City sewer rates could hike 4% over next four years to pay for infrastructure upgrades, operating costs
Jul. 2—Santa Fe's wastewater rates will need to increase by about 4% a year for the next four years to help pay for a new wastewater treatment plant and support increased operating costs, according to a city consultant.
"That's what's going to be needed to pay for the operating and maintenance expenses as we see them today and to finance this wastewater treatment plant facility which is being proposed," Jason Mumm, principal of Denver-based Financial Consulting Solutions Group, said at a Public Works and Utilities City Council Committee meeting on Monday.
Mumm, whose firm consults with several city departments, said a sewer rate increase was not projected in an update last year but that circumstances have changed. He said the department's operating costs increased substantially from last year's forecast due to inflation, increases in contract and supply costs and a lease the city was required to start paying for using land at the Santa Fe Regional Airport.
The department's five-year plan includes $60 million in additional spending on capital improvement costs for the wastewater treatment plant, Mumm said, which are anticipated to start in the 2026-2027 fiscal year.
In total, costs for the first phase of a new modular plant are estimated at $120 million. An entirely new plant could cost more than $300 million.
Mumm said FCS Group seriously considered two scenarios for the city. One involved the Public Works and Utilities department borrowing about $138 million and increasing rates by 4% over the next several years. The other involved borrowing only about $103 million, using more cash reserves, and raising rates about 3.75% yearly.
The city has been approved for a loan from the New Mexico Environment Department's Clean Water State Revolving Fund, which has just .01% interest with loan terms of up to 30 years.
"One of the main features of this program that I find to be very advantageous is that the repayment for the debt does not commence until after the project has been completed," Mumm said. "That can have a really important effect on the rates."
The projected $138 million includes $15 million for replacement of UV disinfection equipment, $3 million for sewer line rehabilitation and $120 million for a treatment plant.
According to information on the city's website, sewer rates were most recently increased in 2014 with a schedule of increases going through 2019. The 2019 increase brought the monthly service fee within city limits to $7.53 per unit and the monthly usage fee to $4.64 per 1,000 gallons of water.
In an earlier interview, Water Division Director Jesse Roach said city water rates also will likely need to increase for the first time since 2013 to help pay for more than $100 million in infrastructure projects the division is undertaking, including repairs to Nichols and McClure reservoirs and upgrades Canyon Road Water Treatment Plant.
Roach said in May the division is projecting a 3% hike starting in July 2025, with additional increases in upcoming years. He said that would likely be presented to the City Council in June, but in a Tuesday email said he now hopes to present by the end of August.
"We are doing a bit more work on the funding and spending scenarios under consideration," he wrote.
Several councilors expressed disappointment Monday with the amount of the increases proposed. In response to a question from Councilor Alma Castro, Public Works and Utilities Director John Dupuis said the city does have resources available for residents who are struggling to pay their utility bills.
Mumm said he will deliver his presentation to the full City Council at its upcoming July 10 meeting and that his understanding is city staff would like to move forward with the rate increase "expeditiously." He said he could have more specific information next week about how the increases would affect individual ratepayers.
The City Council has not been formally presented with options for the future of the wastewater treatment plant, which has suffered a series of maintenance failures that have brought the city out of compliance with state and federal environmental regulations. Officials have said they are exploring a modular buildout of a new plant which could potentially be a partnership with Santa Fe County.
Dupuis said the wastewater treatment plant is "much more regularly in compliance" now than it was earlier this summer following a number of ongoing emergency repairs.
"That's really just a Band-Aid," he said. "What we need is something ... that's not 60 years old."
