A Comprehensive Guide to Belleville’s Water Rate Increase

Many residents and business owners of the Village of Belleville were dismayed to hear about the upcoming Public Hearing on May 13, 2020, at 3:00 p.m. before the Public Service Commission (PSC) to consider a water rate increase for the water utility. A lot of questions have been emailed or posted to social media regarding this matter. This post will attempt to answer those questions and describe the process up to this point.

Background on the Proposed Water Rate Increase:

The Water Utility Must be Self-Sustaining:

The Village of Belleville operates a water utility and a sewer utility as part of its operations. These utilities are accounted for separately as independent enterprise fund activities. This means that they are tracked separately from other operations that are funded by property taxes and each must be self-sustaining through its rate structure.

The PSC regulates the rate structures of all water utilities in the state of Wisconsin. PSC regulations ensure that water rates are set so that the utility makes enough revenue to pay for annual oerations and maintenance, pay for annual debt service payments, and generate a small rate of return to allow for minor fluctuations in annual costs.

Expenses to Upgrade the Water Utility Must Be Paid by the Water Utility Fund:

When the water utility/Village decides to make upgrades to its infrastructure, such as replacing water mains or constructing a new well, the costs of these capital improvements must be paid for by the water utility. The improvements are assets of the water utility and are reported as such in our annual audit and PSC Annual Reports. Large capital projects will likely require the utility to issue revenue bonds to pay for the improvements.

In 2018, the Village Took Out a Bond for Safety and Availability:

As the name implies, revenue bonds are secured by the revenues of the water utility. On June 13, 2018, the Village Board approved the issuance and sale of $1,490,842 in Water System Revenue Bonds through the Wisconsin Department of Natural Resources (DNR) Safe Drinking Water Loan Program (SDWLP) at an annual interest rate of 1.87% for a period of twenty years. This debt was incurred to pay for the engineering and construction of Municipal Well #3. The Water Utility will begin making debt service payments on this DNR loan in 2020.

About Municipal Well #3:

The Village water system includes many miles of water mains for distribution of drinking water, a water tower for storage and pressure purposes, and three municipal wells for pumping of groundwater. The addition of Municipal Well #3 was planned for well over a decade prior to it completing construction in 2019. The developers of the West Side expansion were required to dedicate land to the Village for the construction of Well #3. The well was necessitated by three primary factors:

1. The need to provide an adequate water supply for a growing village,
2. The need to provide adequate water pressure for customers and fire protection needs, and
3. To provide redundancy in our water system.

General Timeline of the Current Water Rate Study and Water Rate Case:

October 15, 2018 — At a meeting of the Village Board, a representative of Ehlers, the municipal financial advisers, gave a presentation regarding the Water Rate Plan. This plan was then approved by the Village Board in a vote of 6-to-1.

November 5, 2018 — The Village Board approved a task order with Ehlers to conduct a Water Rate Study.

July 29, 2019 — Ehlers filed an application to increase water rates on behalf of the Village of Belleville with the PSC.

March 12, 2020 — An initial notice for a Public Hearing with the PSC regarding the proposed rate increase was published in the Post Messenger-Recorder and posted on the Village website, at Village Hall, at the Belleville Post Office, and at the Belleville Public Library. This hearing was scheduled for April 2, 2020 and was canceled by the PSC due to changes in the hearing process brought about by the COVID-19 public health emergency. The date of the Public Hearing was changed to May 13, 2020.

April 23, 2020 — A notice of the Public Hearing with the PSC regarding the proposed rate increase scheduled for May 13, 2020, was published in the Post Messenger-Recorder and posted on the Village website, at Village Hall, at the Belleville Post Office, and at the Belleville Public Library.

Frequently Asked Questions About the Proposed Rate Increase:

What Does This Proposed Rate Increase Mean to My Utility Bill?

Your water and sewer bill that you get from the Village is based upon the amount of water used by you. The average home uses approximately 3,000 gallons of water per month at a base cost of $28.60, which includes fire protection charges but not sewer charges.

The proposed water rate increase would increase the bill on 3,000 gallons of water to $42.24 per month, which includes the fire protection charges. This is an average increase of $13.64. It will not increase the sewer portion of the bill.

Why Is the Village Doing This Now of All Times?

The process that got us to this PSC Hearing began over 18 months ago, and the application was filed with the PSC in July 2019 to start our current Rate Case with them. It is unfortunate that the timing coincides with the financial upheaval and uncertainty brought about by the COVID-19 public health emergency, but this process is time-sensitive.

The application with the PSC is based upon a twelve-month “test year” period of projected revenues and expenses for the water utility. This gives us a limited window from the time the application if filed with the PSC to complete the process.

The ramifications of stopping the Rate Case now would be:

1. The Village would lose any costs incurred up to this point with the Rate Study and Rate Case and be forced to start over and
2. The projected revenues for the water utility would fall short of making debt service payments related to the financing of the Municipal Well #3 project.

What Are the Legal Notice Requirements for This Public Hearing With the PSC?

The Village is required to, at a minimum, publish the notice provided by the PSC 7–15 days before the date of the hearing in a newspaper having general circulation in the service area of the utility. For the Village of Belleville that is the Post Messenger-Recorder. Additionally, we may choose to post the notice in other manners, which we have done in this case.

A physical copy of the public notice was posted at the Village Hall, the Belleville Post Office, and at the Belleville Public Library. Additionally, the notice was posted on the Village website. Recently, it was also posted on the Village Facebook page.

What Is the Proposed Rate Increase Paying For?

The proposed rate increase is expected to provide enough revenue from the sale of water for the utility to cover its operations and maintenance costs as well as Debt Service payments on an ongoing basis based upon current debt, planned improvements, and inflation. It is not covering a one-time project or cost but ongoing payments and costs over years.

$200,000 to Pay for Equipment Was Mentioned in Village Board Discussions for the 2020 Water and Sewer Budget. What Was That About?

$200,000 in a Sewer Repair and Replacement fund is being used in 2020 to pay for a new generator at the North Shore Lift Station and for an Orthophosphate Analyzer at the Wastewater Treatment Plant. These costs belong to the sewer utility, do not require a change in sewer rates, and have nothing to do with the proposed water rate increase.

Why Are Sewer Rates So High?

In 2007, the Village borrowed $6.6 million to greatly expand the capacity of its Wastewater Treatment Plant. This was based upon rapid growth of the community between 2000–2006 and the expected addition of 300 new houses in developments on the west side of the community.

The Great Recession stopped that expected new home construction until recent years. The treatment plant as currently built is expected to support the growth of the Village up to slightly more than double its current population. The last payments on this sewer debt will be made in 2026.

Why Does the Village Feel the Rate Increase Is Necessary, and What Other Options Were Considered?

Again, the water utility is expected to be a self-sufficient operation paid for by its rate structure. There is not an option to shift the debt to the tax levy; it must be paid for by the water rates. Without this rate increase, the water utility would not be able to pay for itself.

Why Were Residents Not Notified Before Now of the Plan to Request a Rate Increase?

The Village conducts business all of the time on behalf of the residents of Belleville within duly noticed public meetings. This current rate increase was discussed in October 2018 in one such meeting and other times since. Two public notices regarding a hearing were published leading up to the scheduled hearing on May 13, 2020.

There were also public meetings held where the Safe Drinking Water Loan was discussed as well as the construction of Municipal Well #3. An annual budget hearing is also held each year to approve the budget for the next year. The Village has complied with the law in its notification processes and anything else would be above and beyond what is required.

How Is the Village Planning to Pay for Future Infrastructure Repairs and Upgrades?

The water utility has a budget for general repairs to water mains, hydrants, meters, etc. in its operations and maintenance budget. Large capital projects are typically borrowed for though they may not be in the form of Revenue Bonds.

Some water main replacements as part of larger street repair projects are borrowed as General Obligation debt (guaranteed by tax revenues) with the water portion paid for by water revenues. The next large water project anticipated at this point will be the replacement and upgrading of water mains in conjunction with the State Highway 69 project planned by the Wisconsin Department of Transportation in 2023.

The Village does not have a budgeted cost for that work at this time, so plans regarding financing have not been prepared. Unknown factors which may affect financing include water usage and revenues at the time the work is completed. If the Village continues to add new customers, then it is conceivable that current rates could support financing the work without the need to borrow.

Wasn’t There a Water Rate Increase in 2017/2018? Do We Need to Expect a New Rate Increase Every Few Years?

An application for a water rate increase was filed with the PSC in 2017, and a similar public hearing was held in 2018. That rate increase was approved by the PSC. This current proposed rate increase was initially to be a part of that process, which was intended to ask for a two-step rate increase.

Instead, it ended up being a partial, single-step increase due to the timing of the Well #3 project; we couldn’t ask for an increase related to a project that wouldn’t be completed within twelve months. That is why we had to come back in 2019 and file for a second rate increase so soon. This is the last anticipated rate increase request at this time.

How Is the Village Prioritizing Spending for Infrastructure Versus Other Costs the Village Faces?

The Village Engineer works with the Public Works and Parks Committee each year to update and provide a five-year Capital Improvement Plan (CIP). This plan includes streets, water, sewer, and storm water projects. Smaller projects are paid directly by the tax levy, while larger projects may require the issuance of General Obligation debt with payments to be made by the tax levy over time.

Why Didn’t the Developers Pay for Municipal Well #3?

Municipal Well #3 is an asset of the Village and the water utility, and it will serve the entire Village and not just new development on the West Side. The developers were required to dedicate land to the Village for the construction of the well.

Other infrastructure improvements, such as water mains in the West Side, were paid for and installed by the developers and turned over to the water utility. The developers also had to dedicate land for a sewer lift station, but this improvement was paid for by the Tax Increment District, as it was necessary to serve the new construction and not otherwise required for the sewer utility.

PSC Public Hearing and Beyond:

The public is encouraged to provide comments for the PSC Public Hearing as detailed on the notice. You may call in during the hearing or listen online. Options are also provided to give written comments prior to the hearing.

Following the Public Hearing, the PSC will provide a decision regarding the proposed rate increase. If the rate increase is approved, the PSC will set a time in which the Village must implement the new rates. Normally this is the first billing cycle after the decision is received by the Village. The Village has requested that the rate increase be delayed until at least 180 days after the end of the current public health emergency; however, it must be implemented by the December 2020 billing to meet 2021 water utility revenue requirements.

It is unfortunate that this proposed rate increase is happening right in the middle of the COVID-19 crisis, but this has been planned and underway for some time. With debt incurred for the Municipal Well #3 project in 2019, we had to take action to adjust our water utility revenues to keep the utility self-sufficient. The Village is aware that the current public health emergency is causing hardships for many families in our community and we are working to reduce their burdens at this time by delaying the implementation of any new rate increases as long as possible.