Showing the "Why" Behind Utility Rate Increases
Customer since 2018 | Population: 11,485
CHALLENGES
- Insufficient rates not covering operating expenses or capital renewal
- Playing catch-up from years of underfunding
- Lack of clarity of enterprise fund's financial forecast for elected officials
- Public resistance to raising rates
- Time-consuming, expensive process of hiring consultants
RESULTS & BENEFITS
- Easy-to-understand visual representation of rate, rate increases, and how they affect citizens
- Smaller, more regular rate increases
- Full cost recovery of operating expenses
- Confidence in the ability to fund future capital renewal
- Better conversations with elected officials and increased public understanding of the value and cost of water delivery
BACKGROUND
The City of Leon Valley, Texas, is a suburb North West of San Antonio, home to approximately 11,000 residents. The City of Leon Valley provides water services to approximately 3,000 connections, about 30 percent of which are residential. The remainder of the population receives water service from the San Antonio Water System, which also provides wastewater treatment for Leon Valley. This complexity of service and mix of economies of scale has historically proven problematic for Leon Valley as it faces the same with many small municipalities.
"We were not recouping enough to pay for all of our expenditures, in addition to updating infrastructure."Yvonne Acuña, Assistant Finance Director, City of Leon Valley, Texas
THE CHALLENGE
Yvonne Acuña, Assistant Finance Director for the City of Leon Valley, describes that when she joined the City's Finance department, previous Public Works administration was responsible for utility rate setting. Best estimates for rate increases were made; however, the true cost of water service delivery was not known, and over the years it became apparent that small and infrequent increases would not be sufficient to support the replacement of aging infrastructure. With water wells failing, the immediate issue was to million in bond debt.
Following the failed vote, the City hired an external consultant to diagnose the true long-term needs of their water system and develop a plan to pay beyond. While the recommended rate increases, 3% over three years, partially addressed the system's underfunding, there was no explanation as to why 3% and not 10% was being charged. "Every couple of years we would hire them, and they would look at it, we would raise the rates, we'd move on," describes Acuña.
Without a clear understanding of the financial state, and, in fact, of Leon Valley's water system, staff were challenged with educating elected officials on the need for ongoing rate increases. And these increases were initially not well-received by ratepayers either. "But we had to," says Acuña, "because we were not recouping enough to pay for all of our expenditures, in addition to updating infrastructure. And so that's where we were at."
"The Waterworth system is great, you hold it all in your hands."Yvonne Acuña, Assistant Finance Director, City of Leon Valley, Texas
HOW WATERWORTH HELPED
With Waterworth's help, Leon Valley has now adopted a better, more accurate approach to the financial management of Leon Valley's water system. Their first "win" was to not accept a large term financial model. "That was really eye-opening," says Acuña. "We just entered our data, created our model, and could see this is where we are," she adds. "The Waterworth system is great, you hold it all in your hands. We're in the City year in year out; it's in charge of our water system that an accurate picture daily."
Waterworth has also led to better conversations with elected officials, too. Acuña shares, "I met with the City Manager and some of the City Council members prior to a council meeting and pulled up Waterworth and showed them. I said, here we are, without getting into all the detail, showed them the rates. Either 3%, 5% or 10% increase. And so that was really helpful for them too, to understand. This graph was our experience, it was our chart, and it tells us where we need to set the rates to be successful. So that was our 'ah ha!' Lightbulb moment."
As a result of these conversations, Leon Valley has gained the confidence that decisions made today will not only allow support recovery of operating expenses but also allow them to save for infrastructure replacement in the future.
"The ease of obtaining very knowledgeable support is the main thing. You know, anyone can offer support, whether it's worth anything is another thing."Yvonne Acuña, Assistant Finance Director, City of Leon Valley, Texas
A BETTER ALTERNATIVE
They say you can't have your cake and eat it too — but when it comes to utility rate setting, Leon Valley might disagree. Staff are now equipped to financially manage their water, wastewater, and stormwater systems in house, while still receiving the peace of mind and expertise of professional support.
"The ease of obtaining very knowledgeable support is key," shares Acuña. "You know, anyone can offer support, whether it's worth anything is another thing. With Waterworth, knowledgeable support is right at your fingertips. It's easy; I don't have to call and jump through hoops."
And for small, resource-restricted communities, ease of use, clarity, and time savings are critical. "I think what's great about Waterworth is that I don't have to wait for a consultant. I don't have to compile all kinds of information. As long as my model is maintained, I can go in and get a snapshot of what I'm looking at. And so that's what I enjoy. It's the convenience of being able to get the information I need in a timely manner."
Waterworth also simplifies data collection. You start with the easiest to acquire information — last year's financials, about 1 hour to gather — and use them for the model, more difficult to obtain datasets, such as billing data, to refine your model.
"A lot of us wear many hats, especially a small entity like Leon Valley, and it's made my life a lot easier, and in the process has educated everyone, as opposed to just throwing some numbers up there and saying, okay these are what our rates need to be. I can show them the graph and they immediately understand why. This is an eye-opener for them."