Rugby City Council members reviewed recommendations to raise water rates for city and rural users in 2022 at a special meeting held at city hall Thursday, Oct. 14.

Miranda Kleven, financial analyst for engineering firm AE2S, outlined a list of water and sewer infrastructure needs for Rugby and recommended a rate structure that would generate revenue through user fees.

The fee structure, set into a five-year framework would allow the city to “update budget and sales data annually to stay on track,” according to information supplied by Kleven.

The rates take into account costs incurred by payments to Northwest Area Water Supply, water plant operations and water distribution operations.

The rates also fund a council-approved storm and sewer infrastructure replacement for 2 ½ Avenue and Sixth Street Southeast. Total costs for the project, paid with a $4,934,000 loan, a $1,650,936 grant and $322,000 in city contributions and a search grant amount to more than $6.9 million. The city applied for funding through USDA’s Rural Development Agency to fund the majority of the project.

Other proposed projects for infrastructure include improvements to the city’s water treatment plant, replacing asbestos pipes in city water lines and replacing the city’s water main.

To fund the proposed and ongoing projects and keep up with rises in current costs, Kleven’s analysis recommended applying a fixed charge of 7.5 percent to users’ water bills, with another 7.5 percent tacked onto usage per thousand gallons. Kleven also recommended annual reviews and adjustments to the charges and using a “true-up” process to reconcile rates paid by All Seasons Water Users District (ASWUD), which buys water from the city.

The “true-up” process finds the difference between rates paid and the actual cost of the water used, including water plant maintenance, employee salaries and other costs. Users make up the difference in cost.

The proposed recommendations also called for an increase of 30 cents per 1,000 gallons for sewer use and a fixed increase of five percent per user.

Council member Neil Lotvedt reviewed the list of proposed projects, saying they added up to about $23 million.

The council has not approved most projects in the plan, such as replacing asbestos-cement water mains.

“The city needs to maintain (infrastructure). They need to replace the water mains,” Lotvedt said.

“And the sewer lines, and the water lines,” Kleven said, nodding.

“And 2 ½ Avenue, that has to be done,” Lotvedt agreed. “But the other one, I think that’s five or six million of it. We’re debt free now (in sewer costs), aren’t we?” Lotvedt asked. “How do we pay for the streets, curbs and gutters?”

Kleven said those expenses “are typically paid in special assessments.”

“We have to do something, but I don’t know how it pencils out,” Lotvedt said of the city’s infrastructure needs.

Kleven said spreading the cost of major projects out over years “makes more sense … because everybody’s paying their share over the life of the debt.”

Lotvedt also pointed out the work would affect the city’s bond rating should it apply for funds for other projects.

Kleven said by following the recommendations she outlined, “You’ve put in place a lot of the factors that the bonding agencies look at. They want to see 30 percent of your revenue or more generated by a fixed charge, which you have by the way you have your fixed and variable charges structured. So, taking debt for these projects is very responsible.”

“I’m not a bond rater, but I would expect that kind of responsible debt does not hurt you in terms of how you’re viewed by the financial agencies,” Kleven added.

Kleven said the proposed rate structure was “the most fair way to do this. The water rate payers pay for it or the sewer rate payers pay for it.”

Lotvedt expressed misgivings about the proposal. “You can’t fund it all with this rate structure,” he said.

Rugby resident Craig Zachmeier asked the council if they had considered prioritizing the infrastructure projects needed by the city to make them more affordable.

“Twenty-three million dollars to pay for water and sewer is crazy,” Zachmeier said. “It affects middle-aged, not elderly but middle-aged people with multiple kids, with multiple showers, that’s who it’s going to affect. The low income, but not the ones with one person in their household, not the ones who don’t water their grass.”

“I paid $500 a month to water my lawn this summer,” Zachmeier added. “With the increases through 2026, it will be over $1,000 a month to water my grass at the same rate with sewer included. That is totally and completely unacceptable when you’re trying to have beautification of the city and bring in industry. This is not the way – to do all of it.”

Zachmeier expressed frustration with delays for the 2 ½ Avenue project.

Jim Olson, city engineer who also works for AE2S said were caused by material shortages and other factors beyond the city’s control.

Council Member Frank LaRocque also questioned a graph Kleven presented to compare Rugby’s water user rates to those of other cities such as Langdon, Stanley and Thompson.

“How many of these have their own water plants?” LaRocque asked.

Kleven acknowledged many of the cities on the list that pay more for water buy their water from other utility districts and do not treat their own water.

“Carrington is the closest city we compare ourselves to,” Lotvedt said.

Carrington has a water treatment plant.

Lotvedt pointed out the city lost water revenue when people stopped watering their lawns to save money on water bills during the past year, however, Kleven said the fixed increase would still bring revenue in for the city.

North Dakota State Representative Jon Nelson, who also sits on the ASWUD board, attended the meeting. Nelson said the district had seen an increase in usage from 2020 to 2021.

Nelson also asked why Rugby had not asked for a share of federal American Rescue Plan funds he said were being distributed by legislators in Bismarck for North Dakota cities.

“We need to be at the table at some of these funding agencies to see if we can assist the residents of Rugby and the rural area outside of Rugby to keep their rate structure as low as we possibly can but still build reserves and meet the obligations that lenders have,” Nelson said.

“I think we need to spend more time doing things like that rather than just accepting the fact we’re going to pay 100 percent of the cost. I guarantee Bismarck is looking at it totally different. They had a request for $50 million for wastewater replacement lines. I can give you six or seven or eight other cities that have similar requests,” Nelson added.

Olson said he was monitoring a state water commission meeting on headphones at the meeting. “We are on the list for receiving $881,000 in about 10 minutes,” he said. “So, we are doing long-term planning.”

Other concerns mentioned at the meeting included an unexpected increase of the city’s share of a highway infrastructure replacement project by the North Dakota DOT.

“Even though we had a previous rate study, public works and finance did not raise the recommendations on the previous rate study last year,” Rugby Mayor Sue Steinke pointed out. “This is a guideline. This is not set in stone.”

Steinke recommended the city’s public works and finance committees study the proposal.