Bloomington’s planned case for water rate increase delayed until early 2021

The average for each day from 2012 to 2019 is plotted in gray. For 2020, plotted in blue, the data have been smoothed out by calculating a 7-day rolling average.

One dollar is enough to make around 300 gallons of pour out of any residential faucet that’s hooked up to City of Bloomington Utilities (CBU) water.

The residential price of $3.69 per 1,000 gallons, like the rest of the city’s water rates, will stay in place for a while longer.

That bit of news was delivered by CBU director Vic Kelson at last Thursday night’s city council budget hearings. Kelson told the city council that before the COVID-19 pandemic hit, CBU had planned to bring a rate review to the city council in July this year.

Kelson said the current plan is to bring a rate increase proposal to the city council sometime in the first three months of 2021. It will also be reviewed by the Indiana Utility Regulatory Commission (IURC). Any approved water-rate changes would be implemented a year later, in early 2022.

CBU’s total proposed 2021 budget is about $43.3 million, which is made up of water ($17.7 million), sewer ($22.8 million), and stormwater ($3.1 million). That reflects and overall drop of 7 percent compared to 2020.

The push for higher rates is based in part on a need to replace a lot of aging pipes. The cost of replacement is higher in an area like Bloomington, where putting in a new pipe often means busting through shallow bedrock.

The delay in the rate rise is not the only impact of COVID-19 that Kelson reported. He told the council that CBU has seen the number of delinquent accounts increase threefold. Kelson also told the council that the IURC had ordered local utilities not to do any disconnection due to nonpayment through Oct. 12.

COVID-19 also means that water use is down. It’s due in large part to the absence of university students who were sent home around the time of spring break. That’s reflected in the 2021 budget as an estimated 7-percent reduction in water use, assuming that the reduction seen this spring would apply to the entire year in 2021, Kelson said.

A 20-percent reduction in use—at least on a per capita basis—is part of CBU’s longer-range planning. That’s based on a goal that’s included in the city’s sustainability action plan, which is a 20-percent per capita reduction in daily water use by 2023.

Kelson told the council that one of the 2021 goals is to complete a study of per capita water consumption history, in order to set benchmarks for the 20-percent reduction called for in the sustainability action plan. The sustainability action plan indicates that current daily per capita use is around 96.2 gallons a day.

Rate rise, delinquency, pipe replacement

City council legislative records indicate the most recent water rate increase was approved in 2016.  That year, the council OK’d a rise from $3.30 to $3.69 per 1,000 gallons, which is about a 15-percent increase. The $3.30 rate was set in 2010.

Kelson told the council that CBU has 25,300 active accounts. There are typically around 1,000 customers who are more 60 days delinquent. But in May, June, and July this year, CBU has seen about 3,000 delinquent customers per month. That’s about 11 percent of all accounts.

Looking ahead to when the prohibition against service cutoffs ends (Oct. 12), Kelson said CBU is being as aggressive about reaching out to people who may eventually be facing disconnection. “We don’t want people to get $2,000 or $3,000 behind—it’ll only get worse. So we want to have them on payment plans or take advantage of customer systems, or whatever it takes to help make sure our customers can pay the bills,” Kelson said.

Revenue from customer payments that exceeds operation costs goes into infrastructure improvements, Kelson said. One infrastructure goal for the waterworks in 2021 is to replace 2.5 miles worth of water main at a cost of $1.7 million.

Councilmember Matt Flaherty observed if 2.5 miles are replaced per year, that makes for a long replacement cycle for the city’s 420 miles worth of water mains.

Earlier this year, in May, the city replaced a 123-year old main under 6th Street downtown, north of the county courthouse.

Flaherty asked Kelson just how CBU plans to replace that “overwhelming amount” of water main infrastructure.

Kelson said that Bloomington, like nearly everybody in the United States, is way behind on water main placement. He added that in Bloomington, it’s particularly expensive to replace water mains.

When Bloomington’s water main replacement program was established in 2017, $1.7 million a year was budgeted. That was based on an estimate of replacement cost that turned out to be low. At that time, CBU was hoping to replace more than the 2.5 miles it now knows to be realistic mileage for $1.7 million.

Kelson said it turns out that replacing pipe is much more expensive than CBU originally anticipated. That’s because there’s a lot of bedrock at the depths where water mains run.

Kelson said it’s not a matter of pulling out the old pipe out and putting a new one in its place. Service has to be maintained to all the people who are connected to the pipe that’s being replaced, Kelson said. That means you have to dig a trench, lay the new pipe, and then transfer all the services. Because of that, Kelson said, “we tend to have to break quite a bit of rock when replacing water mains.”

The new water main replacement program will be a part of the case for increased rates that CBU will proposed to the city council in the spring of 2021, Kelson said.

Water use

The decrease in water use during 2020 as a function of the absence of university students is being factored in as a possible revenue drop for 2021—around 7 percent.

Based on CBU numbers, the amount of water CBU drew from Lake Monroe from mid-March through mid-May this year was down about 10 percent compared to the average for that period in the previous eight years.

Based on information from the city’s new online financial system interface, revenue to CBU waterworks from metered sales, as a percentage of all revenue, breaks down in part like this: single-family (27 percent); multi-family (22 percent); and commercial (11 percent).

At Thursday night’s hearing, Kelson responded to a question asked by The Square Beacon about a possible 20-percent reduction in water use: Given that reduced water use will reduce some costs, but probably not by 20-percent, wouldn’t achievement of the sustainability action plan’s goal of a 20-percent reduction translate into a need to increase rates?

Kelson said less demand per capita means CBU doesn’t pump as much water, which means CBU doesn’t use much chemicals, which saves money. Moving less water saves a lot of electricity, Kelson said. He added that electricity is one of the largest costs that CBU bears.

But a reduction in use, Kelson said, doesn’t change CBU’s debt service, and doesn’t change staffing needs. “So the truth is, it will reduce our costs, but it won’t reduce them by anything near 20 percent,” Kelson said.

What can offset that, Kelson said, is that Bloomington is a growing community. If there are 20 percent more people, then 20 percent less per capital means about the same demand.

Kelson said that’s why CBU is committed to doing rate cases on a regular basis, every four years. Those rate cases will take into account everything related to finances and how CBU is running. “It won’t be like a sudden shock,” Kelson said, where CBU says, “Sorry, everybody you’ve got to pay for the 20-percent reduction.”

One thought on “Bloomington’s planned case for water rate increase delayed until early 2021

  1. No one mentions the effect of the newer meters which read more usage for the same number of gallons – cbu will charge more money for the same amount of water, the new meters operated as a rate increase themselves.

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