The Orchard City Town Board is being challenged on the method and reasoning that it used for establishing new water rates. The new rates take effect May 1 and will show up in rate payers' June billing.
Orchard City constituent Doug Keller is basing his position on the town's own figures which, he says, point to a conclusion that the proposed town water rate increase is not necessary.
Keller, a retired Certified Public Accountant, told the DCI that he has extensive experience in setting and analyzing rates for enterprises far more complicated than the Orchard City water utility. He said that he worked for several years for a private firm that calculated federal medical payment reimbursement rates for nursing homes, and that later he worked for over a decade auditing finances of some 200 nursing homes per year.
Keller has met with the trustee water committee about his water rate analysis and has made presentations to the full town board on two occasions. On those two occasions and in an interview with the DCI, Keller has made the following points:
• On March 8 Keller explained to trustees that their method of deciding how much money they wanted to raise for the water fund was flawed from a business perspective. A business would first determine how many gallons of water need to be sold for the utility to "break even." Then, appropriate charges could be determined.
Keller asked trustees for that break-even number of gallons; but he told the DCI on April 7 that he still has not gotten it. The DCI asked trustee Dick Kirkpatrick, who explained that Orchard City billed for about 195 million gallons last year receiving about $638,000 in revenue. Due to the complexity of the town's many rates, an exact answer to Keller's question isn't possible, he said.
• Keller disputes the town's claim of an average 7.4 percent annual increase in water system costs over the past eight years. He cites an analysis from a U.S. Bureau of Labor Statistics website showing an annual national inflation rate over the past eight years of 1.3 percent.
• Trustees have said they want another $1 million in the water fund in order to have a reserve fund of $2 million for use in catastrophic water system emergencies. At the town board's April 5 work session, Keller showed trustees that the town already has over $2.5 million "sitting in the bank now" in the water fund and water capital construction fund combined; and all of that money would be available in the event of a water emergency.
• Keller told the DCI that it was during a meeting he had with the trustee water committee (Dick Kirkpatrick and Bob Eckels) that the town's math error in setting new water charges was discovered. (See related story.)
• Citing a spreadsheet analysis, Keller faults town officials for over $1.1 million worth of treated water leakage from the distribution system over five years.