Proposed water, sewer rate increases could flex for Mitchell residents depending on demand
Although Mitchell's rates would be increase, the proposed equitable rate structure could lessen the increased costs for residential customers' water and sewer bills.
MITCHELL — Now that city leaders have a few models to consider for raising water and sewer rates in Mitchell over the next four years, how do the rates compare to other like sized cities?
An engineering firm that’s developed a proposed rate structure for Mitchell calculated the water and sewer rates in some of the state’s larger cities based on a roughly 5,000 gallon per month user. Mitchell’s proposed water and sewer rate increases for this year would bring a monthly bill up to $107.77, which would put rates $31 above Sioux Falls, $36 more than Watertown and $16 above Pierre’s rates, according to HDR Engineering’s data. It comes as the city of Mitchell is trying to raise funds to add a secondary water source and fund infrastructure that will cost at least $60 million.
If the proposed 2023 rates are approved by the Mitchell City Council, Mitchell would still have lower rates than three other cities. As of now, Brandon's combined water and sewer rates per month amount to $141, roughly $34 more than Mitchell if the proposed increase for 2023 goes into effect. Yankton’s monthly rates are also sitting at $110, while Harrisburg’s rates are $128.
During Monday’s city council meeting, Shawn Koorn, vice president of HDR Engineering, broke down a new “equitable rate structure” that Mitchell leaders are considering. Koorn said a key goal of developing the equitable structure was to reflect the proportionality of residents’ water and sewer usage, meaning residents and businesses that utilize more water and wastewater than those who use less be charged based on their use.
“This really gets into thinking about how your customers use the system,” Koorn said, referencing residential, commercial and industrial water and sewer users. “Each of those customers uses the system in a different way. Staff have to design the system to meet each of those peak needs for the water or the type of wastewater that’s being generated that goes to the plant to be treated. Our goal here is to make sure we collect adequate revenues, and we collect them equitably and proportionately between our customer classes.”
As of now, the $9.21 base rate for water services in Mitchell represents the same fixed costs for all users, regardless of usage. However, Koorn introduced a model that would charge the base rate for water users based on the size of meter attached to the home or business. Under the equitable rate structure, a home with a 1-inch water meter — a typical size for a home — would have a monthly water base rate of $13 in 2023 with a $5.10 per unit charge, while a business with a 3-inch meter would be charged a $78 monthly base rate and $5.10 per unit fee.
“What we’re seeing is that there should be a change in the cost of service for commercial customers and industrial customers,” Koorn said. “What this alternative does is that it looks at the size of the meter, and it says, 'This is the capacity that you as a customer can place on the system because you have a 2-inch or 6-inch meter.' That capacity is a much higher driver in cost. We would then balance that with the consumption or variable charge.”
The other rate structure that was provided to the council does not integrate the equitable model. Under the structure Koorn dubbed as the “status-quo” model, the base rate for water fees for a 5,000-gallon monthly user would increase to $13.80 per month this year, marking a roughly $4 jump from the current base rate. The unit rate for the status-quo model is proposed to jump to $5.20 this year as well, which is a little over $1 from the existing $4.15 unit rate.
Looking at the long-term rates under the status-quo fixed-rate model, in 2024, water base rates would increase to $17.46 per month, while the unit rate would jump to $6.58. By 2027, the base rate would increase to $23.63, while the unit fee would be $8.90, according to HDR’s model.
For wastewater rates, the proposed model would increase the average monthly bill (based on a 5,000 gallon per month user) — which is at $39.01 — to $51.49 this year. In 2024, the monthly bill would jump to $54.33 and ultimately increase to $60.81 by 2027.
Historically, Mitchell has left water and sewer rates untouched. From 2000 to 2007, Mitchell went seven years with the same water rates. In 2008, the city raised rates by 6% and left them untouched until 2014. Since then, water rates went up slightly roughly every other year.
In 2019, city officials began increasing water and sewer rates more drastically to help fund infrastructure projects they began tackling.
While residents enjoyed low rates over the past two decades, Council President Kevin McCardle said it put Mitchell in a bind that’s now emerged. In 2019, the base rate for water jumped 67%, bringing it to $5 per month. Since then, it rose to $9.21 — the current rate. The sewer base rate increased 115% in 2019, which brought the monthly fee to $10.75. In 2021, the sewer base rate jumped 50% and another 10% in 2022, bringing the current amount to $22.01.
“When you don’t gradually raise rates on a steady basis and you need to do some big infrastructure projects, it puts us in a bind," McCardle said. "It’s no fun having to raise rates this much in a short time span, but we have to keep our infrastructure working somehow."
Factors behind rate hikes
As for what’s driving talks of rate increases, the city is seeking to secure a multimillion-dollar secondary water source with Fort Randall Community Water District to expand its maximum daily water capacity, which has become an issue over the past few years. Public Works Director Joe Schroeder said the city exceeds its 2.6 million gallons of maximum daily water capacity with B-Y Water District — the city’s sole supplier of water — roughly 25% of the year.
“We get charged a higher rate when we have to ask B-Y to go over our daily amount. It stacks up real quick. A secondary water source with Fort Randall would provide a minimum of 2.5 million gallons of water per day, with the possibility of (obtaining) more,” Schroeder said.
Although B-Y Water has never refused to provide water to Mitchell when it goes beyond its maximum daily capacity, the potential growth of Mitchell could make it a more frequent issue in years ahead. According to Schroeder, the city’s daily water capacity is projected to reach 5 million gallons per day by 2040, nearly double the amount of the existing water capacity.
The biggest factor driving the proposed rate hikes is funding city infrastructure improvements, which has become a major focus among city leaders the past few years after dealing with drainage woes, aging pipes and wastewater treatment facilities.
According to Koorn, the $60 million secondary water source addition with Fort Randall is responsible for roughly 33% of the rate increase, while the remaining factors are infrastructure work.
“It’s eye-opening to see how far behind we are on our infrastructure after looking through this study with HDR,” Schroeder said. “We are trying to chip away at this and be transparent about how we could.”
The council has not taken action on the proposed rate hikes. Schroeder said the council and residents will be presented with more information throughout the remainder of the month.