Water rate increase could be formally approved Sept. 19

The cost of tap water in Duluth appears poised to climb substantially, despite some grumbling both from within the city and from neighboring communities it serves.

On Tuesday night, the Duluth Public Utilities Commission voted 5-0 to direct city staff to schedule a public hearing and bring forward a resolution that would raise water rates by 4.7 percent annually for each of the next six years. That hearing on the proposed water rate hikes will take place at 5:15 p.m. Tuesday, Sept. 19, with a vote on the matter expected to follow the same night.

Commissioners Noah Hobbs and Jennifer Julsrud were unable to attend Tuesday's meeting, but Jim Benning, Duluth's director of public works and utilities, expressed confidence the rate plan will garner broad support.

The compound effect of the proposed increases would be to boost the current water rates by a cumulative 31.7 percent over the next six years.

Eric Shaffer, Duluth's chief engineer of utilities, explained that many of the city's water pipes and other components are reaching or nearing the end of their useful life cycles and require replacement.

"It really all comes down to simple math. If a water main has a useful life of 100 years, then we need to replace 1 percent of our system every year, so we're on track to replace every water main at the end of its 100-year life," he said.

As Duluth moves water via a 430-mile network of pipes, that would mean replacing 4.3 miles of pipe each year, versus the 1 to 2 miles of pipe it has been able to average in recent years.

To accomplish that much work, Shaffer estimates the city water department will need to annually budget $5 million for capital improvements - about twice as much as it does now.

The proposed rate increases are expected to get the city to that investment level.

"It's a hard pill to swallow, but it's a known pill at least," Benning said.

He said the plan would enable customers, both residential and business, to budget for the growing costs.

"We're following what the Duluth Chamber of Commerce wanted - consistent, known increases. They're going to plan accordingly, and it seems to make sense. It attains our goal of being able to replace pipes and not having to come up with a new plan every single year," Benning said.

David Ross, president and CEO of the Duluth Area Chamber of Commerce, could not be reached for comment Wednesday afternoon.

City Council President Joel Sipress, who is one of three councilors appointed to serve on the utilities commission, said that the proposed rate increases would add about $80 to the average residential water bill on an annual basis when fully implemented in six years, but he said smaller households that use less water ultimately would see about a $20 to $30 cost bump.

The six-year rate plan was made public in May, and the utilities commission held several community meetings to field questions and receive comment, but Sipress said it received "relatively little negative feedback" on the proposal.

But neighboring communities that receive water service from Duluth - including Proctor, Rice Lake and Hermantown - have been among the loudest critics.

Unhappy neighbors

Rice Lake Mayor John Werner has registered his concerns but said they seem to have received little consideration.

"Rice Lake would be more than happy and would understand if it was going into the infrastructure that supplies us, but I don't understand why we are paying for everybody else's stuff, and then we are left holding the bag in reference to our own infrastructure," he said.

Rice Lake City Councilor John Goman said: "As it is, we get this 4.7 percent increase, and we'd have to tack that onto our rates. Where does that leave us, because we have repairs as well? So now for us to add another 3 percent for our repairs, we're looking at an 8 to 10 percent increase, otherwise we're falling behind on our own system."

Sipress said it wouldn't work to charge water customers for the upkeep of only the infrastructure that directly serves them.

"It takes a certain amount of money to operate and maintain a water system, and when a Duluth resident is paying their water rates they are paying their share of the cost of maintaining the entire system that allows them to get water when they turn on their tap," he said.

"I would say it's the same principle for the other entities and municipalities that we sell to. That water would not be arriving in their pipes if not for the existence of a municipal water system in the city of Duluth, and just like any other customer, they have to carry their fair share of the cost of maintaining and operating the full system," Sipress said.

Local concern

Many Duluth residents, particularly those with modest, fixed incomes also are concerned, according to 4th District City Councilor Howie Hanson

"I will continue to be as strong a voice as I can be to tell this administration to stop this nonsense of increased taxes and fees. The people in the neighborhoods I serve are tired of this nonsense," he said.

Hanson also criticized what he called a "fundamentally flawed" system that allows a utilities commission to set rates rather than an elected city council.

While the council can move to veto any proposed water rate increase, six of the city's nine councilors would need to vote to overturn. And Hanson noted that the rate increase could also sail through the council unchallenged.

"This council could say: They (the PUC) made the decision. They have that authority, and we're not going to touch it, because we've got a bunch of weak-kneed councilors," Hanson said.

Sipress said the City Council continues to play an active role.

"In the end the council has to have the final say, and the way we have it set up, the council has the final say. And if the council believes the proposed rate increase is not justified, the council has the ability to reject. That's as it should be, because ultimately it's councilors who are accountable to the public," he said.

Defending the role of the utilities commission, Sipress said: "The PUC process allows a group of people to really dig into this in detail and come up with a thoughtful solution to the problem.

"We've spent years at the PUC discussing the problems of our failing water system, and we've spent months working on this proposal," he said.