Most Star Valley water customers will see a 41 percent increase in their water bills starting July 1 after the town council approved a rate hike last week to make urgently needed repairs.
The average water user’s base rate for a 5/8-inch hookup will go from $16 a month to $22.50 for the first 4,000 gallons of water. For those that cannot afford the increase, the town has included a hardship clause.
Even with the increase, however, officials say the town will lose roughly $12,000 a year on the water system due to the number of needed repairs. The town plans to subsidize any shortages out of the general fund.
Even after the increase takes effect, Star Valley water customers will pay, on average, $1.28 less per month than Payson water customers. Payson only includes 2,000 gallons of water in its base rate while Star Valley includes 4,000 gallons.
Mayor Bill Rappaport said he didn’t want to raise water rates due to the economy, but pictures of the state of the water system convinced him the council had no choice.
“These images are just sickening,” Rappaport said holding up a dozen pictures detailing decaying equipment at three well sites. “I personally had no idea this was occurring.”
Brooke Utilities, the water system’s previous owner, had reportedly failed to make improvements to the system in the last 15 years. A lack of maintenance is evident everywhere you look, said Tim Grier, town attorney and manager.
After only a little more than two weeks of ownership, water staff has already found a myriad of problems, including well pumps sitting out in the open, rusty pipes, severed electrical connections and aging water tanks, Grier said. The town has already made at least $5,000 in immediate repairs.
Robert Rippy, the town’s new water operator, presented the council with a list of 18 repairs needed over the next five years, with a price tag of $500,000. The town is hoping to get a $300,000 State Special Projects grant to help cover the costs of repairs at the Milky Way water storage tanks.
“We anticipated this when we bought the water company,” Grier said. “We knew it was a water company that hadn’t had ongoing maintenance and that was one of the reasons we bought it as a town was we believed we owed it to the citizens of Star Valley to ensure health and safety of their water supply and that we could do a better job in making it a more reliable facility.”
To make the system more reliable and bring it up to code, the town needs money. The council debated whether it should spend out of the general fund for repairs or charge existing water customers more. Currently, only a small percentage of residents are hooked into the system. Of those 360 hookups, almost everyone has been paying the same rate for more than 10 years, said Councilor Vern Leis.
For some residents, any increase is a hard pill to swallow.
The town estimates the water company will cost at least $172,000 a year to run. That includes $65,000 for employee salaries and benefits, $53,000 for day-to-day maintenance, $35,000 for emergency repairs and $16,000 for state taxes.
With no rate change, the town expects to gross $132,000 a year. That leaves a deficit of $40,000.
The council looked at three possible rate structures and picked the biggest increase -- $6.50 a month. That will still leave a $12,000 shortage.
Rappaport asked if there was any way to lower the rate increase, possibly by not having water customers pay back the $35,000 the town took out of the general fund for start up costs.
The town used $775,000 from the town’s budget to buy the water system. Water rates will not cover that cost so “we are truly subsidizing the water company in many ways, probably in the tune of $875,000,” said Councilor George Binney.
But Binney said that customers would have a far higher rate increase had a private company taken over.
“The public is getting a really good buy for their money for a system that was falling part,” he said.
A private company can solicit the Arizona Corporation Commission for a rate increase that covers both the cost to buy the system, make repairs and still earn a profit. The town is not asking water users to cover the cost of the system or for the town to make a profit.
Rappaport said he still felt uneasy with a rate increase.
“I agree 100 percent with you, but we are already subsidizing it to the tune of almost a million dollars,” Binney said.
Grier added that the town had already put $5,000 into the system in only a few days.
The water department will likely eat through the $35,000 for “emergency repairs” easily in the first year.
“Right now the site is pretty much in disarray,” said Garrett Goldman with Tetra Tech.
The town is working with Tetra Tech for engineering services and to help write a grant application to fund repairs at Milky Way.
Goldman said the current water system, while operating without contamination issues, is in dire need of renovation.
One of the well pumps is sitting out in the open. Other repairs include cleaning tanks in the Knolls, adding a connection from the Payson water system and replacing chlorinators.
Rippy said he expects more repairs as he takes a closer look at the system.
Leis said he realized a $6 increase might be a lot for some residents. He offered to donate the $200 he makes a month as a councilor back to the town to help cover water bills.
Grier said he could add a hardship clause to the ordinance.
The council agreed a hardship clause was needed.
For those that can prove they cannot afford the increase, the town agreed to subsidize the $6, but not the entire water bill.