Gilbert residents and businesses are expected to see a hike in town utility rates that likely will go into effect April 1.

Town Council approved on Dec. 14 for staff to publish a notice of intent to raise the rates. Council’s final consideration is scheduled for Feb. 22. The proposed increase for residents would be a little more than 15% or higher, depending on household usage. Commercial increases are harder to typify because of the wide variance of services and uses, town officials said.

The rate hike would be the first since November 2018 and the second since 2009. Even with the increase, Gilbert’s utility rates would be the second lowest among peer cities in the Valley, according to data.

“The comparison with the costs across the Valley, Gilbert is still a really great deal,” Gilbert Budget Director Kelly Pfost said. “We try to be fast, effective and efficient, but we still have to make appropriate water quality and [meet] the cost of materials and supplies that it takes to provide that.”

The increases are in two parts of the bill: water and environmental services, which includes trash pickup and recycling. The pressures forcing the increases differ, officials said.

For water, it is primarily the need to rebuild—at a cost of $460 million—the 25-year-old North Water Treatment Plant, which cannot produce enough clean water for a growing town at a time when raw water quality is deteriorating, officials said. In environmental services, the increases are related to the volatile recycling market, increased volume, and fees and costs over time.

Town staff told Town Council it will need to approve the rate hikes in spring to avoid balances in the town’s self-sustained water and environmental funds from failing to meet council policy on reserves, what the town terms minimum fund balance.

Plant necessitates water rate hike

Under the proposal, the base residential water meter fee for a three-quarter-inch water meter—which town officials said about 90% of residential customers use—would go from $16.30 to $21.13 a month. Larger meters would have similar increases of nearly 30%.

Water volume rates would rise in step-scale fashion to encourage conservation, Deputy Public Works Director Eric Braun said. The minimum increase for residents would be $0.22 per 1,000 gallons for customers using 1,000-8,000 gallons, which Braun called a health-and-safety basic water use level.

“Once you start to get into discretionary water use, now you have the option to not use that water,” he said. “So you can avoid that additional cost.”

Officials said residents’ uses can vary widely month to month and depending on their landscaping needs, but a median use would be about 9,000 gallons.

Nonresidential users also would see an increase of $0.54 per 1,000 gallons for domestics uses and $0.72 per 1,000 gallons for landscape uses.

At the heart of the increases is the need to refurbish the North Water Treatment Plant near Guadalupe and Higley roads, partly to meet higher water quality standards from the federal government than were in place when the plant opened in 1995 and partly from lower raw water quality, officials said.

“The change in the water quality conditions has been pretty dramatic and unlike what we’ve experienced historically, and it doesn’t look like that’s going to change for the better anytime at all in the near future,” Assistant Town Manager Leah Rhineheimer said. “And so that’s created a whole new kind of paradigm for how our [operation] needs to function.”

Robert Glennon, a University of Arizona regents professor emeritus with an expertise in water, said mature cities in the Eastern U.S. often have higher water costs than in the dry West as a result of neglecting treatment systems, causing costly problems.

The water quality also can vary as a result of wildfires and storms, officials said, creating problems for the plant.

“It goes from very, very clean ... to crazy milkshake dirty,” Public Works Director Jessica Marlow said of the varying water quality. “The ability of that plant to adapt is just not there.”

A 2018 examination of the plant uncovered its deficiencies, Marlow said, and further study showed that it would be more cost efficient over 40 years to begin parallel construction of a new plant adjacent to the old one than to refurbish the existing one. Parts of the existing plant will be repurposed into the new one.

Project supervisor Jeanne Jensen said the project should begin in March with construction starting in earnest in January 2023. The plant would come online in 2025.

The new 60-million-gallon-a-day replacement plant—15 million gallons a day more than the current plant—would be paid for in two ways. System development fees charged to developers for growth projects would cover the expanded portion of the plant, while the replacement portion would be funded exclusively out of the water fund by water users.

Bonds will be used to put the money up front, Pfost said, but they will not be voter-approved bonds that are serviced and repaid through property taxes. Instead, it will come from a water resource municipal property bond, which is serviced through the water fund over time. A citizen board and Town Council approve those bonds.

“This is a self-contained fund,” Pfost said. “None of the money from the water bill goes to pay for any other types of services in the town.”

Environmental services funds

The last time the town adjusted its rate in 2018, the environmental services charge on bills actually decreased despite the overall utility bill increasing because of how much money was in the funds, Pfost said.

“A lot has changed in the recycling market since then,” she said. “Instead of getting revenue from recycling, we now have to pay for some of it. It has improved in the last couple of months, so we’re hopeful long-term that there might be some benefit, but we’ll have to wait and see.”

As a result, environmental services residential and business rates also will be increased. For residents, the monthly fee a resident with the typical 90-gallon containers would go from $14.80 to $19.03. That covers trash and recycling pickup, household hazardous waste facility use and bulk-trash pickup 10 times a year. Other container fees and a number of one-time fees for additional services would be increased to cover costs.

Commercial customers also would see increases in a number of different services offered to them through the town, although those customers also can use private services.

“We just looked at the cost of service for all of those things,” Marlow said. “We’ve definitely seen increases ... in terms of fees to actually dispose of the trash at the transfer stations and landfills. But we do still feel that we will be very competitive in that market, and we’ll monitor that.”

Into the future

At the time of the 2018 increases, town officials said they hoped not to have to go back to residents and business owners for another increase in rates. But officials said a deeper look at the plant’s operating condition and the dramatic changes in the recycling market, as well as economic conditions from the pandemic, all affected the acceleration of the timeline.

Still, the hikes were delayed last year because of the pandemic, with council directing some of the town’s Coronavirus Aid, Relief and Economic Security, or CARES, Act money to be used to prop up the town’s enterprise funds, preventing them from going under their minimum fund balance.

Without an increase, the environmental services funds all would fall under their minimum balances in the spring and water would next fiscal year, Pfost said.

Now officials said they are looking at how to best balance the operating funds without hitting too frequent or too dramatic rate changes.

“We’ll look to bring [Town Council] rate recommendations more often—smaller amounts in shorter intervals,” Pfost said. “And then we’ll let council make those decisions if they’re ready to implement them.”

Glennon said, if anything, Gilbert residents are paying too little for water.

“Even on the cost of service rate structure, where you're not paying at all for water, that bill is for almost all Americans less than what they pay for cell phone service or for cable television,” Glennon said. “So we Americans are spoiled. We have some of the cheapest available water on the planet, and that's an unsustainable luxury.”