Newton provides further clarification on IRUA water rate increases

Ever since Newton City Council raised the water rates for Iowa Regional Utilities Association, the community has been in uproar over the costs affecting rural customers’ water bills and the decision by elected officials to hastily waive the second and third readings. In response, the city offered further clarification.

Newton Mayor Evelyn George on April 1 released a statement to the Newton News and read it aloud during the city council meeting that night. In it, she provides more details regarding the relationship between the city and IRUA, as well as the city’s justification for waiving additional readings.

Here is the statement from George in full:

A recent decision of the Newton City Council on water rates to IRUA was made to protect and invest in our local water utility. Some community members have requested additional information on the Council’s decision to adopt increases to IRUA rates.

After more than a year of meetings between the City and IRUA in which rate increases were discussed, IRUA cancelled two scheduled meetings in August and September of 2023 and refused to schedule any further meetings. On October 16, 2023, the Newton City Council adopted Resolution 2023-279, awarding a professional services agreement for a water Cost of Service Study. This study was specifically completed to determine how much it costs the City of Newton to produce 1,000 gallons of water for IRUA. The study, completed by a licensed engineer experienced in producing cost of service studies, determined it costs the City $3.27 to provide IRUA with 1,000 gallons of water.

Based on the Study, the City Council increased IRUA’s rate to $3.27 per thousand gallons of water. The City is currently losing money providing water to IRUA and, after the increase goes into effect, the City will be providing water at the City’s cost. Any rate below $3.27 per thousand would require City residents to continue to subsidize IRUA customers. It is important to note the water cost itself is a small portion of the amount charged by IRUA to provide water to its customers. The new IRUA rate of $3.27 per thousand gallons is significantly lower than IRUA’s contracted amount with Pella, which is $4.30 per thousand gallons, and is also lower than most other providers. Table 6.1 (shown below), from the Cost of Service Study, lists wholesale water rates charged by cities to rural water districts in Iowa

Prior to the adoption of the ordinance by the City, the City provided a letter to IRUA notifying them the City intended to review the rates charged to IRUA. A copy of the Study was provided to the IRUA on March 12, 2024. All actions of the City Council are open to the public and posted in conformance with Iowa Open Meetings laws. The purpose for having second and third readings of ordinances is to allow City residents to have input. Since residents are not impacted by this water rate increase, there was no reason for additional readings of this ordinance.

The City of Newton has not only followed every requirement under the contract, but exceeded those requirements in order to establish a fair rate for IRUA. The rates for July 1, 2024 and July 1, 2025 are now established; however, the City is hopeful IRUA will take the opportunity to resume conversations to negotiate rates for July 1, 2026 and beyond. —Evelyn George, Mayor, City of Newton

TAKING A HARD LOOK AT THE NUMBERS

Much of what George said in her statement builds upon an earlier statement from the city, which argued IRUA’s new discounted volume rate was increasing by 187 percent based on what they purchased in the past. Newton News reported that water rates were increased by almost 800 percent. Both percentages are correct.

According to the updated rate schedule included in the March 18 city council agenda packet, three tiers of rates show 793 percent, 754 percent and 737 percent increases for a monthly minimum of 0 to 31,000,000 gallons, then the next 14,000,000 gallons and the next 48,000,000 gallons, respectively.

However, the city later clarified IRUA would most likely pay the higher tier rates for the monthly minimum of 93,000,000 gallons and anything over 93,000,000 gallons, which would calculate to 187 percent and 172 percent increases, respectively. Those rate calculations are as follows:

Monthly minimum 0 to 31,000,000 gallons:

$1.09 to $9.73 (per 1,000 gallons) = 792.66% increase

Next 14,000,000 gallons:

$1.14 to $9.73 (per 1,000 gallons) = 753.51% increase

Next 48,000,000 gallons:

$1.17 to $9.79 (per 1,000 gallons) = 736.75% increase

Monthly minimum 93,000,000 gallons:

$1.14 to $3.27 (per 1,000 gallons) = 186.84% increase

All over 93,000,000 gallons:

$1.23 to $3.34 (per 1,000 gallons) = 171.55% increase

IRUA WOULD STILL BE PAYING A LOT FOR WATER

The city council did not clarify which rate IRUA would be paying during its March 18 meeting. Even with the 187 percent rate increase as opposed to the 793 percent increase, IRUA would be paying much more for Newton water. To note, IRUA has about 55,000 customers across several counties.

According to data from IRUA, the utility company purchased an average of about 1.05 billon gallons from Newton per year since 2020. Here is what they paid:

• $1,129,384.97 in 2020

• $1,202,697.85 in 2021

• $1,104,244.64 in 2022

• $1,325,814.60 in 2023

Using the new rates approved by the Newton City Council, if IRUA purchased the same amount of water from Newton the past few years, it would total more than $3.4 million. Which is almost as much as what IRUA paid for water the last three years combined.

RATES WERE TOO LOW FOR TOO LONG

In June 2023, the city staff held a work session to review water rates for IRUA. The council had only just taken over the reigns of the Newton WaterWorks after a vote of the people agreed to dissolve the WaterWorks Board of Trustees in late 2022 and have the utility be managed by the city council.

During the presentation, it was alleged IRUA had been undercharged for water for several years. The costs to cover the production of water could not by covered by current IRUA rates. Coupled with needed infrastructure projects, city staff and council members made it known rates would likely increase.

Residential and commercial properties in Newton are paying about $3.84 per 1,000 gallons of water. Those customers outside city limits are paying about $4.80 per 1,000 gallons of water. Newton Utilities Director Jody Rhone said last year the costs to make the water is about $3.75 per 1,000 gallons of water.

Newton had some of the lowest water rates for IRUA compared to other cities.

The IRUA Board of Directors was not keen on the results of this work session, and as a result the president of the board, Ron Dunsbergen, wrote a letter to the editor saying he was “shocked and disappointed” at the implication that rural users of Newton WaterWorks have been given some type of free ride.

IRUA BOARD PRESIDENT SAYS INCREASE IS ‘OUT OF LINE’

Dunsbergen returned to the April 1 city council meeting to speak at the citizen participation portion. After many years of cooperation with the Newton WaterWorks Board of Trustees, he said the board was taken aback by the rate increases passed by the city council last month.

“We serve all of Jasper County, with the exception of Colfax, Kellogg and Prairie City and the few outlying rural residents. Over the past year we have contributed well over $2.25 million for Newton WaterWorks,” Dunsbergen said, noting the utility company also assisted the city with other projects.

For instance, IRUA has made water available from the north tower for increased fire protection.The board president said IRUA’s demand for water is 178,000,000 gallons per month. Dunsbergen also said any increase or decrease in rate should be based on demonstrated increase or decrease in costs.

But as it stands now, Dunsbergen said the IRUA board feels the proposed rate increase is “out of line,” and he encouraged council to rethink its past action.

“We would like for you to rescind your proposal and come to the table and have a joint negotiation with IRUA to come up with a rate increase that would be acceptable to both parties,” he said. “We understand the costs of production have increased over the years and we are willing to discuss a reasonable rate increase.”

NEWTON CITIZEN SPEAKS AGAINST COUNCIL DECISION

Lindsey Peck, of Newton, was “incredibly disheartened” and “honestly ashamed” of the city council for its handling of the water rate increase for IRUA. While she wholeheartedly agrees rate increases are warranted due to the cost increases in operations, she said an increase of this proportion is business altering.

But Peck was especially critical of what she perceived as council’s dismissive attitude toward those it does affect.

“You waived the second and third readings. You provided IRUA with a copy of your study this month. And then voted on this unfair increase. Then to justify this by stating and agreeing with this decision not affecting Newton citizens as much is just ridiculous,” Peck said. “IRUA customers own businesses in the city.”

They also have kids who go to school in Newton, and many of them even shop at local stores, she added. IRUA employees also live in the city. Peck said the citizens benefit from the city’s partnership with IRUA, claiming citizen rates would be “significantly higher.” But it is not clear if that would be true in the long run.

Still, Peck urged council to reconsider its previous decision and to take more consideration in future action, and “to act with more integrity and transparency.”