Sycamore city officials say inflation to blame for proposed water bill fee hikes

SYCAMORE – Sycamore city officials told the Sycamore City Council recently that inflation is primarily to blame for proposed fee hikes on monthly water bills for residents and businesses that could go into effect in May, if approved.

Aldermen debated the pros and cons of the proposals and how it might impact residents versus the city’s largest water users, including area businesses, which officials said bring consistent tax revenue to town.

City staff have said the proposed fee hikes will make up for revenue shortfalls needed to pay for planned infrastructure projects. The city is considering three options: Increase water bill fees based on two types of usage rates, including one that could break users into two tiers, or implement a flat monthly rate increase of $3.23 per unit regardless of water usage.

City Manager Michael Hall said inflation was the top culprit for the lower-than-expected revenue coming in via water bills.

“The problem is that we have an increase in cost to commodities going up. We need to budget for maintenance and replacement for infrastructure,” Hall said. “So that infrastructure is like wells, pumps, the SCADA systems, water towers. We need to start planning for the replacement or servicing.”

The vote will come more than a month after Sycamore officials announced they settled at $6 million class-action lawsuit over water quality concerns, including foul odor and discoloration as well as fears over documented elevated lead and chlorine levels. Hall said the utility fee proposals aren’t related to the recently settled lawsuit that came after years of concerns raised by Sycamore residents regarding water quality concerns in the city.

“Everything that we’re talking about tonight has nothing related to do with the water lawsuit at all,” Hall said. “So this is all things that we planned before that, and this has got nothing to do with any of that that happened,”

The council is expected to vote on the proposal during its next scheduled meeting set for 6 p.m. March 20 at the Sycamore City Center, 308 W. State St. downtown.

According to the settlement agreement reached out of court in January, the city is required to pay an average of $1.2 million annually toward water infrastructure improvements through 2027. The settlement also requires the city to pay for additional testing of lead and chlorine levels annually through 2025.

Sycamore already conducts annual water testing; however, the settlement stipulates a larger pool of properties be tested using a laboratory chosen under the settlement agreement.

“Everything that we’re talking about tonight has nothing related to do with the water lawsuit at all. So this is all things that we planned before that, and this has got nothing to do with any of that that happened,” Hall said.

—  Sycamore City Manager Michael Hall on proposed water utility fee increases for residents

Fewer than three years ago, the Sycamore City Council increased residents’ water fees after a November 2020 vote that imposed a $6.90 water bill base fee to help fund water system improvements. But according to city documents, Public Works Director Matt Anderson requested the council take up the considerations because the current fee structure isn’t bringing in enough revenue.

City Council weighs in

Aldermen remain undecided on what direction to take for the proposed fee increases.

Some expressed concern that water fees would grow significantly for the city’s larger users, including big businesses that they said bring consistent tax revenue into town.

Fourth Ward Alderman David Stouffer said he preferred to adjust the water usage fee structure to a flat rate.

“If I had to pick one right now, in light of looking out for the residents and everything, option three stands out to me,” Stouffer said in support of a flate rate increase.

Fellow 4th Ward 4 alderwoman Virginia Sherrod said she agreed with Stouffer.

Third Ward Alderwoman Nancy Copple said she needed more time to think before attaching herself to any of the options. Her 3rd Ward counterpart Jeff Fischer said he’s also still deliberating fee impacts on the city’s larger businesses.

“I’d like a little bit of time just because, kind of going to the idea of places like Suter and those types of places that do have jobs and it provides tax money, and so there’s a lot that goes into those types of decisions,” Fischer said. “Some of these options, their cost would go up substantially, and so that’s what I’m kind of fighting between.”

Second Ward Alderman Chuck Stowe said he also supports a flat rate fee increase. His 2nd Ward 2 colleague Pete Paulsen was absent from the March 6 meeting.

Bauer said he supports a plan to change the city’s water billing to a two-tiered option that would impose fees based on usage, a lower fee for users utilizing fewer than 748,000 gallons, and a higher fee for larger users. He said he would support a yearly analysis of city water usage to keep up with any necessary rate changes.

“So I was thinking a little on the softer side for business and small business for option one,” Bauer said. “I like option three [flat rate], but I think that’s a little hard to take for the largest users.”

First Ward Alderman Josh Huseman said he’s also in favor of a two-tiered water billing structure. He said he doesn’t support the flat rate fee because could increase bills for the city’s highest water users by almost $4,000.

“I think a lot of our heavy water users do provide jobs to the community, who provide additional revenue sources that should be accounted for,” Huseman said.

Why adjust fee structure?

According to city documents, city staff have asked the council to approve an increase on water usage, meter maintenance and radium removal fees in order to offset revenue expected to fall short for needed water infrastructure improvement projects.

Water user fees this year are projected to bring in $2 million in revenue, $110,000 below the $2.1 million Public Workers Director Matt Anderson said is needed to fund well and water tower maintenance and other planned capital projects, city documents show.

Outside of infrastructure improvements and maintenance, Hall said cost increases to chemicals needed to treat the city’s water has also impacted the city’s budget.

“The chemicals – this is a really good example – the chlorine has gone up a 140% increase. It’s a lot. That’s just one example of those chemicals that we use,” Hall said.

Beyond shoring up the expected revenue deficit, Hall said the city should be making efforts to build in funds for emergencies.

According to city documents, the city is projected to bring in revenue about 5% less than it budgeted for during fiscal 2023.

Water bills now and in future

Sycamore residents are charged a water rate based on their metered usage where one unit is 748 gallons of water.

A home that used four units of water – 2,992 gallons – is billed $3.20 per unit, the highest of the tiers of water rates. The lowest water rate is reserved for those who use the most water. Any home that uses more than 170 units of water – 127,160 gallons – is charged $1.72 per unit.

Over the next five years, the cost difference between the highest and lowest tiers will shrink from $1.48 to 38 cents per unit, and by May 2027 the seven tiers will condense down to two, documents show.

All fee hike options presented to the City Council would go into effect in May, documents show.

The first option is to modify the rate structure down to two tiers, documents show. Under that option, anyone using fewer than 1,000 units of water – 748,000 gallons – would pay $3.37 per unit, while anyone using more than 1,000 units would be billed at $2.10 per unit.

A second option would keep the existing tier structure but increase rates for all customers. A home using four units would be billed $3.74, or 59 cents more per unit. A property using more than 170 units would be billed $2.22, or 35 cents more, documents show.

The third option is to eliminate the tier structure and charge a flat rate of $3.23 per unit regardless of water usage, documents show.

Small and large residential homes would see the smallest cost increases from the two tier and flat rate options. Under the flat rate option, however, an industrial facility could pay up to $15,313 a month for water.

Hall said the city identified all three increase options by asking how much more money the city still needs – about $2 million, documents show – and then determined how the proposed rates would meet that goal.

Because the current pay structure changes incentives based on water usage, Anderson said it took several years of analysis to determine the proposed changes in residents’ costs for water usage if fees increase.

Other considerations

Two other considerations regarding water bills also are up for a vote March 20.

One of those is a request to increase the monthly water meter maintenance fee based on meter size. For those with a 0.6-inch meter the change would amount to 25 cents. For those with a 6-inch meter, the rate would jump from $42.54 to $50.41.

According to city documents, the meter related expenses for the Meter Replacement Program has exceeded meter maintenance fees by over $30,000 per year, since fiscal year 2018.

Hall said the city’s hands are tied due to increase costs for meter supplies which are supplied to the city by Badger Meter. the city budgets about $160,000 for meter purchases, but the cost of water meters have gone up between 12% and 15%.

According to city documents, $190,000 – about $30,000 more than what is currently budgeted – is needed to ensure meters are replaced at the end of their useful life.

A proposed increase to the monthly radium removal fee also is under consideration. Properties with the smallest meter size would see rates increase from $6.75 to $7.30. Those with the largest would see a $37.70 increase, from $462.66 to $500.36.

Hall said the city budgets about $710,000 for radium removal, and according city documents, the proposed fee increase would grow the budget to $770,000 per year.