Proposed Utility Rate Increases Necessary to Maintain Services, Keep Pace With Growth
Based on a forward-looking review of the City utility maintenance and construction needs, the City of Sioux Falls is proposing single-digit rate increases to four of its five utilities: water purification, water reclamation (sewer), storm drainage, and sanitary landfill. The fifth utility, City Light and Power, does not have a proposed rate increase. Along with rates, the City is also proposing changes to the utilities’ associated licenses and fees.
The rates proposal is for a four-year period, from 2024 to 2027. For the average Sioux Falls homeowner, the total dollar amount increase per month ranges from $3.70 to $4.22 over the next four years. Two of the five utilities had no rate increases during the prior four years as the City continues to strive to minimize rate increases, while also responsibly planning for the long-term maintenance of the utility systems. With the proposed rate increases, the City still maintains some of the most competitive and lowest utility rates in the region.
“The City of Sioux Falls prides itself in providing safe and reliable utility services at the lowest possible cost for customers,” said Mark Cotter, Director of Public Works. “Based on a thorough analysis and modeling of anticipated costs in the years ahead, the proposed rate adjustments are the minimum revenue requirements to keep our utilities fully functional and to provide the same level of service our community deserves and expects.”
The City’s five utilities are enterprise funds, meaning they are paid for by customers. Revenues from utility rates cover the cost of service to customers, which includes operational, maintenance, and equipment costs, and funding for key infrastructure projects that account for future service needs, whether that is rehabilitating existing infrastructure or supporting the city’s growth. Utilities are managed by the City’s Public Works department.
Utility rates are regularly reviewed to ensure revenues and costs continue to match. The last rate review took place in 2019 for the 2020 to 2023 timeframe. During that period, rates for water reclamation (sewer), storm drainage, and City Light and Power were increased by single-digit percentages. Water purification and sanitary landfill rates were not increased during that time.
“Regular rate reviews are critical for two reasons,” Cotter said. “First, to protect customers’ expected level of service by ensuring revenues meet service costs; and second, to prevent delayed and sporadic reviews that often result in moderate-to-high rate increases for customers.”
- The Water Purification division collects, treats, and delivers drinking water to all Sioux Falls residents.
- Proposed rate increases: 6 percent in 2024; 5 percent in 2025; 4 percent in 2026; and 4 percent in 2027.
- Monthly cost increases for the average residential customer, based on 5,200 gallons per month: $1.73 in 2024; $1.58 in 2025; $1.34 in 2026; and $1.34 in 2027.
- This is charged via monthly bill to customers. Customers can have some control over their water bill by limiting water usage. View tips on how to conserve water at www.siouxfalls.org.
- Primary reasons for rate increase: water purification plant improvements, water main transmission system improvements, and source water expansion via Lewis and Clark Regional Water .
Water Reclamation (Sewer)
- Water Reclamation collects and treats wastewater from Sioux Falls and regional customers and returns it to the Big Sioux River, meeting federal and state regulations.
- Proposed rate increases: 6 percent in 2024, 6 percent in 2025, 5 percent in 2026 and 5 percent in 2027.
- Monthly cost increases for the average residential customer, based on 4,600 gallons per month: $2.29 in 2024; $2.37 in 2025; $2.14 in 2026; and $2.22 in 2027.
- This is charged via monthly bill to customers and tied to water usage, which gives customers some control over their monthly bill.
- Primary reasons for rate increase: improve system capacity, expand for growth and development, and replace and rehabilitate existing infrastructure.
- Storm Drainage consists of infrastructure, like storm drains, pipes, and drainageways, to protect people and property from damaging floods or excess water.
- Proposed rate increases: 4 percent in 2024, 4 percent in 2025, 4 percent in 2026 and 3 percent in 2027.
- For the average property owner, based on a 7,500-square-foot residential property, the monthly cost increases are: $0.20 in 2024; $0.21 in 2025; $0.22 in 2026; and $0.18 in 2027.
- Storm Drainage rates are charged annually via special assessment on county property taxes. These rates apply to property owners only.
- Primary reasons for rate increase: improvements to drainage in existing areas, regional drainage improvements like the Southwest Sioux Falls Project, and regional ponds along Veterans Parkway.
- The Sioux Falls Regional Sanitary Landfill serves Sioux Falls and five counties, including Minnehaha, Lincoln, McCook, Turner, and Lake.
- Proposed rate increase per ton of municipal solid waste: $2 in 2024; $1.50 in 2025, $1.50 in 2026; and $1 in 2027.
- Rates for the landfill are charged per ton and per visit.
- Primary reasons for rate increase: maintain and replace equipment, improve Household Hazardous Waste Facility, and design and construct cell #5, a waste-holding basin within the landfill.
City Light and Power
The City is not seeking rate increases for City Light and Power. City Light and Power serves electricity to about 3,000 residential and commercial customers, half of which are public buildings, in the central and northern areas of Sioux Falls. This utility received a rate increase during the last cycle from 2020 to 2023. The utility is well-positioned for increased electric demand, focused on converting overhead power to underground, and will be constructing a new Light, Power, and Traffic building in the coming years to move away from the current and aging municipal power plant.
Utility Licenses and Fees:
In addition to rates, the Public Works department also conducted a review of the utilities' associated licenses and fees. Like rates, the City aims for license and fee revenues to cover the cost of service to customers, which supports the utilities in being fully funded.
One-time and annual licenses are issued by the Public Works department. Professional licenses include those for building movers, recycling facilities, commercial/industrial wastewater discharge, and garbage, liquid waste, and medical waste haulers.
Utility fees apply to new or altered utility connections, requested utility services, and landfill usage. Examples of fees range from water and sewer connections, meter charges and lab fees to charges for one-off items to be taken to the landfill, like mattresses, tires, and animal carcasses. Most fees are not upfront costs to individual residents, with the exceptions of landfill fees—which are based on individual usage—and late fees, which impact anyone who is tardy paying their bill.
The cost increases to licenses and fees are incremental, and the biggest impacts are to customers outside the landfill and other utilities’ service areas. The proposed changes, along with minor language updates, will be reflected in City ordinance.
The City will bring the proposal for utility rates, licenses, and fees to City Council for a first reading on Tuesday, June 6. Following a second reading and approval by the City Council, the proposed rates, licenses, and fee updates would go into effect on January 1, 2024. For additional details, visit www.siouxfalls.org/rates.
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City of Sioux Falls images: 2023 City of Sioux Falls Utilities (image credit: City of Sioux Falls)