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The Verde Independent | Cottonwood, Arizona

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6/8/2013 2:18:00 PM
Cottonwood Council eyes utility rate hikes
Courtesy City of Cottonwood
These tables compare combined rates using 5,000 gallons of water and 5,000 gallons of wastewater at residential rates. Inside limit rates places the City of Cottonwood in the middle of all those surveyed.
Courtesy City of Cottonwood
These tables compare combined rates using 5,000 gallons of water and 5,000 gallons of wastewater at residential rates. Inside limit rates places the City of Cottonwood in the middle of all those surveyed.

Jon Hutchinson
Staff Reporter


COTTONWOOD -- Cottonwood is once again considering rate increases for its utilities.

The Cottonwood Council, during a Tuesday evening work session, will hear a proposal to adjust water and wastewater rates that also includes a differential rate for those living outside of Cottonwood. Of primary concern is water rates after rate holders downgraded Cottonwood's bonds for failing to provide a 1.35 percent ratio in 2011.

The City last adjusted the water rates in October 2010 after six years with no change.

Administrative Services Manager Rudy Rodriguez notes the original rate study at the time when the first water companies were acquired in 2004, anticipated annual increases. Still rates were not adjusted even after the largest private water company, Cottonwood Water Works, was added.

The council delayed raising rates to prevent a hardship to citizens during the recent recessionary economy.

Consequently, Rodriguez says, the city has found itself in violation of its bond covenant that states that Cottonwood would maintain rates at a level which to provide a minimum of 1.35X the annual debt service once all Operations and Maintenance was paid for the year. This violation prompted Moody's to downgrade the water bonds in May 2011.

The wastewater utility has not seen an increase since 2001. It has no continuing debt, but after 20 years needs regular maintenance and the enterprise fund has consumed about $2 million in reserves since the sunset of a portion of sales tax used to build the system.

A rate committee consisting of council members, local residents, utility personnel, management staff, financial adviser, and a county representative created a draft proposal.

The proposal includes both increases for water and wastewater services. After reviewing the additional burden and the factors behind differential rates inside and outside city limits, the committee consensus was to implement a differential rate program.

The draft rate proposal calls for the rates within the city limits to increase by $5 for a basic 5/8-inch connection and by $12 for the same fitting outside the corporate limits. After 2014 the rate is would increase incrementally by 2 percent each year both inside and outside city limits. Other service fees would also be adjusted using a differential schedule.

No action will be taken at the Tuesday work session.


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Reader Comments

Posted: Thursday, July 11, 2013
Article comment by: Bubba Lishis

The Verde Villages do indeed getting taken to the cleaners. Take the Cottonwood city limits for instance, which continues down Highway 260 past Verde Village unit 1 at Prairie Lane road. So any homes or business that are beyond Prairie Lane road, will only feel the increase the city gets. The Verde Villages, being outside the corporate limits, but are in fact islands within the city limits are being preyed upon. The city of Cottonwood decided to purchase the VV water system, knowing full well (no pun intended) that the Verde Villages would be the coffer to fill their piggy bank with in the future. Problem was the economy tanked, and they so charitably didnít raise rates. Now that the economy is showing some signs of life again, Cottonwood water will be first in line to dig into the struggling citizens of the Verde Villages. Donít get me wrong, Iím all for increased water rates, and understand that the City incurs increases from their vendors as well, but to double the rate increases on islands within the city limits, is just plain wrong!

Posted: Wednesday, June 12, 2013
Article comment by: Boss Hog to Roscoe PPPPPPPPPP- ?

Well Roscoe P- you seem determined to lock your self in the jail and let those duke boys get away no matter what...

If as you suggest the city had some magic way to determine the condition of the entire water system prior to purchase- maybe they could have increased your rates right from the get go rather than give you a nice discount for many years?

We know you will figure a way to get the shaft no matter how justified the differential is so why bother trying to reason at all?

Enjoy trying to catch those outlaws... you know they never meant you no harm...right?


Posted: Wednesday, June 12, 2013
Article comment by: Roscoe P

@ the other side of the coin

The point is, the City of Cottonwood did purchase the Verde Village water system and with that purchase they are expected to provide a quality product and the maintenance that goes with owning the water system. Cottonwood knew or should have known about the maintenance requirements within the Verde Village water distribution system, if they did their due diligence. I believe they did know. The purchase price with all the known maintenance requirements, combined with the revenue that is generated by the customers of Verde Village should be fair compensation for the city. Therefore, the Verde Village gets the shaft.


Posted: Wednesday, June 12, 2013
Article comment by: the other side of the coin -

If the city has not purchased the villages water system they could still be leaking 30% of their water into the ground and pumping that much more to make up for it or they could be drinking water with arsenic levels that were too high etc...

Who was it that got the shaft again?


Posted: Wednesday, June 12, 2013
Article comment by: Verde Village gets the shaft

Good point by Roscoe. Might also check your water bill for various fees and improvement charges above and beyond the cost of water.

These extra fees benefit the city government and not you outside the city limit. Are those fees even legal?


Posted: Tuesday, June 11, 2013
Article comment by: Roscoe P

So, ďThe draft rate proposal calls for the rates within the city limits to increase by $5 for a basic 5/8-inch connection and by $12 for the same fitting outside the corporate limits.Ē My bill says Cottonwood Municipal Water, the same as everyone else who is served by them in the valley, so why do I have to pay more because the city made the decision to buy Verde Villageís water distribution system knowing full well the Village terrain, the construction of the infrastructure, etc. Real easy to make this decision when I canít vote them out of office. And thereís no guarantee the rate increase will be used for the benefit of Verde Village water delivery system. You know rate increase will go into the cities coffers while the Verde Village will get shaft!

Posted: Monday, June 10, 2013
Article comment by: Which Story Do we believe?

At a recent meeting the blow hard city water guru said there was enough water to fully develop the entire valley. A month later we have a severe shortage? Also funny how they waited until the voters passed the permanent increase before they turned around and want to stick us for more. One story after another. My concern is this all sounds premeditated!

Posted: Monday, June 10, 2013
Article comment by: Rate Comparison Should Include Systems Run By Private...

operators. This would give a broader insight.



Posted: Monday, June 10, 2013
Article comment by: @ Bartosh

Blah Blah Blah

Just shut down the Rec Center. Will save us about 500k a year and return that water back to the people.

Go resurrect your baton and get back on your beat.


Posted: Monday, June 10, 2013
Article comment by: It seems to me:

The City doth protest too much.

That ratio could be maintained by lowering operating costs.

Spending all that money on a treatment plant and then using the treated water to irrigate a strip along the river does not do anything for conservation of water supplies or the Verde River. (As has been said at many Council meetings and never truly answered.)

A super-treatment facility belongs near wherever the City plans to locate inversion wells, not in a flood plane right next to the river.

Water for the park could come directly from and seep right back into the Verde at a fraction of the current projected irrigation cost.



Posted: Monday, June 10, 2013
Article comment by: Doug Bartosh, City Manager

Just a few points of fact to some of the blog comments. First, the reason that we show a comparison to other cities and water providers is to show some perspective to the cost of services we do not use these comparison to set the rates. Just as indicated in the blog, we use the cost of services to include maintenance, capital replacement, operations, etc., to set rates. We also need to consider one other factor and that is a bond requirement that promised that the city would maintain a 1.35 ratio to revenues vs. operational costs. We have not met that requirement for several years and the bond holders are getting ready to lower the city's bond rating again because we have not maintained that required ratio. The City Council has tried hard to keep rates at the lowest levels, particularly during these tough economic times however, unless we correct the ratio we all get hurt with higher interest rates for city projects.

In terms of the $35 million, I have explained that erroneous information and I am not going to do it again.

Finally, in case you have not read in the media there is a real concern about water sustainability in the Verde Valley. The Riverfront Reclamation Plant represents the most sustainable step to protecting our water supply and the river. This new plant represents the future of water in the Verde Valley and will be a good investment for years to come.


Posted: Monday, June 10, 2013
Article comment by: John Doe

Just charge the high school more for the use of the swimming pool! Great management.

Posted: Monday, June 10, 2013
Article comment by: ahhh the 35million dollar man(?) returns ---

Still spreading your favorite to the point of a fetish number?

Suppose you never actually too the time to contact the City about it after the City Manager addressed you concern directly? If so please let us know the outcome, if not? Stop using that snapshot as your shock value attention getter.

Would you represent your financial entirety with a single snapshot of your account at any given time or the whole of its activity over the course of a year perhaps?

Yet that is exactly what you are attempting to do for whatever reason isn't it? Seems a bit disingenuous doesn't it?

Let us all know once you actually speak to a person rather than parrot a single number from a report that has 106 pages.


Posted: Sunday, June 9, 2013
Article comment by: Rates should serve people not government

Let's be clear about this: Cottonwood is not a profit-making organization.

The city government exists to serve the public, not the other way round.

So utility rates should be based on Cottonwood's reasonable costs of operations, not marked up for profit, and not on comparisons to other cities.

Debt service, ongoing maintenance, and reasonable administrative overhead are all legitimate factors on which to base rates.

Rates charged by other cities are not.

Every city and town has their own and unique infrastructure, population, cost basis, and different set of circumstances.

Let's also keep in mind that Cottonwood already has close to $35 million in total cash reserves according to its 2012 financial report. As of now, that number may be more or less.

So how much more of their citizen's money does Cottonwood realistically need?

These are reasonable questions when we see the City allocate $10 or 15 million (the price keeps going up) to what many consider to be an overly extravagant sewage treatment plant at Riverfront Park.

Or $15,000 to promote itself as the "Sturgis of the Southwest". Or any of of many other questionable expenditures.

So yes, the people should question where our money is going and how wisely it is being spent.




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