-in meter 1 $765 50

Dwelling units 2-4 — $0

Dwelling units 5 & up — $0

Consumption rates

Current per 1,000 cubic feet Rate

0-100,000 cu. ft. $9.35

100,001-500,000 cu. ft. $4.85

500,001 cu. ft. & up $4.50

Proposed per 1,000 cubic feet Rate

0-100,000 cu. ft. $9.50

100-001-500,000 cu. ft. $5.35

500,001 cu. ft. & up $5

Flow rates

Current per 100 cubic feet Rate

Commercial & residential $2.42

Industrial $1.72

Proposed per 100 cubic feet Rate

All customers $1.95

The Albert Lea City Council is slated Monday to consider whether to switch the billing structure for city sewer and water rates.

Albert Lea City Manager Victoria Simonsen said the present system was set in 1983, revised in 1994 and since then rates have been on percentage increases and decreases. When Farmland Foods burned in 2001 and shuttered the plant, it left the city operating with a rate structure based on having a very large sewer customer. The city now is seeking to implement a structure that seems less arbitrary, and, thanks to a study from a St. Paul firm, has some research for rate-setting.

The city along with industry officials and other parties have been combing over the rate structure for months, and most have agreed the process has been fairly open and accessible.

However, the latest version of the proposal came out just earlier this month, and there is a call from the business community to give more time for people to review the proposed rates. Simonsen said though Jan. 1 makes a good starting date for future year-to-year comparisons, she is amenable to a later implementation.

The state mandates the city run water and sewer as enterprise funds. That means they pay for themselves and cannot use general-fund dollars. In fact, they are two enterprise funds — one for sewer and one for water.

In addition, the state has a mandate for cities to reward conservation. Cities are required by 2013 to have to what’s called an “inclining block” or at least be flat, but Albert Lea has a “declining block.” Declining means as you use more, you pay less — almost like those pizza deals where you get half off for the second one. Inclining is simply paying more if you use more. Flat, of course, is paying the same rate as you go.

What’s proposed, Simonsen said, would still be a declining water rate, just closer to flat and with the hopes of getting to flat in coming years. She said it would be a harder hit on users if the city waits until 2013 to meet the mandate.

The next thing to understand about water and sewer rates — old or new — is they have fixed charges and variable charges, said Albert Lea Public Works Director Steve Jahnke.

A sewer system and a water system have infrastructure and operating costs. They are known expenses that can be budgeted in advance. These fixed costs help determine the basic service charge on a bill; it doesn’t change regardless of how much is used.

The amount of use, however, is subject to change. These expenses vary. For instance, more sewage means needing more treatment chemicals. Hence, with sewer, these are called flow charges, and with water, consumption charges.

Remember this, too: Albert Lea sewer users — not water users — are split into three categories: residential, commercial and industrial.

Residential and commercial are subject to the fixed and flow charges.

Industrial, however, are companies that rely on sewer in greater amounts — usually food processing — and are subject to sewer surcharges. There are three surcharges — biochemical oxygen demand (BOD), total suspended solids (TSS) and total Kjeldahl nitrogen (TKN). In other words, your surcharges depend on what you send down the drain.

There are seven companies in Albert Lea that pay surcharges. At meetings, you hear the term “wet industries” to refer to them.

The recent history of disagreements on rate changes has focused on whether the wet industries should bear the burden of having a wastewater treatment plant bigger than presently needed — built in 1983 because of Farmland Foods (which then was Wilson & Co.) — or should that cost be spread out over all users. All sides point out that having a large plant is good in that, unlike in Owatonna and Faribault, users won’t have to pay the expensive cost of expansion should more wet industry come to Albert Lea. And all sides wants more wet industry, which would help defray the expense. But the down side is shouldering a big expensive plant until that day comes.

“It’s all whether you believe in the philosophy of this rate structure. If you use more, you should pay more,” Simonsen said. “Or should the residential pick up the costs?”

In November 2008, the City Council reduced charges for industrial sewer users by 25 percent following discussions of a possible expansion at Mrs. Gerry’s Kitchen, a wet industry. Then in January, the City Council also ordered a study performed on water and rates. The company hired was TDKA of St. Paul.

Jahnke pointed out that residential and commercial users won’t see much changes in their bills.

Referencing a slideshow from a recent council meeting, he said an average residential customer users 2,100 cubic feet per quarter. The current monthly water and sewer bill would be $14.10 for water and $28.54 for sewer, for a total of $42.64.

The proposed monthly water and sewer bill would be $14.65 water and $28.95 sewer, for a total bill of $43.60.

The increase is 96 cents.

“Any residential customer that uses 2,800 cubic feet or more per quarter will actually see a reduction in their sewer charges,” the slideshow notes.

Jahnke said the rates are simpler to understand. Determining a 5/8-inch meter as a factor of 1, the city could then calculate the equivalent rates based on meter size, which he called “meter-equivalents.” For instance, a 3-inch meter can handle 16 times as much water as a 5/8-inch meter. If the meter equivalent is $8, the user pays 16 meter-equivalents.” This allows the city to factor its total fixed costs among all users based on those units (see boxes). For water, the budget is divided into meter-equivalents of $8. For sewer, $15.30.

If the rates are approved, industrial users will see an increase of about 15 percent compared to 2009, as a result of the November 2008 cuts for 2009 rates, Simonsen said, but they will pay less than they did in 2008.

“This rate structure is sustainable well into the future, where the other had a random approach,” she said.

Jahnke said the goal is to have a rate structure that is easy to understand.

Engineer Kyle Skov said commercial users are likely to as little change as residential users.

“A small insurance office will pay no more costs than a house, and probably less overall because of less flow,” he said.

Albert Lea-Freeborn County Chamber of Commerce Director Randy Kehr said he thinks the City Council needs to give more time for business and industry to understand the rates. He called for the city to pay to publish the rates in the newspaper (rather than hoping the paper prints a story such as this).

He said the city could pick a selection of businesses — such as a restaurant, hotel, car wash, food processor and so forth — and show how the bills will change. He said the city bears the burden of sharing its information.

“If they want input from business, they need more time,” Kehr said.

Albert Lea Economic Development Agency Director Dan Dorman said he is more comfortable with the process this time than in November 2008, when he pushed for rate cuts for wet industries and won. Still, more time, he said, would make sure more people understand the structure.

He said among his concerns is that heavy users are bearing too much burden for rainwater that gets into the sewer system and to the wastewater treatment plant. He said if the cost of inflow and infiltration — sewer jargon for rainwater — is factored on the flow side, then that places the cost of it on industry. He said if I&I is factored on the fixed side, then the cost is on all users, which he said is more equitable.

He also is concerned about the factors for fixed charges coming from maximum potential use of a meter. He said because a user with a 3-inch meter can use 16 times as much as a user with a 5/8-inch meter doesn’t mean that user will come close to that potential. Some companies are required by state law to have larger meters.

He said he feels the city should decrease the rates for larger meters and increase the rates for smaller meters. He said he can’t find a city with the fixed charges similar to what Albert Lea is proposing and said he is worried about wet industries opting to not expand in Albert Lea. Or worse yet, leaving.

“But if the council understands this and goes forward, I’ll support them,” Dorman said.

The City Council meets at 7 p.m. Monday at Albert Lea City Hall.

About Tim Engstrom

Tim Engstrom is the editor of the Albert Lea Tribune. He resides in Albert Lea with his wife, two sons and dog.

email author More by Tim