Jackson secures $10.1M for wastewater treatment system upgrades

FOX23 News at 9 p.m.

JACKSON, Mo., (KBSI) — The City of Jackson commissioned a wastewater rate study to update its 2020 analysis and examine potential rate structures to support continued operation and maintenance of the city’s wastewater system.

The study evaluated two rate increase scenarios. Scenario 1 includes a single rate increase in 2023 to fund Phase 1 improvements at the city’s wastewater treatment plant, financed through a $10.1 million State Revolving Fund loan. Scenario 2 examines financing $22.4 million in improvements to the wastewater treatment plant and sanitary collection system across Phases 1, 2 and 3. Under that scenario, the city would secure three State Revolving Fund loans closing in 2023, 2026 and 2029, with phased-funding options reviewed.

The analysis updated wastewater operations and maintenance costs and proprietary fund contributions using the city’s 2021 and 2022 budgets and the 2020 final audit report. Revenue projections assumed annual rate adjustments of 5%, based on the Consumer Price Index and consistent with recent trends, in years without new loan closings. In years when new State Revolving Fund loans are added—2023 under Scenario 1 and 2023, 2026 and 2029 under Scenario 2—various rate increase levels were tested to determine the revenue needed to adequately fund the system. Customer and usage data were updated using the city’s Missouri Public Utility Alliance data sheets from 2019 through 2022.

Under Scenario 1, the study found a 25.2% rate increase in 2023 would fully fund the wastewater system without annual deficits. The proposed rate structure includes a monthly minimum charge of $17.74 and a usage charge of $4.32 per 1,000 gallons. A customer using 5,000 gallons per month would pay an estimated monthly bill of $39.34.

Once the city’s existing long-term debt is retired in 2024 and 2029, the wastewater department would see significant increases in net revenue under the recommended rate schedule. Those surpluses could be offset by forgoing annual Consumer Price Index adjustments in certain years or by modifying allocations to proprietary fund accounts.

The study also evaluated whether the rate structure and revenues from Scenario 1 could support the expenses associated with Phases 2 and 3. That analysis showed the 25.2% rate increase recommended under Scenario 1 would be sufficient to fund all Phase 1, Phase 2 and Phase 3 projects.

Any initial rate increases below 25.2% for the first State Revolving Fund loan would result in deficits in some years, with the duration and amount dependent on the level of increases adopted by the city.

One phased-funding option under Scenario 2 includes three equal rate increases of 7% in 2023, 2026 and 2029, corresponding with loan closings, with Consumer Price Index adjustments in all other years. Under that option, revenue deficits would occur from 2023 through 2026 and again in 2029 and 2030, while revenues would be sufficient in all other projected years.

A second phased-funding option proposes a 10% rate increase in 2023, followed by 7% increases in 2026 and 2029, with Consumer Price Index adjustments in other years. Under that approach, revenue deficits would occur in 2023, 2024 and 2029, with sufficient revenues in the remaining years.

Given uncertainty in the broader economy, including inflation, interest rates, evolving state and federal infrastructure funding rules and upcoming federal elections, the study notes it may be prudent for the city to take a short-term approach to funding the wastewater system. A shorter-term strategy would allow the city to reevaluate conditions at the end of the period and better assess potential supplemental funding through the American Rescue Plan Act or the Infrastructure Investment and Jobs Act.