What is Being Proposed?
The City of Decatur is asking the City Council to approve water rate hikes of 20%, 15% and 15% currently and in each of the next two years, respectively. The effect of these increases is to collect a additional City Revenue of $5 million or more per year from the community. The stated use of these funds is to expand the city's water reserves which has not yet been voted on, approved or specifically planned. The combined effect of the proposed increase is a 59% increase in water rates over two years. To see our estimates of the effect on your water bill, please click on this link.
Why is this Being Done?
The City is suggesting that the additional revenues are needed for shortfalls in the water fund and to fund the development costs of a new water reservoir. The city has not posted any timely financial information rationalize the assertion that water revenues are not sufficient to cover expenditures. Historical data suggest the opposite.
Are Rates Being Increased to Pay for a New Water Reservoir?
There has been no decision to build a new reservoir. The costs or ultimate funding are not known. The costs of a new reservoir are partially unknown as the site, size and development costs are not known. In addition there has been no discussion of seeking funding from county, state or federal sources. There has been discussion of partial funding coming from ADM, but nothing has yet been committed. For these reasons, it would appear premature to raise more revenues from user fees.
Does the City of Decatur Water Fund need more Revenues?
The most recently available financial statements of the city show that the water fund has over $20 million in investment reserves and is operating in the black. (If more recent financial statements suggest otherwise, then this should be made available to the public.) The City 2006 Financial Statements available on the city's webste show: (see pages 20 – 50 of city annual report posted on City web site)
- $24 million in investments (convertible to cash)
- Water Fund (per most recent city financial statements)
- Revenues/investment return = $13.2 million
- Expenditures = $13.0 million
- Transfers out of water fund were $6.6 million
- Net additional cash generated in 2006 in water fund = $2.9 million
- Financial statements say “lower water sales [from 2005 to 2006]” (p27 pdf)
Does the City of Decatur Need a New Lake?
Many believe the city does. The current lake provides approximately 20,000 acre feet of water storage. The additional water reservoir would provide a 50% increase in water storage. All the analysis of water supply and needs shows that in a "normal rainfall year" the Sangamon River watershed provides all the water that the city of Decatur could possibly need. The water available to Lake Decatur substantially exceeds the annual water consumption.
The need for expanded reserves are to protect the city and water users in the event of a "catastrophic drought" which would prevent the the lake from being replenished with rainfall for a prolonged period (over 6 months). Some estimates claim that the risk of a catastrophic drought is about ten percent. This means that some experts believe that one in ten years would result in a major disruption to out water supply that feeds industry and the community.
- More to Come -
Our Suggestions:
1. Table the decision to raise rates until one or more public hearings are held.
2. Do not agree to combined rate increases of over 50% over the next two years.
3 . Rebate $20 million in water fund reserves to the community through rate reductions or outright reductions in property taxes.
4. Require City Manager to provide more thorough disclosure and discussion of any increases in city fees, rates or taxes.
The Herald & Review Article on Water Rates August 4, 2007
MCSV Analysis Effect of Increasing Water Rates - Clicking Here.
