Newton increases water rates for IRUA by almost 800%

Iowa Regional Utilities Association was not personally notified of the Newton City Council’s vote to increase its water rates by almost 800 percent, and as a result of officials waiving the second and third readings in a 5-1 vote on March 18 the water utility company will no longer get a chance to weigh in on the action.

Newton News learned of this after reaching out to IRUA for a comment on the rate increases on March 21, three days after council approved the action.

Although IRUA knew rate increases were bound to happen — even as early as June 2023 — officials were made aware of the formal council vote only when the newspaper inquired about it. Sources also told Newton News one week before the council meeting the city did send IRUA a cost-of-service study.

Prior to the council vote, IRUA was charged about $1.09 per 1,000 gallons for zero to 31 million gallons a month, which means the company would be charged more than $33,000. The rate has now been increased to $9.73 per 1,000 gallons for zero to 31 million gallons a month, or $301,630 — an increase of $268,630.

According to the new rate schedule for IRUA, the next 14 million gallons will also be $9.73 per 1,000 gallons, an $8.59 increase from $1.14 per 1,000 gallons listed in the 2019 contract rates. The next 48 million gallons brings it up to $9.79 per 1,000 gallons from $1.17 per 1,000 gallons.

Rates do go down slightly to $3.27 per 1,000 gallons when the monthly minimum is at 93 millions. Anything above 93 million gallons will be changed at $3.34 per 1,000 gallons, which is still an increase from the $1.23 per 1,000 gallons listed in the 2019 rate schedule. All of these rates are effective July 1.

By 2025, the city will increase IRUA’s rates once again. The monthly minimum zero to 31 million gallons will then be $10.21 per $1,000 gallons.

RELATIONSHIP BETWEEN CITY & IRUA

IRUA uses approximately 60 percent of Newton’s water. Before the city council took over management of Newton WaterWorks in late 2022, it was managed by its own board of trustees. For years, the rates for IRUA were very low. City staff have stated in the past that IRUA had been undercharged for years.

Jody Rhone, utilities director for the City of Newton, said during a June 2023 report to council that the current rates for IRUA were not fiscally responsible.

“I don’t feel like right now where we’re at is being fiscally responsible with our water rates to our citizens who are subsidizing people who don’t live in Newton,” Rhone said after reminding council that the city’s mission is to provide excellent services that make sense economically.

Newton City Administrator Matt Muckler told council members at that same meeting last year that the city wants to keep a good working relationship with IRUA, and he stressed he was not placing blame. Initial proposals for the rate increases were between $3.75 per 1,000 gallons and $4.99 per 1,000 gallons.

“We need to take a long-term approach, we need to be a good partner with IRUA. It’s not their fault or our fault. What’s behind us is behind us, and I think we need to work with them as a partner moving forward,” Muckler said, noting IRUA may not have received a lot of feedback of rates changes in the past.

IRUA’S BOARD PRESIDENT HAS SPOKEN OUT IN PAST

In response to the city staff report from June 2023, IRUA Board of Directors President Ron Dunsbergen said in a letter to the editor that he was “shocked and disappointed” at the implication that rural users of Newton WaterWorks have been given some type of free ride, calling it “untrue and not supported” by facts.

Dunsbergen said for more than 40 years Newton residents have enjoyed high quality water and fire protection with one of the lowest water rates in the state. At the same time IRUA, he said, has helped numerous rural residents, businesses and small communities have safe, quality and affordable water service.

IRUA also invested water infrastructure in Newton, such as the southeast and northeast hydropillar water towers, he added. Dunsbergen said IRUA provided millions of dollars in additional water revenue for Newton WaterWorks and that rates were developed upon analysis by WaterWorks’s own consultants.

“So where do we go from here?” Dunsbergen asked in 2023. “From IRUA’s perspective, we will continue to honor our agreement with Newton WaterWorks, partner with Newton WaterWorks on expanded and improved facilities when it makes sense and provide the best service we can to our customers.

“Hopefully, the City of Newton does the same.”

WAIVING SECOND AND THIRD READINGS

After officials passed the first consideration for the IRUA water rate increases, council member Stacy Simbro motioned to suspend the rules and waive the second and third considerations, which would have been put on the April city council agendas. Council member Randy Ervin questioned the motion.

Although he incorrectly stated the city council had only ever waived subsequent readings three other times in the past four years he served on the council, Ervin still shared his concerns. Other council members protested the claim but the councilman stressed it “isn’t something to take lightly.”

Council member Joel Mills asked if it is common for council to waive readings when it comes to a fee or rate schedule. Newton Mayor Evelyn George said it depends on the timing. Council member Melissa Dalton was OK waiving the process, saying the process was started months ago.

“I’m just not a big fan of waiving second or third readings,” Ervin said.

Simbro defended his motion, saying it doesn’t affect Newton citizens as much.

“Good point,” Dalton said.

“Good point,” Ervin added.

The motion to waive the second and third readings passed in a 5-1 vote, with only Mills voting no.

UPDATE FROM THE CITY

On Tuesday, March 26, the City of Newton provided Newton News with a statement about the IRUA rate increases. Here is the statement in full:

“Newton City Council took over the day-to-day operations of Newton Waterworks in March 2022. It officially took ownership after a special election in September 2022. The council has had a Facility Plan done by Fox/Strand Engineering, a Rate Comparison Study by McClure Engineering, and a Cost-of-Service Study by Bolton & Menk Engineering. The Cost-of-Service Study shows what it costs to produce water for the Iowa Regional Utilities Association (IRUA) customers. IRUA and its customers receive a volume discount and pay less than Newton City residents. IRUA has not had a rate increase in over five years, and based on the Cost-of-Service Study, the cost to produce water for IRUA has increased. To no fault of the City or IRUA, the rates must be increased to cover the cost of producing the water for IRUA and their customers. This fee schedule was approved by the City Council on March 18 and is based on IRUA’s current usage. Their new discounted volume rate is increasing by 187% based on what they have purchased in the past. The new rate is also lower than many other Iowa cities charge rural utilities for producing water. This increase will help the City continue to produce water for IRUA and its customers and hopefully allow us to extend the partnership far into the future. The City is open to conversations about future rate setting with IRUA.”