Even a modest rate increase could help the City of Backus come closer to breaking even on its water system. Larger rate increases would be needed to break even on the sewer system.
With water and sewer projects on the horizon, the city needs the money.
Frank Stuemke of Minnesota Rural Water Association (MRWA) reminded the council, Monday, that the city is currently operating with an $11,457 annual loss on city water with the current rates. Additional dollars generated by user fees could fund capital outlay repairs to the system, reducing the losses.
The city is also losing approximately $17,000 annually on its sewer system.
The non-profit MRWA provides water/sewer technical support to cities free of charge.
"Water and sewer should be run just like a business: for profit, cash in the bank," Stuemke said. "You don't need to go for the gusto right away," he added, as some communities start out with small increases in water/sewer rates.
Backus, a city of 319 residents, has 180 water connections and 178 sewer connections.
Currently rates are $39.50 quarterly for water and $28.50 quarterly for sewer.
There is a 12,000-gallon quarterly minimum charge for both water and sewer.
If the council raises its water rates by 25 percent - essentially an additional $10 annually per connection - it will have an annual deficit of $4,347. With a 50 percent fee increase - essentially $20 additional - the city would have an annual surplus of $2,763.
Somewhere in between they'd be able to break even.
Regarding sewer rates, the city would have to raise its rates upward of 75 percent (approximately an additional $20 annually per connection) in order to break even.
Stuemke also pointed out that the city had 1.9 million gallons of water unaccounted for in 2006 (23 percent of the total usage), meaning more gallons were pumped than sold.
Stuemke said that the Department of Health prefers 10 percent or less of unaccounted water.
For sewer there was approximately 939,000 gallons unaccounted for last year (approximately 12.8 percent.)
Mayor Cloie Smith mentioned that a large fire likely contributed to the water usage. Stuemke also recommended that the city replace old water meters and consider switching to monthly billing to help people budget. Water/sewer Operator Bob Williams reported that the city is in the process of replacing the old meters, some of which are 30 years old. Each meter costs approximately $84, he said.
The MRWA training that City Clerk Carol Vredenburg and Williams attended puts the city in the running for a $10,000 grant for a sewer feasibility study. On Monday night, the council voted unanimously to submit a grant application.
