The Board regularly updates water and sewer rates after considerable analysis of ongoing revenue requirements. This is a huge effort involving collaboration between the Board, staff and experienced rate consultants. Balancing the financial and infrastructure needs of the District, while keeping rates affordable for our customers, is near and dear to our hearts as commissioners and ratepayers loo.
In recent years, the cost of labor, supplies, building materials, and fuel, among other items, have gone up considerably. This isn’t news to you as you experience this inflation every time you go to the grocery store or fill up your car with fuel. These increases have made the major projects we have undertaken to improve the delivery of water and sewer service much more expensive. It also drives up the estimated costs we attach to future projects. This in turn increases our need for future borrowing and for additional revenues from rates.
In conjunction with the rate study, the Board adopted a budget that establishes projects that will be needed over the next ten-year period to maintain the systems. With the need to replace or upgrade a significant amount of infrastructure, our current Capital Improvement Program (CIP) budget is $450,000,000, the highest level of infrastructure spending ever adopted. With the necessity to upgrade treatment plant facilities and to repair sewer mains to reduce the amount of vagrant water that makes its way to the treatment plants during rainy periods, the sewer system bears the greatest share of the CIP, which puts more upward pressure on sewer rates to accommodate these future costs. The water system has needs too. Aging water mains need to be replaced on a regular cycle to keep the water system operating reliably.
With an eye towards the future, the Board made a decision in 2021 to sell bonds to cover some of the costs of future CIP projects. The sale of these bonds brought in eighty-five million dollars, with an interest cost of 2.2%. This interest rate, which was lower than typical for municipal bonds at the time (in large part due to the District’s AAA rating), saves millions of dollars in interest over the life of the bonds compared to what would be paid in the bond market now. Additionally, with the high borrowing costs at present, the Board is choosing to shift more funding of projects to rates rather than to debt. We believe this strategy will pay off and help us keep rates as low as we can in the future.
Considering all of this, we still have among the lowest water and sewer rates in the region. Know that the Board and staff will continue to work hard to keep this true in the future.