How We Pay For Water Renewal
August 27, 2020
Over the past few weeks, we have talked a lot about reliability, innovation and building resiliency in our water renewal system. Some of you may be thinking- what will this all cost? The City of Boise has had relatively low user rates for services, but as much of our infrastructure reaches the end of its useful life, we’ll need to commit significant financial resources to repair, maintain and replace this critical system. Upgrades must be made to meet regulatory requirements and the needs of our growing community, all while keeping our customer rates affordable.
Up until now, we have utilized a pay-as-you-go funding model for our operations and our construction projects. Water Renewal Services collects money primarily from the rates that customers pay on their monthly bills and through connection fees for new customers. In order to fund required investments, we will need more revenue over the next twenty years than we are currently collecting.
There are two options that could be used for funding the plan. The first is to raise rates for current customers and continue to pay as we go. The second is financing, - we take out a loan similar to buying a house. The interest on the loan would cost more in the long run, but the up-front rate increases would be less. Plus, the cost gets distributed more equitably across generations rather than having current customers fund benefits for future residents.
Keeping It Affordable
We are not only determining the best way to pay for the future, but also how we keep rates affordable for our customers. Currently, rates are approximately $34 per month for a typical household. Recent analysis has shown that this rate has an outsized impact on lower-income households. As the cost of service is going to continue to increase, we are in the process of developing strategies to help our customers keep their bills affordable. Some of those methods to be considered by city leadership could include:
- Bill Discounts: Structuring our rates to reduce impacted customer bills
- Flexible Terms: Options may include timing adjustments or levelized billing
- Lifeline Rate: Customers pay a standardized rate for a fixed amount of water, then the rate increases for additional water use
- Temporary assistance: Help cover customers on a short-term basis to prevent disconnection of service
- Water Efficiency: Utility subsidize efforts to increase water efficiency
Water Renewal Services will be asking city council for guidance on funding and affordability options while conducting an in-depth study to explore our different options for funding and affordability and will present the recommended plan to city council once it is complete.