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Rate study suggests lower rates, but raises questions about “$70M”

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Everybody has a little to learn, showed the much-awaited rate study

By Liam Adams

Brighton City Council received a suggestion on Aug. 27 to lower water customers’ rates for the near future. 

The rate study arrives in a heated political climate over the city’s water rates, with claims made that residents paid the city upwards of $70 million in fees and bills. The debate has resulted in an effort to recall Mayor Ken Kreutzer. 

Some saw the presentation by Stantec, the rate consultants, as evidence that residents have been “gouged,” said Councilman Matt Johnston, a vocal critic of the city’s water practices and co-leader of “Recall Brighton.” However, Stantec representative Carol Malesky told Johnston he was incorrect in thinking that the study is proof that Brighton overcharged residents for water.

One major reason, Malesky explained, is that the study didn’t look further back than 2018. The study is forward-looking, said Maria Ostrom, Brighton’s interim finance director.

While Stantec suggested that Brighton should charge residents less, the research also countered the notion that residents’ payments has gathered into a “$70 million slush fund.” The evidence was provided in Stantec’s breakdown of the utilities’ current “unrestricted net position” balance, or savings, in the water and wastewater funds. 

Stantec explained there are two sources of revenue: operating and maintenance (O&M) payments, which customers (also referred to as “ratepayers”) pay, and plant investment fees (PIFs), which developers pay. In the water fund, there’s $15.2 million in O&M money, and in wastewater, there’s $12.6 million, a total of $27.8 million. 

Previous references to the “$70 million” have also included savings in the third utilities fund: storm water. However, according to the 2018 City Annual Financial Report, there’s $4.6 million of savings in the storm water fund (a combined figure from ratepayers and developers), which still doesn’t equal $70 million in a ratepayer funded balance.

Stantec recommended council lower customers’ rates for both the water and wastewater funds. In water, council can either decrease rates 8 percent across the board, starting in 2020, or choose a 4 percent decrease with adjustments to differently tiered customers.

To determine how much to charge customers, Stantec matched current rates and fund balances with future expenses for the next 10 years.

Currently, average water bills are $29.54 in the winter and $75.80 in the summer. Depending on what council decides, the average bill in 2020 could be between $26 to $27 in the winter and $66 to $69 in the summer.

The average bill projection for water service was a sum of Brighton's cost to supply water to customers plus an additional $4.60, the amount that every Brighton water customer pays to receive desperately needed water from Thornton.   

Stantec, however, didn't factor in Thornton's rates for recommending new rates, because Brighton city council has no control over Thornton's rates, which could change in future years. 

Average wastewater bills are $32.80, but could be $30.16 if the council approves the wastewater decrease.

Both funds will need a 2.8 percent “inflationary rate increase,” in 2024 for the city to keep pace with expenses in the late 2020s.

The biggest future expense afforded by ratepayers in the wastewater fund is transitioning to treating sewage from the current local plant to a regional one under the “Metro Wastewater Reclamation District.”

Agreed to in 2009, Brighton would buy into the metro plant, which involves connecting existing sewage lines to the new plant. With thousands of connections needed, Brighton agreed to pay over $1 million/year and make a balloon payment in 2035, which in 2009 was said to be $12.3 million.

The balloon payment is subject to change depending on what the metro district determines future costs are. While Stantec accounted for the originally agreed-to payment, the rate consultant did not factor in a potentially higher payment in 2035.

Depending on the city’s future negotiations with the metro district, O&M rates could change, among other financing options.

Stantec also showed that Brighton’s rates currently rank 10th highest out of 14 other neighboring counties and cities. If decreases are adopted, the city could be the 11th out of 14.  

Overall, Ostrom said the rate study helps ensure that, “revenue in equals expenses out,” for the next 10 years.

A mathematical presentation, however, didn’t stop the subject from being politicized on both sides.

“A lot of these [council] members voted for 10 years to add percentages, in order to make it where now, we’re having to decrease the water rate,” said Johnston.

In response, Mayor Ken Kreutzer said, “We were given the information that we believed, at the time, was necessary to make the decisions at that time.” 

Similarly, Kreutzer hopes Stantec’s information will help the city move forward in the necessary ways. The mayor said, “It’s time that we take care of this utility black eye.” 

Update: An earlier version of the story included some of the rate study's results. The story has since been updated to include additional results, while also explaining certain results in greater detail. The story was also updated with a note about Stantec's consideration of water service from Thornton. The story's headline was also updated to more specifically reflect the story's originally reported information.