Rate study forwarded to PSC asks for boost to cover cost of Fredonia Avenue installation
Can you say “sticker shock”?
Village of Fredonia water customers are likely to soon feel the financial impact of installing new water lines along Fredonia Avenue.
The installation of the new lines cost about $900,000, and was done last year in advance of the reconstruction of the road.
A draft water rate study prepared for the village by the accounting firm Baker Tilly suggests local water rates should rise 86% to cover that capital expense.
Before such a staggering water rate increase can go into effect, it must be approved by the state Public Service Commission.
That process includes a public hearing where comments from the village’s water customers — residential and commercial — will be accepted.
Wendy Unger of Baker Tilly reviewed the water rate study with the village’s Utilities Committee last week, noting that Fredonia currently has the second-lowest municipal water rates in Wisconsin, and the lowest in Ozaukee County by a large margin.
Even if the PSC approves the full 86% rate hike, Unger said, the village’s water charge would be the 48th lowest among the state’s 358 municipal water utilities.
The village conducted its last full water rate study in 1983.
Since 1995, the village has enacted five 3% rate hikes, the maximum allowed by the PSC without going through the full review process.
The latest water rate study was a requirement of the village applying for a Clean Water Drinking Act loan, which will be used to pay for part of the water main project.
“The PSC is anxious to complete that loan request, so my guess is they are going to be moving the rate hike along,” Unger said.
She said the actual rate increase request could be modified by the PSC before going through the approval process.
Although the recommended increase needs state approval, village officials were wary of what the gut reaction to the request will be from residents.
“People are going to read about the increase in the paper and it is going to scare a lot of them,” acknowledged Trustee Don Dohrwardt.
“But even if the increase goes through, we would still be the lowest in the area.”
Trustee Scott Ehaney agreed customers need to take a long-range look at utility charges.
“This is something that should have been going up incrementally over the years. People have been getting a bargain for a long time,” Ehaney said.
Water charges only make up about 25% of the quarterly utility bill, according to village officials.
Based on that premise, if the rate increase is approved, the water charge on the quarterly utility bill for a typical home would rise from $22 to $40.55.
That same overall residential utility bill would increase from $105 to $125 — a 17% increase.
According to the village, the quarterly utility charge for a large industrial customer would increase from $8,600 to $11,360 — a 23% increase.
The quarterly water bills for the Northern Ozaukee School District would rise from $3,600 to $4,350 — a 17% increase, according to the village.
As an enterprise account, the water utility is expected to operate without support from the tax levy.
However, officials noted the utility operated at a $58,000 loss last year — with operating expenses exceeding revenues.
Unger said the rate study may have also uncovered a concern over impact fees.
The village has been collecting impact fees on new development for anticipated water system improvements since 2002.Unger said that account has grown to about $80,000, but she said she can find no indication that any money has been spent.
“Even with extensions, you might be quickly coming up to the point where you need to spend that money or return it,” Unger said.
The rate study was also presented last week to the Village Board, which authorized Public Works Director Roger Strohm to file the report with the PSC.
According to Unger, that will trigger the full rate hike review.