The Next Rate Study Has Already Begun

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The HCSD Board has approved a joint rate study with the City of Eureka.

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This study could guide water and sewer rates for years. The questions asked at the beginning will be very important.

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When the Board approved the study, I asked that several issues be included in the meeting minutes and sent to the consultant.

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My goal is simple: The study should examine more than how much additional money HCSD could collect.

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It should also explain:

• What HCSD truly needs

• Which projects must be completed first

• Which projects can wait

• How much money HCSD already has

• The fairest and most affordable way to pay for the work

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A joint study may help HCSD and Eureka better understand their shared wastewater costs. However, HCSD must remain independent when deciding its rates, reserves, financing and other policies.

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Did the 2023 Rate Study Get It Right?

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Before creating another rate plan, the consultant should compare the 2023 study with what actually happened.

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The new study should show:

• Revenue predicted by the 2023 study

• Revenue HCSD actually received

• Expenses predicted by the study

• What HCSD actually spent

• Capital projects that were planned

• Projects that were completed

• Projects that were delayed, changed or canceled

• Money collected for projects but not yet spent

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If earlier estimates were too high or too low, the public should be told why.

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We should learn from the last study before approving another one.

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How Much Money Is in Reserve?

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Reserves are important. They protect HCSD during emergencies and help pay for future needs.

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But reserve money comes from customers.

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The new study should clearly show:

• How much money is in each reserve

• What each reserve may be used for

• Whether the money is legally restricted

• How much has already been promised to projects

• The minimum balance HCSD must keep

• How much HCSD plans to add

• When the money is expected to be spent

• How reserve targets affect monthly bills

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As of June 30, 2026, HCSD reported approximately $22.7 million in total cash and investments. That does not mean all of this money is available to spend.

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The public needs a clear breakdown showing what is operating cash, what is reserved, what is restricted and what is already committed.

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Must Every Project Be Paid for With Cash?

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The study should not assume that one payment method is right for every project.

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It should compare:

• Paying cash from current rates

• Using existing reserves

• Low-interest government loans

• Long-term bonds

• Grants

• A combination of these choices

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​​Routine maintenance and smaller purchases may be good choices for pay-as-you-go funding.

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Large projects expected to last 50 to 70 years deserve a careful financing comparison. Future customers who will use those projects may also help pay for them.

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For each choice, the study should show:

• Yearly payments

• Interest costs

• Cash needed from reserves

• Effect on monthly bills

• Total cost over time

• Benefits and risks

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Financing does not make a project free. But paying cash does not make it free either. The question is when the money is collected and which customers bear the cost.

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Have We Pursued Every Available Grant?

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HCSD staff have successfully obtained millions of dollars in grants. General Manager TK Williams and district staff deserve credit for that work.

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The new rate study should identify:

• Grants HCSD has already received

• Grant applications still being reviewed

• Grants that may be available for future projects

• Local matching money that would be required

• Low-interest state or federal loans

• Deadlines and other requirements

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Grant funding is not guaranteed. But the study should not assume that ratepayers must pay the full cost before every reasonable outside funding source has been explored.

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Which Projects Must Be Done First?

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The study should not treat every project as equally urgent.

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Each major project should be placed into a clear group:

• Needed now for health or safety

• Required by law

• Needed to prevent a likely failure

• Expected to lower future costs

• Needed for future growth

• Helpful but able to wait

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The study should explain what could happen if a project is delayed for one, three or five years.

Waiting too long may increase costs or cause more repairs. But doing every project immediately may make rates unaffordable.

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The Board and public need to see both risks.

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What Will Customers Actually Pay?

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Percentage increases can be difficult to understand.

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The study should show the effect in real dollars for several types of customers, including:

• A typical household

• A low-water-use household

• A larger family

• A small business

• A customer using only water or only sewer service

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For each option, the study should show:

• The current monthly bill

• The bill after each proposed increase

• The total increase over five years

• The amount going toward operations

• The amount going into reserves

• The amount paying for capital projects and debt

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Customers deserve to know what each choice would mean for their household budgets.

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Are Connection Fees Fair?

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The new study should also reexamine HCSD’s connection-fee method.

The previous study helped increase water and sewer connection fees from roughly $5,000 to more than $20,000 for one new home before physical installation costs.

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The new study should explain:

• What new customers are being asked to pay for

• Which costs are related to future growth

• Whether new customers are paying for facilities built many years ago

• How HCSD compares with nearby districts

• How the fees affect housing and business development

• Whether other fair methods are available

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New customers should pay their fair share. But connection fees should not unnecessarily discourage needed housing or responsible growth.

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How Will Eureka’s Costs Affect HCSD Customers?

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HCSD sends wastewater to the City of Eureka for treatment. This means Eureka’s operating and construction costs can affect HCSD customers.

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The study should use current, supportable estimates for these costs.

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It should also clearly explain:

• Costs HCSD can control

• Costs charged by Eureka

• How future Eureka increases would reach HCSD customers

• Whether proposed pass-through increases have limits

• What decisions would still require a public Board vote

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The HCSD Board should retain control over HCSD rates and policies.

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The Board Must Review the Assumptions

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A rate study depends on assumptions about inflation, growth, expenses, construction costs, reserves and financing.

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Small changes in those assumptions can produce very different rate recommendations.

The Board should review and discuss the major assumptions before the consultant completes the proposed rate plan.

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The Board should also receive enough time to study:

• The consultant’s financial model

• Alternative rate plans

• Financing choices

• Reserve targets

• Project schedules

• Effects on customers

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The public should also receive a short, plain-language summary before the Board votes.

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The Standard I Will Use

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A rate study should not begin with the question:

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“How much money can HCSD collect?”

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It should begin by asking:

• What does HCSD truly need?

• When is each project needed?

• What money is already available?

• What grants or low-interest loans can be obtained?

• What is the fairest way to share the cost?

• How will each choice affect monthly bills?

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​​HCSD must maintain dependable water and sewer systems. It must also remember that every dollar comes from someone.

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The next rate study should give the Board and the public enough information to choose the safest, fairest and most affordable plan.