MITCHELL — Mitchell residents will see their water and sewer rates increase this summer after the Mitchell City Council unanimously approved a new equitable rate structure.
After being presented with several rate structures from an engineering firm that studied the city’s water and sewer rates, the council decided Monday to go with the equitable model that will raise the monthly base rate for water users with a 1-inch meter – the most common size for residents – to $13 and the per unit charge to $5.10. The monthly base rate for sewer services – regardless of meter size – will jump to $29.05, marking a roughly $7 increase from the current $22.01 base rate.
The increases will go into effect in July.
Council member Susan Tjarks explained why she supported the rate increases and emphasized it’s “what it will take to keep water running and toilets flushing.” City leaders have said the key reasons behind the rate hikes is to provide sufficient revenue to fund ongoing and upcoming infrastructure projects like the roughly $30 million improvements planned for the wastewater treatment plants and other sewer and water-related projects.
“These are all essential parts of our infrastructure that have to happen. The advantage of us doing them at this time is us being able to take advantage of this grant money. I’m sympathetic to all those who are struggling with this looming rate increase, but I also want to emphasize this is what it’s going to take to keep water running, toilets flushing and providing clean water for our community,” Tjarks said.
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As of now, Mitchell’s $9.21 base rate for water represents the same fixed costs for all users, regardless of usage. However, the equitable rate structure that was laid out by Shawn Koorn, vice president of HDR Engineering, in January calculates the rates based on the size of each home and business’s water meter size – a key change from the existing structure.
To get a better idea on how the new structure impacts business or homes with larger meters, a business, for example, with a 3-inch water meter would be charged a $78 monthly base rate and $5.10 per unit fee, which is $65 more than a home or business with a 1-inch meter.
“For the industrial users, yeah, it’s a way bigger change than it is for a residential user. I think that – at least in the comments we’re getting – seems to not be really understood that’s changing. It’s changing to try and make the increases more equitable and less for residential customers and more for the people who cost the city more in the long run for overhead and maintenance,” Council member Steve Rice said, noting rates for residential customers would have been much higher if the council didn’t go with the equitable model.
Mitchell has 20 customers with a 1.5-inch or larger water meter and 500 customers with 1-inch meters. The remaining customers — which represents the majority of Mitchell residents – have water meters that are less than 1 inch.
In the downtown business district, Public Works Director Joe Schroeder said most of the businesses along Main Street have a 1-inch water meter, which means their rates would be adjusted on the lower end of the cost scale.
From a water and sewer customer’s perspective, Dan Kaup, a Mitchell resident, echoed his concerns of the rate hikes, which he said will eventually double from where they are now by 2027.
“Right now, they are about $60 to $70 (for some users), but by 2027, our utility bills are going to double to $150. I have to believe there are going to be a lot of people in this town who will have a hard time paying those,” Kaup said.
Kaup also questioned whether the groundwater storage tank project and the $60 million secondary source city officials are pursuing are both crucial enough to support the type of rate increases that were approved Monday.
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In response, Mayor Bob Everson said pursuing a secondary water source with Fort Randall Community Water District is a vital move to set Mitchell up for future growth, considering the city has been exceeding its maximum daily water capacity with B-Y Water District — Mitchell's sole water supplier — more frequently in recent years. Although B-Y has always supplied water when Mitchell exceeds its daily capacity, council member John Doescher highlighted that the city pays a significantly higher fee for water any time Mitchell exceeds the 2.6 million gallons per day.
"Most of the cities in South Dakota are handcuffed right now, including Sioux Falls. Water capacity is an issue. What we're trying to do is position Mitchell to be in a very better place for a very long time to come to help us grow and be more prosperous," Everson said of expanding the city's water capacity by adding another source via a pipeline with Fort Randall Water in Lake Andes.
Schroeder explained the 2.5 million gallon ground storage tank that will sit above ground in southern Mitchell is aimed at improving the city's water pumping process. In addition, he said it will provide the city with a spot to mix B-Y and Fort Randall's water, pending the $60 million agreement with Fort Randall is approved.
"We're adding this extra storage so that we can pump from it. We're relocating our storage tank," Schroeder said, which would improve distribution to more densely populated areas.
Breakdown of rates for lower users vs. average users
For lower end water and sewer users typically seen in single-person residences, city officials say it’s common those respective customers use about one unit of water and sewer per month, which equates to 750 gallons. Under the new structure, in June 2023, a one unit user’s bill — combining water and sewer rates — would jump from the current amount of $55.03 to $66.81. By the end of 2024, a one unit user’s bill would rise to $74.36.
For a three unit user, which equates to 2,250 gallons of water and sewer commonly seen in homes with roughly three or four residents, the monthly bill – combining water and sewer – would jump from the current $70 to $83.81 in 2023. In 2024, rates for a three unit user would increase to $95.76.
Everson said a majority of Mitchell’s water and sewer users fall into the 3-unit per month category.
Grant funding, loan programs impact on rate increases
City Administrator Stephanie Ellwein said another notable factor behind the rate increases is the city utilizing the Clean Water State Revolving Loan Fund (SRF) program, which is a financing mechanism available for cities taking on projects to improve wastewater treatment, stormwater drainage and drinking water. Ellwein explained the requirements the city has to follow to utilize SRF loans to fund infrastructure projects.
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“The SRF loans require us to implement a surcharge that segregates part of our revenue and put it towards these infrastructure projects. Without that, it goes against your constitutional debt, and we don’t have $196 million worth of cash to finance these projects,” Ellwein said.
With a limited window to apply for American Rescue Plan Act (ARPA) federal grant money as part of President Joe Biden’s infrastructure improvement goals, Schroeder has applied for ARPA funding to offset some of the city’s most costly infrastructure projects like the $30 million south wastewater treatment plant project and the $16 million ground storage and pump tank.
According to Schroeder, the city has already secured roughly $13 million in ARPA funding for the upcoming infrastructure projects. However, he said that funding would go away if Mitchell’s water and sewer rates remain untouched.
Another factor playing into the rate hikes is the city’s pursuit of a $60 million secondary water source with Fort Randall Community Water District. Although the council has yet to approve an agreement with Fort Randall to bring another Missouri River water source to feed Mitchell, the equitable rate model factored in the hypothetical $60 million agreement will eventually be approved in the near future.
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