Albuquerque’s municipal water utility will likely need rate increases in 2016 and 2018 to pay to replace aging water pipes, pumps and treatment plants, the utility’s chief executive told its board Wednesday evening.
In a series of presentations punctuated with pictures of raw sewage leaking onto South Broadway and a water main break outside City Hall, the board’s staff laid out the case for decaying municipal water infrastructure that has been shortchanged by tight budgets in recent decades.
The current annual operating budget of $180 million per year falls some $35 million per year short of the spending needed just to keep up with problems that range from aging water pipes to a sewage treatment plant at risk of contaminating the Rio Grande, according to staff members of the Albuquerque Bernalillo County Water Utility Authority.
The board, which consists of members of the Albuquerque City Council and Bernalillo County Commission, last year approved two rate hikes, one that took effect last summer and another that will take effect in 2013, each time generating roughly 10 percent in additional revenue.
But that will not be enough, said Water Utility Authority chief executive Mark Sanchez.
“There’s a $35 million gap between what we should be spending and what we actually are spending,” said David Price, head of the utility’s water resources management program.
“We see the need for rate adjustments in 2016 and 2018,” Sanchez told the board.
Without action, Sanchez said, water main and sewer breaks, already a problem for the metro area’s aging system, would become more common.
“We would see more emergencies,” Sanchez said.
Sanchez said the typical residential customer’s bill of $45 per month today would likely rise to $51 per month in 2016 and have to be raised another $3 per month in 2018.
The Standard and Poor’s bond rating agency last month downgraded the utility’s bond rating from AAA to AA+, echoing issues raised last summer by Fitch Ratings. Investors use the findings to help guide their decisions about whether to buy the utility’s bonds.
The rating downgrade comes as the water utility has just finished running up about $500 million in debt to build a new water treatment and distribution system. With that work completed, the agency recently acknowledged it now needs to spend about $250 million to upgrade Albuquerque’s sewage treatment plant, which recently has been tagged with federal Clean Water Act violations when equipment failures resulted in contaminated water being dumped into the Rio Grande.
The utility’s debt at the end of the last fiscal year was $687 million, up from $259 million in 2004. That averages out to $1,239 per person in its service area, according to the agency’s most recently financial statement.
The utility board took no formal action in response to Sanchez’s proposal. Any decisions on future rate increases would require additional action at a later date.
But board chair Ken Sanchez, an Albuquerque city councilor, said in an interview after the meeting that he agrees that the rate increases will be needed.
“The infrastructure is aging,” Ken Sanchez said. “I think that we almost have no choice.”
— This article appeared on page A1 of the Albuquerque Journal