Multifamily residential complexes could be getting some immediate, and retroactive, relief from the recent utility rate changes that have reportedly sent bills for those properties skyrocketing — some doubling — since Lake Havasu City’s revised water and sewer rates went into effect over the summer.
Although those rates were instituted starting on July 1, residents first began seeing the effects of the changes as utility bills reflecting the new rates started being released in early September. Assistant to the City Manager Anthony Kozlowski said the city has received lots feedback from citizens since then. Many property managers, owners, and homeowners associations of multifamily complexes have informed the council of how their properties were specifically affected during call to the public at the past three City Council meetings – some reporting bills that had more than doubled.
A proposal by city staff would reduce the utility bill for multifamily residences significantly, effective immediately, and they would instead increase slowly back up to the current rates over the course of the next five years.
“Through this implementation period there is a need to make some adjustments, so that is something we are going to be taking a look at so we can make those adjustments for our residents,” said Kozlowski, who is the city’s project manager for the utility rate study. “We have received a lot of concerns from the public regarding multifamily, and the increase that they are seeing in some of their charges. That spurred some more conversations with our consultants to take a look at what we can do to ease that increase and spread it out over the next five years in order to allow them that time to adjust and make some changes moving forward.”
According to city officials, most of the increase that multifamily complexes have experienced is attributed to the updated sewer rates, rather than the water rates. So city staff is proposing that council reduce the monthly base charge for sewer by $20 per unit for multifamily residences – from $48.67 to $28.67. For reference, the base charge for a single family residence is $52.12 a month but multifamily units pay a higher flow rate ($6.26 per 100 cubic feet) for sewer than single family residences ($1.76 per 100 CF).
Kozlowski said the adjustment is expected to reduce the total sewer bill for multifamily residences to roughly what they had been paying under the previous rates.
Kozlowski said the sewer rates for RV parks has also increased much more quickly than other customer class types, so the council will consider reducing the monthly base charge per RV space from $24.34 to $14.34. Unlike the revisions to multifamily bills, Kozlowski said RV parks will still be paying more than they previously had prior to the new rates being instituted but it will help smooth out the adjustment.
“The RVs will still see an increase just due to the previous base rates that they were paying in the past,” Kozlowski said. “There was a need to readjust those. So that $10 will bring them down significantly, but it won’t bring them all the way down to what they were paying prior to the rate increase.”
But the adjustments to the sewer bills for multifamily housing and RV parks will not be permanent. Kozlowski said that if approved as proposed the sewer rates would drop back down this fiscal year and would increase more slowly over the next five years back to the current rates – $48.67 per unit for multifamily and $24.34 per space for RV parks.
Another part of the proposal that council will also consider is declaring and emergency “to preserve the peace, health and safety of the City’s residents.” The emergency declaration would allow the changes to be implemented immediately rather than going through the required process of introducing the changes during a public hearing, followed by another public hearing and a final vote by City Council 30 days later, and if approved a 30-day waiting period before those changes can take effect. That process would mean any adjustments to sewer bills would not officially take effect until sometime around the end of December.
If approved, staff’s proposal would be implemented retroactively, meaning that whatever rates council decides to adopt during the meeting would be applied to previous sewer bills of all multifamily residential complexes dating back to July 1, 2021. Kozlowski said city staff is still discussing whether the reduction in past bills will result in a refund being paid or if affected customers will have their account credited and automatically applied to future bills.
According to staff analysis, the financial impact of the proposed changes could cost the city up to $1.3 million over the next five years although Kozlowski said it may turn out to be a little less than that. He said today’s meeting will include some discussion about what the city could do to make up for that expected loss in revenue over the next five years. He mentioned using some of the money earmarked for the city from the American Rescue Plan Act as a potential solution.
At the public hearing
The public hearing is expected to include multiple presentations including background information from Kozlowski about the history of the Irrigation and Drainage District and why the city sought to update its water and sewer fees last year, and the nine-month utility rate study process that resulted in the adoption of the new rates by the council at the first meeting in May.
Kozlowski said consultants Kevin Burnett and Pat Walker from Willdan Financial Services will also give a presentation to council about what is causing the current situation and options that the council has to address it, a presentation from Public Works Director Greg Froslie about how the money from water and sewer bills is utilized to maintain and improve the system, and a presentation by Administrative Services Director Jill Olsen about Havasu’s enterprise funds for water and sewer and how they need to operate to comply with state and federal laws.
Basically, Havasu has to use water and sewer bills, and only those bills, to pay for the water and sewer services provided. The city cannot use utility bills to pay for any other city services, and the city cannot spend any of its revenue from other sources on water or sewer infrastructure.
“Other funding sources cannot be utilized to maintain the system,” Kozlowski said. “It has to be enterprise funds.”
The public hearing will also include discussion from councilmembers, and it will be open for members of the public to comment either in person or by submitting written comments by email to firstname.lastname@example.org.
Why did the rates change?
The City Council began the process of revising its water and sewer rates in 2020 in response to the Irrigation and Drainage District’s expiration scheduled for the end of June 2022. The IDD currently provides about $5.8 million annually that is used to maintain, operate and improve the city’s water services. Additionally, Havasu’s utility rates for water and sewer had not been adjusted in more than a decade. The council hired Willdan Financial Services to conduct a utility rate study to determine how much money each system needs to bring in each year in order to keep the services running smoothly, and how the city should set its rates in order to recoup those costs moving forward.
Ultimately, Willdan’s analysis found the Havasu would need to bring in a total of $10 million more than it had been in order to continue to operate and maintain the system properly – about $7 million more for water and another $3 million for sewer.
Although the rate changes generally caused water and sewer bills to increase, Kozlowski noted that this will be the last time residents in Havasu will see the IDD assessment on their property tax statements. Property owners can see exactly how much they will save in future assessments by taking a look at the IDD line on the assessments on property tax bills sent out by Mohave County within the last couple weeks. The district is assessed at a rate of $268.85 per acre.
“That reduction will help to minimize the rate increase that they are seeing on their bills,” Kozlowski said.