At this Monday’s Council workshop – scheduled for 2pm – Interim Town Manager Jim Steele will present the results of the 2016 Water Rate Study conducted by the consulting firm Raftelis Financial Consultants. This week, Steele showed us a draft of that study and explained that the reasoning behind doing the study was to give the Town a better understanding of how much residents’ potable water bills would need to be raised to pay for the completion of the water line replacement project, the building of a reserve fund, the increased costs for operation and maintenance and the increases in what Lee County charges us for water.
In May, Steele presented a water utility cash flow projection where he predicted a rate increase of 6.82% in 2017. The results of the water study are nearly the same – a 7% increase beginning on October 15 of this year, an increase that will be followed by additional 7% increases in 2018 and 2019, after which that number will drop to 5% for 2020 and 2021, and finally down to 1% from 2022 until 2026.
So what does that mean? Steele explained that 7% represents a monthly increase of approximately $2.75 for ‘the average residential customer who uses 5,000 gallons of water each month, meaning that person’s bill will go from $40.05/month to $42.89/month.
Sound confusing? It isn’t once it’s broken down. We looked at a water bill for a single-family home on the island. The homeowner used 6,000 gallons, meaning all of their water usage remained in the ‘Block 1’ tier, which is $4.90 per 1,000 gallons for the first 6,000 gallons. (Note: any usage over 6,000 gallons – say 8,000 gallons – would be charged $4.90 for the first 6,000 and $5.85 for Block 2, per 1,000 gallons for the remaining 2,000 gallons). The customer was also charged $9.62 for a base charge, $2.72 for capital reserves and a $3.21 administrative fee, for a total of $44.95. So, if the 7% increase is approved, this customer’s bill will go up $3.14 for a total of $48.09. Continuing to factor in the next 7% increase in 2017, another 7% in 2019, 5% in 2020 and 5% in 2021, by the time the project is complete this customer’s water bill will be an additional $15.74 per month, assuming 6,000 gallons/month usage.
But wait, this customer’s bill has two more charges on it: a sewer charge of $55.55 and a Storm Water charge of $19.98.
“The Storm Water charge is for the Town’s new Stormwater Utility – which is different from potable water and for which the rates were established earlier this year – and the sewer charge is from Lee County, so those are separate and would not be included in the proposed 7% increase for potable water,” said Water Utility Supervisor Christy Cory.
Those owning or renting duplexes, condominiums and mobile homes see slightly different rates on their water bills, but each unit is considered separately when determining water usage (meaning a building with two dwellings in it would be charged the Block 1 rate of $4.90 per 1,000 gallons for the first 10,000 gallons, as ‘Multi-Family’ has a base rate of 5,000 gallons).
So what do the rate increases cover? Many things, according to Steele, and all are necessary.
“First off, the rate increases will cover County increases and rising operational costs – inflation at 2.3% each year, labor and benefits at 3% each year, utilities at 5% each year and personnel insurance rates at 10% each year,” Jim told us. “We buy our water from the county, and they typically raise their rates every two years – typically 10% per 1,000 gallons. The last time the Town raised residents’ water rates was in 2014, when a 2.53% increase was implemented to account for this.”
The biggest thing the rate increase will cover, of course, is the cost to replace the town’s ancient potable water system – a project that began in December of 2013 with the ‘basin-based neighborhood’ of Alva Drive to Gulf Beach Road, continued onto the first segment of Estero Boulevard – completed earlier this year – and will go on to the 2nd segment of Estero Boulevard and the side streets off North Estero Boulevard next.
“The total cost of all of the projects associated with this – from 2015 to 2020 – is estimated to be $40.9 million, of which $10.2 million has been completed and $30.7 million remain, with approximately $6.7 million in cash used to fund already completed projects,” Steele said. “That leaves $34,155,000.”
Jim explained that, since the Town recently qualified for the State Revolving Fund, the initial 7% increase will cover the debt service on that loan and allow us to begin building reserves,” he said.
“When you borrow from the state they like you to have a ‘cushion’ in reserve, so we should have a reserve of $1.6 million for water, which will take us two years to reach – we will get there after another 7% increase in October of 2017,” he said. “Then each additional increase will allow us to build up enough reserves that we won’t have to borrow the full $34,155,000, but rather spend a million out of reserves in year 2017, 2018 and 2019 so we only borrow $31,155,000.”
The rate study offers an alternate scenario where a stiffer increase of 9% would occur in 2017 and 2018, allowing for lower, 4.5% increases in 2019, 2020 and 2021 before dropping to 1% in 2022 when the project is over, but Steele said he prefers the first scenario as he believes that will be more palatable to residents.
So how does Fort Myers Beach compare to other areas in Southwest Florida? According to the rate study, the average cost per 5,000 gallons is $34.77. At the projected rate – should the 7% increase be implemented in October – Fort Myers Beach’s rate of $42.89 per 5,000 gallons is second only to Charlotte County – $45.75, and Marco Island – $55.89.
“But the only islands used in the comparison were ours, Longboat Key and Marco Island,” Steele pointed out. “And we are also undergoing a complete overhaul of our system.”
Keri Hendry Weeg