At the May 16 meeting of the Osceola City Council, council approved setting a public hearing for 7 p.m. June 6 for a proposed rate adjustment schedule to sewer rates 4-0; councilman Doug Gay was absent from the meeting.
Proposed increases
Libby Patton with Veenstra and Kimm reported to the council her findings of current and historic city sewer rates, and a proposed schedule of increase to provide revenue for the new wastewater treatment plant.
As reported in 2019, a new wastewater treatment plant was necessary to meet updated EPA (Environmental Protection Agency) regulations. The plant is estimated to cost about $44 million, with Hormel Foods covering about 47% of project costs. To date, Hormel has contributed over $20 million to the plant project.
The balance of the project is being financed through the State Revolving Fund Loan.
Patton explained in looking at Osceola’s current rate structure to determine if there would be enough revenue generated to cover future expenses the answer was no, and a rate adjustment was likely necessary to cover those future expenses for the plant. Because the new wastewater plant is larger, it will require more expenses such as maintenance and increased staffing. She said that in addition to the revenue component, adjustments to more evenly distribute costs amongst the different customer classes were taken into consideration.
Sewer rates are billed at a monthly minimum of 1,000 gallons with a $28 surcharge. There are three customer classes - residential, commercial and industrial.
Currently, residential customers are charged $5.76/thousand gallons, commercial customers $5.97/thousand gallons, and industrial is broken into two groups with “A” charged $6.27/thousand gallons and “B” charged $6.50/thousand gallon. Patton said that the residential class pays a higher percentage than their usage, while commercial and industrial use more gallons, but provide less revenue.
“That’s pretty common. We’re trying to get away from that, we’re trying to make it balanced,” said Patton.
Patton ran various scenarios on different rate increases across the customer classes to project future revenue and make the burden more balanced across the board. There would be two increases needed - one this year, and one in five years.
The proposed increase this year would be the larger of the two. Residential would increase to $6/thousand gallons, commercial to $8.15/thousand gallons and industrial to $7/thousand gallons. The monthly surcharge would also increase, differing per customer class. Based on averages, residential would see a 40% increase from $44 a month to $61, then another 5% increase in 5 years to $64. Commercial would on average see a 55% increase from $169 to $262, then to $278 in five years. Industrial would have a smaller increase due to their debt servicing with the wastewater treatment plant.
“Your current rate structure cannot fund your future needs…here is what we reviewed and researched and think is where you need to be at, to cover future expenses,” said Patton.
The public hearing will be held during the regular city council meeting at city hall. Members of the public are invited to attend the hearing and make comments at that time concerning the matter. Written comments may also be submitted to city hall to be disclosed at the public hearing.
A notice of the public hearing can be found in the May 25 Osceola Sentinel-Tribune or at Osceola City Hall.