Based on current water usage trends, Bismarck could face a $58 million funding shortfall in the next decade if utility rates aren’t raised, according to consultants hired to assess the city’s utility fee system.
Stantec gave a presentation on Wednesday on how much money the city needs in order to maintain its water, sewer and stormwater systems. The company was hired to run the analysis after proposed changes to the fee structure, which would have charged for water service on empty lots, failed amid concerns from area builders.
Builders felt it was unfair for charges to be levied when no water was being used, so the Bismarck City Commission brought in Stantec to devise a more equitable solution.
Stantec’s initial numbers show the city could cover its costs through gradual rate increases — 8 percent for water in 2019 then 3.75 percent annually after and 5 percent annually for sewer service.
The consultant’s next steps will be how to allocate those increases fairly across users based on how much each user contributes to costs. Those presentations will take place in August and September, with final recommendations coming in November.
"He's doing an extremely thorough job ... They're looking at everything," said homebuilder Brian Eisman, of Stoneshire Builders, adding that the more comprehensive look at all users has helped to address concerns he had when the city was aiming the increases at empty lots.
Bismarck has 371 miles of water lines delivering 11 million gallons per day on average to about 21,000 users. Those users include 17,803 single-family dwellings, 1,749 multi-family properties with a total of 15,000 units, 2,025 commercial users and 289 irrigation users.
There are 313 miles of sewer in the city, and the water treatment plant treats 6 million gallons per day.
Bismarck’s utility customer base has grown at about 2 percent annually for the past 10 years. But at the same time, the use of services has remained steady. That means the infrastructure needed to serve the city has increased but the revenue it collects for those services hasn’t gone up enough to cover the cost, Stantec said.
Projected revenues are around $18 million for water in 2018. Expenses in 2019 are estimated at $21 million: $10 million for operations, $7 million for system improvements and $4 million for debt coverage. Of the spending on system improvements, 53 percent would go to replacing old pipe, 20 percent to water treatment, 5 percent to expanding the system and 17 percent to expansion of Public Works administrative and shop facilities.
“In 2017, we restricted spending, but that’s only temporary. It’s not sustainable long term,” said Michelle Klose, Bismarck's director of utility operations.
Stantec consultants did say the city could reduce the amount it holds in reserves by about $1.7 million in an effort to cut back on rate increases. In 2020 through 2023, Stantec talked about taking on more debt and using bonds to fund system expansions.
At the water treatment plant, the city needs funding to pay for treatment of biosolids in the sewer system, Klose said. Currently, the city applies those biosolids to fields.
"We’re having less available land," she said, so the system needs to reduce the water content of those biosolids to make transport easier.
The one bright spot was in storm water, where the city has been collecting more than enough to cover expenses and could consider eliminating certain surcharges to customers, a particular benefit to multi-family users.
Information from Wednesday's presentation will be posted on the Public Works website.