Pagosa Area Water and Sanitation District (PAWSD) customers may have noticed the small but steady increases in their water and sewer bills over the past few years. Those annual increases — 3% or 7% or 15% — were approved by the PAWSD Board of Directors based on ‘rate studies’ performed by the consultants at Stantec and also based on recommendations from the District’s auditor, Ronny Farmer.
The increases relate in part to America’s generally-inflationary economy, and in part to substantial infrastructure investments made by PAWSD recently including a new $44 million water treatment plant on Snowball Road, and $10 million in upgrades to the Vista Wastewater Treatment Plant on Lyn Avenue as required by the Colorado Department of Public Health and Environment.
My involvement in local government, as a journalist and as a volunteer board member on various boards, has caused me to conclude that inflation in the cost of government, and especially in the cost of government infrastructure, is more severe than in the overall consumer economy.
I can’t give exact reasons for that serious inflation, but I have my personal theories.
For one thing, it’s always easier to spend other people’s money. Once people get on a government board, even those who claim to be ‘fiscal conservatives’ sometimes start acting like tax money grows on trees and massive public debt is nothing to worry about so long as it serves their organization’s goals.
I’m not, myself, immune to those temptations.
Disclosure: I currently serve on the PAWSD Board of Directors, but this editorial series reflects only my own opinions and not necessarily the opinions of the PAWSD Board or staff.
As shared before in this editorial series, the problem laid before the PAWSD Board last week, in a draft 2027 budget, amounts to about $1.6 million. Lenders who have financed past PAWSD debts require the District to bring in slightly more in “operations” income — mainly from customer fees — than PAWSD spends in “operations” expenses plus “debt service”. Over the next few weeks, the Board and staff will need to work together to fill that $1.6 million hole by reducing expenditures or by increasing revenues. Or both.
Last Thursday, PAWSD District Manager Andy Connor provided examples of expense reductions in the administration office and in water and wastewater operations, totaling about $800,000.
Some of these reductions would require PAWSD to cross its collective fingers and hope no unexpected maintenance items arise. Other reductions are for new efficiency upgrades that PAWSD has done without in the past, and could presumably do without in 2027.
That seems to get the District about halfway to the goal of $1.6 million.
Are there fees that can be increased? Of course.
Some of the pertinent sources of “operational” revenue:
1. Customer monthly fees (water, wastewater, or both.)
2. Capital Investment Fees charged to new development (currently about $26,000 per ‘equivalent unit’.)
3. Availability fees charged to vacant properties adjacent to existing PAWSD infrastructure.
4. Higher monthly fees charged to Short-Term Rentals.
As mentioned previously, PAWSD has been increasing customer fees little by little over the past few years, based roughly on a schedule suggested by Stantec, the District’s ‘rate study’ consultants. The goal of a rate study: to look a number of years into the future and estimate how much revenue the District will need to pay its employees, maintain its infrastructure in working condition, and pay its debts without suffering serious financial stress.
The upcoming 2027 budget will be the fourth budget I’ve had to approve since joining the PAWSD Board of Directors, and the first one that, in my opinion, poses serious issues.
We’ve had, during my time on the Board, a very competent staff, and I have mostly relied on the staff’s recommendations, and the recommendations from Stantec, and the recommendations of my fellow Board members, concerning the necessary fee increases and the capital projects necessary to keep the District running properly. Serving on any board involves a learning curve.
This month, however, the staff has presented a draft budget that doesn’t fully meet our obligations to our lenders in terms of ‘Debt Service Coverage’. Some hard decisions — about cutting items out of the budget, and about raising rates — will have to be made, and the Board has to take ultimate responsibility for those hard decisions.
Certain items are out of our control. Health insurance rates are going up, whether we like it or not. Existing debt payments must be made. Basic services must be provided to the community. But a government budget is full of contingent line items. Might an essential computer break down? Might pumps fail? Might a sewer line break? Might the cost of fuel or electricity increase unexpectedly?
When a government has ‘excess revenue’ these contingencies are easy to account for in the coming year’s budget.
It currently appears that, for 2027, PAWSD will not have ‘excess revenue’ unless the Board saddles the customers with uncomfortable rate increases. No one on the Board want to do that, as far as I can tell. Times are already hard for many of our customers; inflation and taxes are already causing anxiety.
Perhaps the hardest conversation to have, in a situation like this, is around staff wage increases. Keep up with inflation? Freeze wages where they are?
Like all local government districts, PAWSD must post a draft budget for public review, by October 15. We then have until the end of December to approve a final budget.
I don’t expect the process of filling a $1.6 million budget hole to be easy.
We have a competent Board and a competent staff. But I don’t expect the process to be easy.