By VERNON ROBISON
The Progress
The Moapa Valley Water District (MVWD) Board of Trustees took on the topic of looming rate increases for the coming year during a meeting held on Thursday, Nov. 9 in Overton. While no action on adjusting water rates was taken at the meeting, board members recognized that rates would have to increase more aggressively next year than they have in recent years.
“When we did all of our budgeting earlier this year, we knew that an increase was coming,” MVWD General Manager Joe Davis told the board members in the meeting. “But as we looked at our revenues, as compared to the inflation on our expenses on the capital projects that we want to do, it became clear that we needed to take a closer look with the board.”
Davis said that the chief complication has been a sharp rise in the cost of materials in recent years. “When you look at the cost of pipe, fittings and other materials, the costs on a few of those materials have consistently gone up 250 percent. Then the majority of other products have gone up 150 percent. Of course, that has increased the cost of all our projects significantly.”
As an example, Davis cited three high priority projects that had been identified by district staff.
First was a plan to drill a new production well at the district’s Arrow Canyon well site. The cost three years ago was projected at about $1 million. Current engineering estimates put the project at $3.6 million.
Another project would have had the district building a new storage tank at Warm Springs. The projected cost on this plan has doubled, Davis said.
The third vital project was a new storage tank located in the Muddy River Narrows between Moapa and Logandale. Previously the estimate had been around $2.4 million to build this facility. But currently, the engineering estimate is at more than $9 million, Davis said.
The staff had opted not to revise the budget scenario with these updated estimates, Davis said. That is because there are still so many variables in place before those projects would be ready to move forward.
“We felt that if we tried to update those numbers right now, it would skew the model drastically for the board,” Davis said. “We still have to deal with BLM on those projects. So we really don’t know the timeline. Some of them might be ready to roll in 2026; but it might be 2030, and it might be 2050. We just don’t know.”
What’s more, Davis explained that there are state and federal grant programs that would assist in paying for infrastructure projects which encourage conservation. That includes water tank projects, he said.
“We would hope that at some point in time, as these projects come on line, that these funding mechanisms might still be around so we might garner maybe an 80 percent match grant funding for them and we would only be at 20 percent of the cost,” Davis said. “So we decided to leave those original low numbers. That way it stays consistent with what the board has seen for the last five years.”
But even using the previous numbers, Davis showed some harrowing projections on the district’s cash position if rate changes were not made. These projections indicated, with no rate adjustment, the MVWD cash reserves would decline steeply, dipping below the district’s target by 2026. From there, cash would continue to plummet until the district would reach insolvency by around 2029, the report showed.
Davis showed three proposed solutions to this dilemma.
The first proposed a 5 percent rate increase each year until 2031, then easing off to 3 percent annual increases after that. But even with this scenario, the district would flow well below its cash position target by 2028 and would stay there for more than a decade.
The second proposal increased rates by 6 percent the first year, and then followed with 5 percent increases until 2031. This approach would still see the cash position falling below the targets. But it would significantly shallow the trough, the reports showed.
The third proposal would be similar to the second; only the initial increase would be 7 percent in the next fiscal year. Then it would drop to 5 percent annual increases after that for a time. This scenario would keep the cash position near the target for the district, the projections showed.
Davis added that all three of these scenarios included the district taking on debt to complete the three major capital projects with a 40 year pay-back schedule on the bonds.
“But it does keep things more revenue neutral,” Davis said.
Another important variable was the community’s growth rate, Davis said. The projections had assumed a very low growth rate, less than 1 percent, based on recent trends in Moapa Valley. But even a small amount of growth could make a significant difference in the numbers, he said. As an example, Davis cited the 165-home Logandale Mesas development just north of Moapa Valley High School, which was first proposed in 2017.
“When we plugged those proposed new meters into the projection it has a dramatic effect on the rates that everyone else will have to pay,” Davis said. “It actually would save us from having to have a rate adjustment that would be equivalent to a 7 percent increase for everyone. So some growth would help immensely.”
Davis concluded that it was staff’s recommendation that an 8 percent initial increase take place with the hope that inflation and other factors would stabilize in the next couple of years and the board might roll back or reduce the future increases in subsequent years.
Board members all recognized the need for a more aggressive rate adjustment in the coming year to get the district ahead of inflation.
Board member Ryan Wheeler pointed out that in the previous year the board had not done an across-the-board increase at all. Rather a new rate tier was added to bring additional revenues from the district’s highest water users.
“I know staff is thinking 8 percent,” Wheeler said. “I am thinking 7 or 8 percent, so I am with you on those higher levels.”
Board member Lindsey Dalley agreed that some aggressive adjustments were needed. But he also wanted to find a balance to keep sudden higher rates from driving ratepayers to added conservation.
“If that happened, we could go through all of this and end up not reaping any benefit,” Dalley said. “So I am wondering if we are better off doing more moderate increases over a longer period of time. I don’t know the answer to that.”
Board member Scott Farnsworth felt that there was no option but to aggressively increase the rates. “If we don’t do anything, I am looking at that chart and it scares me,” he said. “That would not be good for the district or for any of our ratepayers.”
Board Chairman Kelby Robison emphasized that the future is still unclear. Inflation might ease, grants might be available and interest rates might go down, he said. But no one really knows what will happen. He added that the board needed to take decisive action with the data that they know.
“I think we’re better off with a healthier increase now, and then taking a breath in a year or two if we need to,” Robison said. “I don’t want to be caught behind the eight ball and trying to make up for not having enough cash while prices continue to inflate on everything all around us. That would be a disaster. So to me the 5 percent scenario is just not an option.”
MVWD staff was instructed to prepare an action item for rate adjustment for the next meeting which is scheduled for December 1 in the MVWD Board Room.
