City council hears rate study update, public comments

The Gunnison City Council heard an updated version of its water and wastewater rate study from its consultant, Willdan Financial Services, and public objections to the study at its Sept. 8 meeting.

The study update, provided by Willdan Senior Project Manager Kevin Burnett, followed the same format as the last presentation of the study on Aug. 11, with Burnett beginning by outlining the reasons for the city’s need to increase rates and utility investment fees (UIFs), including rising operational costs and the planned construction of a new water treatment plant for the city.

He said that both the city water and wastewater funds are enterprise funds that can only be supported through user rates and UIFs, which can pay for growth-related capital expenses but not operating expenses.

Burnett said that to meet anticipated costs, revenue for the water enterprise fund would have to rise by 45 percent in 2027, 35 percent in 2028, 30 percent in 2029, and 3 percent each year thereafter through 2035. Wastewater revenues would need to rise by 35 percent in 2027, 25 percent in 2028 and 2029, and 3 percent each year afterward to 2035, he said.

The proposed revenue increases, and accompanying rate increases, were calculated assuming that the city is able to secure Water Infrastructure Finance and Innovation Act (WIFIA) Program loans from the U.S. Environmental Protection Agency to finance the construction of the new water plant, Burnett said. WIFIA loans would allow the city to delay repayment for up to five years after the new plant's construction is complete, he said, making them more economical than other loan options.

Burnett then presented a set of proposed water rate increases that aligned with the direction the council favored in its Aug. 11 rate discussion. This structure centers on maintaining a lower “lifeline” rate for customers who use a limited amount of water, paired with sharp increases in rates for higher-use customers as a water conservation incentive.

He showed the council three residential customer profiles and how their water bills would change under the new rate structure. 

For a low-water-use customer using 2,000 gallons of water a month, he said their bill would rise from $42.41 per month at present to $47.74 with the 2027 increases. A medium water use customer using 4,000 gallons per month would see their bill rise from $51.05 at present to $60.70 in 2027, while a high-water use customer using 12,000 gallons a month would see an increase from $93.14 per month at present to $142.78 in 2027.

He said that costs for commercial water users would largely follow this pattern, with steeper increases for higher-volume water users. Rates would continue to increase for all users beyond 2027, with the rate of increase roughly matching the revenue increases needed for the city system.

Following council feedback, Burnett said that Willdan adjusted the capital improvement plan for the wastewater fund to reduce the steepness of the initial wastewater rate increases.

Willdan also did additional work to identify better the costs of serving county wastewater customers, he said, an issue that arose at the previous meeting.

With the proposed increases, Burnett said that wastewater rates for residential customers, who pay a flat fee that does not vary with usage, would rise from the current $57.65 a month to $78.46 a month in 2027, with subsequent increases.

Utility investment fees for water would rise under the proposed rate study, Burnett said. In contrast, fees for wastewater would fall due to a lack of new infrastructure improvements being added to the system.

During and following Burnett’s presentation, he fielded several technical questions about the details of the rate study and its methodology from Mayor Pro Tem Marisela Ballesteros, Councilor Loren Ahonen and Councilor Audrey Zahradka before the council turned to discussing the overall ramifications of the rate increases.

Ballesteros asked that the city conduct more research on existing and potential financial assistance programs for ratepayers to help customers struggling with steep rate increases, especially in the first two years. 

“Just for some folks, this may be a lot, even for me particularly, so it’s just figuring out how can we provide financial assistance to folks more than what we are already providing, considering the next two years,” she said.

Ahonen thanked Ballesteros for her “valuable” comment. “For the record, and it’s something that bothers me, it may not always be rendered that way; these are real costs to real people, and they do impact folks and high base charges in any utility - water, electricity - they promote stability of the system, but they’re also inherently regressive,” he said. “And so, it’s a hard conversation … and I think any opportunity we have to A. recognize that it is a system that we have to offset costs with revenue, an enterprise runs like a business, but alternatively we need to protect our citizens and find opportunities where we can.”

Councilor Matt Schwartz said that he was pleased with the rate study process so far. “This has been a really hard conversation, but I do really appreciate that staff and our consultant have really worked with our concerns and recommendations and worked them into this plan,” he said. “The goal is to make this, I hate to use the word, as painless as possible because I don’t think we can do that, but at least try and keep the baseline consumers in mind and make those impacts as low as possible, and I just appreciate the work that was done to accomplish that.”

Mayor Diego Plata thanked staff and the city’s consultant for their work in getting to this point. He said the water treatment plant has been a “hard conversation” since a 2021 study identified the need for a plant. “It is a really challenging set of numbers to look at and project and think about those in our community that may need some support, how can we find it, so I’ll second Matt’s comments around thanking staff and our consultant for taking all those considerations that we put forth as we built out this plan.”

Zahradka echoed Ballesteros’ comments about further examining the city’s capacity to assist ratepayers. “It really worries me that people on fixed incomes whose income is not going to go up 35 or 40 percent are having to pay increased fees, and that’s really hard for me to reconcile.”

She said that having a city webpage showing currently available assistance could be useful, along with any additional assistance programs the city could create.

City Finance Director Ben Cowan said the city has a webpage listing rate assistance opportunities.

“Like Diego was saying, this has been a really hard conversation, and I really appreciate all the work staff and Kevin have done, and I also appreciate I’ve had a lot of constituents give input as well and I also really appreciate all of that input,” Zahradka said. “It’s been really helpful for me as far as thinking about this.”

Ahonen highlighted the importance of context and the fact that Gunnison previously deferred needed maintenance and did not raise rates. “It’s the lack of raising rates for so many years that has led us to have to have this difficult conversation and make some difficult decisions, and the hope is to avoid future councils and future residents of the community having to see such large spikes.”

In response to a question from Ballesteros, Gunnison Public Works Director Pete Rice said that he should be the primary point of contact for members of the public interested in learning more about the rate increases.

“I strongly urge the community just to have a conversation, have a chat,” Ballesteros said. “That’s how I learn everything, and if you believe you use a lot of water or use it outside of your household, I strongly recommend you have a chat with Pete, even with Ben, just so you can have a better understanding as to what is going on. I am also doing the same.”

Cowan noted that the city previously lacked sufficient reserves in its water and wastewater fund balances and failed to address needed maintenance, contributing to the current situation. “Trying to shift to that proactive stance and provide, like with the water treatment plant project, reliable clean water into the future is really a shift in where the city has been over the last several decades,” he said.

Following this discussion, the council heard seven public comments opposing the proposed water rate increases, including from Gunnison Chamber of Commerce Executive Director Leora Wallace; Scott Cline, owner of High Alpine Brewing Company; and Jody Coleman, vice president of the Gunnison Watershed School District Board of Education.

These comments raised concerns about a variety of aspects of the rate increases, including their potential impacts on businesses like restaurants that use large amounts of water and operate on narrow margins, their impact on residents with fixed incomes, how they relate to ongoing development in the valley and the impacts of increased costs on local schools and Western Colorado University.

Overall, while commenters generally expressed appreciation for the council’s work and consideration, they asked that the proposed increases be delayed or reconfigured in various ways or the projects connected to them be reconsidered.