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Friday, February 27, 2015
Breckenridge boosts water rates to fund $30 million water plant
Come March, folks in Breckenridge will pay more for water than ever before and, oddly enough, no one is complaining.
The town in January announced a 5 percent rate increase for all residential and commercial users connected to the municipal water system, which currently relies almost solely on a 44-year-old plant located 2 miles south of town.
The rate increase is the steepest in recent memory, according to town officials. In the past, usage rates have risen at a steady clip of 1 percent annually.
Along with higher usage rates, the town will also charge a higher plant investment fee, jumping from a historical average of 5 percent to roughly 10 percent for in-town customers. Only new users tapping into the water system pay PIFs.
Yet across Breckenridge, residents and business owners were either unaware of the shifting rates or, in a rare turn of events for a municipal rate increase, ready and willing to pay more.
“I know the town is growing and we need the water, so if that’s what it takes, we’re willing to eat the cost,” said Rhonda Profaizer, general manager for The Lodge at Breckenridge, a 45-unit hotel on Overlook Drive. She did not know the specific amount of the rate increase, but she predicted it wouldn’t affect guest rates at the hotel into the foreseeable future.
Water has factored heavily into the council’s policy decisions over the past decade, leading in2011 to a feasibility study for a new water plant to replace the aging, nearly at-capacity Gary Roberts Water Treatment Plant, located near the Goose Pasture Tarn reservoir 2 miles south of town.
The current plant is rated at 4 million gallons per day (MGD), although the true operating capacity is limited to 3.46 MGD based on water rights. The system is currently at 90 percent capacity — and town officials only expect it to rise as the population grows.
“The West has been in a drought for the last 10 or 15 years,” Breckenridge Councilman Gary Gallagher said. “There’s no substitute for water, and quite frankly, any municipality in the West will agree water has always been very expensive. Water is a business with a full cycle, from sourcing to delivering, and Breckenridge at the moment has a very senior water system.”
Even by the most conservative estimates — population growth of just 1.2 percent annually — the current plant will be overtaxed by 2030, the study found. If the town’s population grows by 2.5 percent annually, the plant will likely reach capacity in 2021.
With demand rising during summer months, the council approved the new water plant shortly before implementing the new usage rates.
“I really think most people get it, that water is a valuable commodity that has always been priced too cheaply,” Gallagher said. “When you talk about pushing rates 5 percent a year for water, there’s not much angst. When I talk to people I know, it’s almost like a yawn in terms of the rates.”
PRICING A NEW PLANT
This year’s rate increases will lay the groundwork for the new water plant’s funding. The $30 million estimate includes planning, design and construction. As it stands, the town’s revenue from water usage in 2015 is estimated at $3 million. The new usage rates could pump an additional $440,000 into the fund, according to Brian Waldes, the town’s financial services manager.
“Yes, it’s a rate increase, but it’s needed, it’s necessary, and I think the council is together on this,” Waldes said. “We think this narrative is common sense — rates have to go up because we can’t be in a situation where our lone water plant is 50 years old.”
Although construction on a new plant might not begin for several years, Waldes says the town wanted to begin hiking rates at a relatively comfortable rate now. This avoids a steep rate hike in 2017, when the town plans to borrow $20 million for design and construction. Repaying the loan will cost $1.2 million per year, and the current plan calls for a 5 percent annual increase until 2018. The $440,000 collected in 2015 — along with additional revenues as the rates increase each year — will be used solely to eat away at the loan payment.
“It’s best to start building the fund balance now, rather than building it at a faster rate closer to the project,” said Waldes, who notes the new water rate revenues won’t be applied for the next two or three years. “We’ll need the same amount of money no matter what, but it’s much healthier to introduce these rates now.”
Like several business owners across the town, Profaizer, with The Lodge, didn’t know the details of the rate increase. The town’s water department bills the hotel based on a metric known as single-family equivalent, or SFE, which is the average amount used daily by a single-family home. The current SFE for Breckenridge is 270 gallons.
The math gets a bit complicated, but the majority of hotels are billed at a rate of 0.4 SFE per unit, or roughly 108 gallons. In comparison, restaurants are billed at 4.5 SFE per 1,000 square feet — easily the most water-hungry enterprises in town.
As Breckenridge continues to grow, the SFE will likely remain the same, but the demand will increase. The 2011 feasibility study shows that a new plant made operational in 2020 will offset the demand for the next 20 years. It will also provide a much-needed backup when the current plant fails.
“The Breck water system is a discreet system: If our system goes down, we’re forced to use trucks immediately,” Waldes said. “That’s not the way it works elsewhere across the county, but here, we’re alone on our own system. Things could get ghoulish overnight.”
Yet at the same time, Gallagher and the town council see the new plant — and even the new rates — as an avenue to highlight conservation.
“One thing that is really driving the rate increase is the fact that Breck has always been at the forefront of sustainability and conservation,” Gallagher said. “Hopefully, changing these rates a bit will help people focus on how valuable water is as a resource.”