The Williams City Council will have a difficult decision over the next few months as to whether to ask property owners to increase their sewer rates to overcome a shortfall that has been growing since 2020.
The shortfall is tied to residential and commercial sewer rates not keeping up with inflation, Williams officials said.
City Administrator Frank Kennedy said he did not want to paint a bleak picture, but may have to ask property owners to increase rates in order to keep up with inflation.
Proposition 218 requires voter approval prior to imposition or increase of general taxes, assessments, and certain user fees.
Residents currently pay approximately $88 a month for sewer, plus $2.65 for every 100 cubic feet of water over 500, up from about $84 in 2019, but rate increases have been based on the Consumer Price Index or 2% – whichever is lower.
But officials said the capped increase of 2% doesn’t even out with the cost of doing business over multiple years.
“We have a structural defect,” Kennedy said.
While the cost of living may be at or below 2% in some years, it only takes one or two years of dramatic increases for the city to get in a serious financial situation.
“We just lived through some extraordinary situations,” Kennedy said. “It was the economy and the cost of living the last few years that created the whole of it,” he said.
From May 2021 to May 2022, the Consumer Price Increase actually rose 8.6%. The CPI rose 4% from May 2022 to May 2023, although core inflation rose by 0.4% month-on-month and 5.3% year-on-year.
Kennedy said lagging sewer rates have resulted in a $167,910 shortfall in the Sewer Enterprise Fund in the 2023-24 budget, and a $202,874 shortfall in the 2024-25 budget.
“That’s about 8%,” Kennedy said.
The Williams City Council approved the city’s projected budget in June, and gave direction to Kennedy and the Finance Committee to do the math before bringing a rate proposal back for consideration.
Officials said only more development and an increase of 7-8 percent may help the sewer fund sustain itself.
City officials said enterprise funds, such as water and sewer, are reviewed by potential grant authorities, and if rates are not appropriate for the services provided, the city could lose funding for projects, which the city relies on for water and wastewater improvements.
“We would jeopardize not receiving the grants, which would be in excess of $35 million…,” said Mayor Pro Tem Maria Leyva. “These would be much greater risks than the potential increase in rates.”
The Proposition 218 process, should the City Council move forward, will require the city to send notices to property owners and hold public hearings.
The council could hold their first public discussion about a rate proposal at their July 19 meeting.■