The Payson Town Council Thursday approved changes that could raise water rates by 24 percent in the next three years.
The potential increase comes on the heels of May’s 10 percent jump, to cover rising costs, replacement of aging water mains and the Blue Ridge pipeline.
However, Payson Mayor Kenny Evans said that despite last night’s vote, the town will “very probably” cancel the increase slated now for 2012 and 2013.
The three-year, 24 percent increase represented something of a “worst case” scenario, to ensure the town has the money to build the pipeline, replace 40-year-old, undersized water mains that serve about one-third of the town’s neighborhoods and adapt the Blue Ridge water to the town’s existing well-based system.
Dan Jackson, a private water rate consultant, said “it is never easy to ask people to pay more, but it is necessary. Without these increases, the system will face serious distress.”
The potential rate increase, which won’t take effect until October of 2011, represents the second sizeable increase this year. In May, the council raised rates about 10 percent — the first increase in seven years.
Currently, the average Payson water user consumes about 5,000 gallons a month and pays $30.50.
The proposed rate structure would boost rates about 10 percent next year — to $33.40 for the average, 5,000-gallon-a-month water user.
The plan calls for rates to jump another $2.50 in 2012 and $1.85 in 2013. That would bring the bill for the average Payson water user to $37.87 a month by 2013, which would mean a jump of nearly a third in four years.
However, that rate structure is based on several pessimistic assumptions.
For instance, Payson normally imposes a $7,500-per-unit water impact fee on new construction, which was supposed to pay for the Blue Ridge pipeline. Before the housing market crashed, Payson approved an average of 250 new homes a year, which would bring in about $1.8 million annually in water impact fees — far more than the annual rate increase. However, in the past year year the town has approved just 30 new houses — and the calculations for the rate increase assumed the housing market will not recover for the next three years.
Other shifts could also bring in more money, making the rate increases in 2012 and 2013 unnecessary, said Evans. For instance, the town hopes to qualify for low-interest, 40-year federal loans to build the pipeline. In addition, if the town’s deal with Arizona State University to build a campus comes through, that would generate about $6 million in water impact fees.
“We are not changing the rules,” said Evans, “we’re simply having to deal with the rules that changed on us. If we can turn this economy around, that would be wonderful — but we have to take our best shot on what we think will happen.”