Members of the Moapa Valley Water District Board of Directors, in a meeting held Thursday, requested that an action item be placed on their next agenda to consider a general water rate increase of 6-8%. Most board members agreed that a rate increase would be needed, but were open to discussion on the exact amount the increase should be.
The last time the MVWD saw a rate increase was in January of 2011 when a previous board instituted a 3 percent increase. This increase was part of a series of gradual rate increases that had been recommended in a comprehensive rate study completed by Red Oak Consultants in 2006.
Since the 2011 increase, however, the board had declined following the recommendations of the rate study. Instead board members had instituted wide-ranging spending cuts to the district’s budget and sought to improve its position in regional water agreements to prevent the need for increases.
But over the past few years, the district has seen almost no growth in its customer base. Furthermore, revenues from water sales have seen a steady five year decline. Meanwhile the district has seen operating costs soar; especially in PERS pension costs as well as insurance costs.
“We have seen some of these costs skyrocket, and unfortunately they are things that are completely out of our control,” said Board member Randy Tobler.
The district’s 2017 fiscal year budget, which was given final approval at the same meeting last week, was precariously balanced. But only by diverting non-operating revenues, which had been earmarked for infrastructure improvements, into paying regular operating expenses. The district was forced to forego $1 million in capital projects that had been anticipated for this year.
Most of the board members agreed that the time had come for a rate increase.
Tobler said that diminished revenues and ballooning operating costs had thrown the district’s broader financial plan out of balance. The district was no longer able to meet the basic goals set by the board, he said.
“Of course, we never wanted to raise rates,” Tobler said. “We have done everything we could to save money and put off the increase. But at this point, we are not just raising rates to bring in more cash, it is needed now to keep us whole. In fact, I think we are probably about two years behind the time when we should have moved on this.”
Board member Lindsey Dalley said that he was concerned about using funds reserved for infrastructure improvements to run the day to day operations.
“The big risk of small utilities is that they don’t address infrastructure,” Dalley said. “They keep pushing it down the road further and further until finally they can’t afford to make the improvements without taking on a huge amount of debt. At that point their hands are tied.”
Dalley said that, five years ago, the current board had expressed determination not to get into that position.
“We announced that it was our goal for the district to remain independent and not controlled by an outside institution or authority,” Dalley said. “Let’s face it, we can’t do that without financial independence.”
But board member Ryan Wheeler was opposed to the rate increase at this time. Wheeler pointed to the fact that the board had recently voted to contract an engineer to study the district’s entire system, forecast what the vital infrastructure needs would be and draft a timeline and budget for addressing them. He wanted to wait until the results of that study were complete to have a full picture of what the district’s financial needs would be.
In the meantime, Wheeler advocated spending down a portion of the district’s cash reserves to meet the operational needs.
The district currently has a total of about $6 million in reserve. Much of that money is in restricted accounts set aside for specific purposes like infrastructure improvements and equipment purchases, staff members said. The district also keeps six months of operating expenses in cash reserve.
Wheeler advocated the possibility of dropping that cash reserve down to as low as four months of operating expenses in order to buy time and delay the rate increase.
“I don’t think we have a full grasp of what the needs are at this point,” Wheeler said. “So why increase the rates now? I don’t like the idea of raising rates while we have cash to hold us until we get a full picture.”
But Dalley said that the board had more than enough information to know that the district needed a rate adjustment.
“I don’t see that there is really any question,” Dalley said. “The picture looks clear that we have a serious operational deficit. I don’t think that we need to wait on that. We should move to make that right. I am okay to wait on the capital improvement side until the study is done. But I don’t need that study to know that our operations side is hurting.”
Board chairman Ken Staton agreed. He worried that waiting another 1-2 years, until the infrastructure study was complete, would put the district too far behind.
“The longer we put it off, the more nervous it makes me,” Staton said. “If we are just scratching the surface of the problem now, what will it be in six months or a year. I don’t want to operate that way.”
Staton asked district staff to place the item to consider a 6-8 percent rate increase on the agenda of the board’s next meeting for Thursday, June 9 at 4:00 pm in the MVWD Overton office. The item will be listed as an action item, meaning that a final board vote may be taken on the matter.
