Board to make third attempt at rate hike

Language linking the water rate increase the Hot Springs Board of Directors will consider Tuesday night to specific capital improvement projects is not practical, City Attorney Brian Albright told the board earlier this week.

The enabling ordinance’s intent section references “betterments” and “improvements” to the water system, explaining they will be paid for by revenue bonds secured by the rate increase, but doesn’t detail which projects the bonds will fund.

The language was added after several directors asked if it were possible for the ordinance to bind the rate increase to specific projects, such as the $95 million undertaking to bring the city’s 23 million-gallon average day allocation from Lake Ouachita online.

It accounts for most of the $110 million in debt the rate increase will

secure. The balance of the debt will finance part of the $5.18 million for a 2 to 3 million-gallon water storage tank supported by a 190-foot-tall tower, a $2 million control system for transmission line pumps at the Ouachita Plant and more than $10 million for improvements to three dams impounding cityowned lakes that were formerly used for water supply.

Albright said the projects will be listed in bond documents the board will consider next year, provided it adopts the rate increase. The board pulled earlier versions of the ordinance from the agendas of its Oct. 17 and Nov. 7 business meetings.

A group affiliated with the coalition that organized successful referendum petition campaigns against two annexation ordinances earlier this year has said it plans to mount a petition drive against the rate increase.

“It’s not going to be viable to have specific projects tied to the rate structure,” Albright told the board. “That will come when bonds are issued. The rates are going to be the rates. If we specify certain items that are tied to the rates, and that’s not what ultimately happens with the bond issue, then we open ourselves up to an illegal exaction and would make investors very uncomfortable. And the underwriters, as well.”

The rate structure has not been adjusted since 2009. Minimum and volumetric charges it established for 2013 have risen

3-percent a year. The updated rate structure would increase the minimum monthly charge for a five-eighths inch residential meter inside the city $3 next year, $2 in 2019 and 2020 and $1 in 2021.

The current $4.99 minimum charge would increase

160 percent by 2021 under the proposed schedule. The minimum charge is applied to the first 1,000 gallons of usage and would increase 3-percent a year after 2021.

The minimum charge for a five-eighths inch residential meter outside the corporate limits would increase $4.50 next year, $3 in 2019 and 2020, $1.50 in 2021 and 3-percent a year after that. The current $7.50 minimum charge would also increase 160 percent by 2021.

The minimum charge for a five-eighths inch sprinkler meter inside the city would increase $4.61 next year, $3.07 in

2019 and 2020, $1.53 in 2021 and

3-percent a year after that. The current $7.65 minimum charge would increase more than 260 percent by 2021.

The minimum charge for a five-eighths inch sprinkler meter outside the city would increase $6.91 next year, $4.61 in

2019, $4.60 in 2020, $2.30 in 2021 and 3-percent a year after that. The current $11.48 minimum charge would also increase more than 260 percent by 2021.

Customers beyond the corporate limits pay a 50-percent premium. According to the analysis informing the new rate structure, about half of the more than 35,000 meters served by the city’s water system are in the unincorporated area. The analysis compares non residents to customers of investor-owned utilities, which are allowed by the state’s Public Service Commission to charge rates sufficient to recover their operating expenses and generate a return on investment that can attract new capital.

Liberty Utilities in Pine Bluff is the state’s only investor-owned water provider.

The city sought out additional water supply after its maximum-day production exceeded 80-percent of capacity in 2012. According to the Department of Health’s survey of the water system that year, the 23 million gallons of maximum-day production in 2012 accounted for 81.47 percent of capacity.

The Ouachita Plant that treats the city’s allocation on upper Lake Hamilton reached

88.07 percent of maximum day production. According to the state survey, the plant can treat

22 million gallons a day. The city’s withdrawal agreement with Entergy Arkansas Inc. allows it to take up to 30 million gallons in a single day, but usage cannot exceed a three-month rolling average of

20 million gallons a day. The Lakeside Plant treats water from the city reservoir at Lake Ricks. The city has said the plant can treat up to 4 million gallons a day, but the state’s survey lists a 6-million gallon capacity.

Jeff Stone, director of the Health Department’s engineering section, said earlier this week that systems need to begin planning for additional capacity when the 80-percent threshold is reached. He said the state can enforce the requirement despite its lack of enshrinement in law or regulation.

“We have never taken enforcement action on the 80-percent threshold issue,” he said in an email. “However, if a water system fell behind on its planning for additional capacity, and growth finally exhausted their ability to supply new customers, they could eventually be saddled with a new customer connection ban until the issue was resolved.

“At this time, the Hot Springs utility is actively planning for additional capacity and is updating its planning documents.”