Several factors should be considered when determining the rate schedule for water and sewer services:
- Operating and maintenance costs;
- Debt principal and interest; and
- Capital requirements (this would include new lines, equipment, etc.).
Rates should be put in place sufficient to generate revenues to fund these items and to build a cash reserve to handle emergencies and other fund needs.
One of the most important points to consider is the necessity of planning and monitoring water and sewer fund needs. Cities often wait until they are in financial distress before increasing rates. Then large rate increases are necessary. These increases upset customers and hurt the public perception of the utility operation. A planned program of much smaller, gradual rate increases will help provide the needed income and prevent the city from getting into financial distress.
MTAS consultants can assist you with rate issues or perform a rate study for your city to help you determine exactly what your water/sewer rates need to be.