Our View: Water fund issue begs more questions | SteamboatToday.com

Our View: Water fund issue begs more questions

No customer wants a 50 percent rate increase, particularly given the current economic climate. But with the apparent state of the city of Steamboat Springs’ water fund, such a dramatic increase seems necessary.

That doesn’t mean the city should be given free rein to continue with additional water rate increases in the coming years, as has been suggested. First, there are a number of issues that must be addressed by city staff and the City Council to justify the increases and determine the best course of action going forward.

Last week, the council voted to increase residential and commercial water rates by 50 percent beginning in January 2009. The rate hike must be approved on a second reading – scheduled for next week’s council meeting – before it becomes official.

City officials say the rate increase is needed because the water fund balance has dropped to a paltry $33,000, leaving the city in a vulnerable position should there be a significant system failure. Ideally, city administrators say the fund balance should be in the millions.

There are several reasons for the fund shortfall, including the city’s failure to adequately increase water rates in the past 15 years. Also, tap fees have been used to subsidize the water system’s operating costs instead of paying for capital projects and debt service, the purposes for which those fees are intended.

The 50 percent rate increase will begin to make up the funding shortfall, but it won’t make up for years of mismanagement. In fact, city officials warn of similar rate hikes in subsequent years.

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The predicament raises obvious questions about the poor management decisions that led us to this point. And though there’s little the current council and city staff can do to fix the problems of the past, there are some questions that should be answered as the city moves forward.

– Beyond across-the-board rate increases, does the city’s current water rate structure need to be updated? For example, should the rate system be tiered to better promote residential and commercial conservation? Rate revenues certainly should be sufficient to fund the water system’s daily operations, but are there other opportunities to improve efficiency?

– Is it time for the city and the Mount Werner Water and Sanitation District to return to the negotiating table for consolidation talks? The two entities have a long and contentious history, and attempts in recent years to return to the bargaining table fell flat. But it’s difficult to understand why a city of 11,000 people has two water systems with two different rate structures, despite sharing virtually all the same resources and facilities. We think there’s an opportunity for the city to take a lead role in reigniting consolidation talks. There must be a route that leads to benefits for users in both districts, not to mention a fair and equitable rate structure for Steamboat residents.

We applaud city staff for pushing this issue to the council, and we’re cautiously supportive of a plan to bring in a consultant to evaluate the city’s water rates and capital needs. But city officials, including the council, need to spend considerable time and energy analyzing our water system before they return to businesses and residents with additional rate hikes.