Here's why Gilbert says it needs to increase its water rates over next 3 years
Gilbert residents could see water rate increases over the next three years as the town grapples with aging infrastructure and cost escalations for projects.
Staff presented the Town Council with two options: Increase the average monthly water bill by 129% or stagger the rate increase over three years and take on new debt. The council chose the latter option. The town will bond up to $80 million for water infrastructure projects and increase an average residential water bill by 50% beginning in April.
The second option was viewed as a better alternative by the majority of council members to give residents a chance to plan for the water rate increases.
Gilbert isn’t the only municipality grappling with water rate increases. In October, Phoenix hiked rates and will increase them twice more over the next two years.
Aging infrastructure, water scarcity and projected rising costs are behind the rate increases.
Selling utility revenue bonds allows the town to phase in the water rate increases over three years and allows large capital projects to be paid for by that funding source.
On Jan. 24, the town will host an open house meeting for residents to ask staff how the water rates will be implemented. The council is expected to vote on the rate increases in February, with the new rates going into effect April 1.
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An average residential water bill could be:
- $51 in 2024.
- $64 in 2025.
- $80 in 2026.
Rates depend on the water usage by the customer. Residents can use the town’s utility bill calculator to estimate how much their cost could increase.
Why are Gilbert water rates increasing?
All the money Gilbert collects from water rates pays for water services. The town doesn’t pull money from its general fund to subsidize that enterprise.
The town is attempting to address the need to repair and replace its aging water infrastructure instead of kicking it down the road, where it could become more costly.
“A tremendous amount of infrastructure was all installed at the exact same time. And now a lot of that is all aging at the exact same time,” said Leah Rhineheimer, an assistant town manager.
Another challenge for the town is some of the pipes are not indicating the lifespan that was promised, so town officials are trying to proactively replace them before a failure occurs.
According to the town, an emergency repair can cost five times more than work done proactively.
Water shortages also are driving the need to increase rates, staff said. Strategies to increase the town’s long-term water resiliency, such as accelerating a 10-year well project to completion in two years, are driving the need to fund projects now.
The cost to purchase raw water from the Central Arizona Project is increasing while municipalities at the same time are being asked to cut back on their allocations.
Gilbert voluntarily cut 4% of its Colorado River allocation of 1,200 acre-feet of water a year between 2023 and 2025. In return, it was compensated $1.44 million.
Rhineheimer said the quality of the water municipalities are receiving has changed, forcing the town to improve its water treatment plant.
What $80 million in utility revenue bonds will pay for
The council’s action also allows the town to sell up to $80 million in utility revenue bonds. The town will pay back $43 million in interest over 20 years. To pay the debt, it will use solely the revenue generated from the water rates.
Gilbert will use the bond funding to pay for projects that have a more than 20-year life expectancy, said Jessica Marlow, the town’s public works director.
The town’s priority at the moment is completing the expansion and updates of its North Water Treatment Plant Facility, where residents’ drinking water is treated.
Gilbert updated and installed technology at the facility to implement new treatment processes to meet the town's criteria for its potable water supply.
Staff said without the bond funding and rate increases it would not be able to complete the project.
The cost estimate for the project has ballooned by 48%, to $677 million from the initial $457 million.
Marlow attributes the budget increase to construction cost escalations and not to design errors. Competing for contractors while large industrial projects like the construction of the Taiwan Semiconductor Manufacturing Co. facility are underway has been challenging for the town, according to staff.
Once construction on the North Water Treatment Plant Facility is finished, about 70% of the town’s drinking water will be treated there. The facility is expected to have a more than 50-year lifespan.
Rhineheimer acknowledged the rate changes will have an impact on residents. Investments can be difficult to make but are “vital to the long-term future for Gilbert,” she said.