The city of Waldport is considering a change in the way it bills customers for sewer and water services.

City Manager Nancy Leonard presented the city council with preliminary sewer and water revenue and usage data during its Aug. 13 session. According to her report, water-operating revenues exceeded operating costs by $21,510 or 5 percent in 2009. That is a decrease of 7 percent from 2006 despite a 4 percent rate increase in 2008 and a 2 percent increase in 2009.

“The recent rate increases are yielding revenues that are less than the inflation rate index,” the report said.

Leonard cited decreased water use by customers as the reason operating revenue has not kept pace with inflation. Although net operating revenue for water operations remains in the black, it has decreased from $45,781 in 2006.

Oregon law prohibits cities from making a profit from water and sewer services but they are allowed to put money left after operating costs into a reserve fund. Waldport has about $65,000 in its Distribution System Improvement Charge, which is used for contingencies such as a waterline break. The sewer reserve fund currently has about $111,000, about a third of the cost to replace one of the nine pumping stations should it fail.

Leonard emphasized that she is suggesting a restructuring in water and sewer rates, which does not mean an across the board increase, she said. For water service, the city charges a base rate of $15.96 for most users and an additional amount for each unit of water used (a unit is 748 gallons). Inside the city limits, the rate is $1.87 per unit for the first four units, increasing to $2.68 for 30 or more units.

An increasing block rate such as Waldport uses is designed to encourage conservation and causes revenues to fluctuate. Despite a slight increase in the number of people using city water, revenue has declined. Last year, 9 percent of customers had an average monthly use of zero.

Although usage and revenue have declined, expenses in running the water treatment plant have increased. Chemicals for the operation cost $15,000 in 2007 and $16,000 in 2008.

Leonard said the council could consider adopting a number of different rate structures, including a base rate structure that includes two of units water, with additional usage being charged by the unit.

The city’s revenue from its sewer operation has been declining since 2005. Last year it was in the red by $24,000. The shrinking revenue comes despite a 69 cent per unit (748 gallons) increase in 2006, and an additional increases of 4 and 2 percent over the past two years, respectively.

Like the water rate increase, revenues didn’t match predictions because of decreased usage, even with a growth in the number of connections, Leonard said, adding that sewer operations incur fixed operating costs that do not drop as usage declines.

The city relies on 1,109 customers to support a sewer operation costing $8.5 million annually. Seven percent of customers had an average use of zero units last year, which can be attributed to vacant homes and vacation dwellings, Leonard said.

For the 2008-09 fiscal year, Waldport residents paid a $15.91 per month base rate for sewer service plus an additional $5.61 per unit used.

The city manager did not include a suggestion for any water or sewer fee increases in her report to the council.

“I’m not saying we want a rate increase. We’re looking at a different way of structuring the rate,” Leonard said.

Mayor Herman Welch said he hopes the council will consider a base rate structure because he believes it will benefit low-income people.

Councilor Dann Cutter said the council has to decide what percent over operating expenses the city wants to collect and adjust rates accordingly.

“Rates will increase to meet expenses,” he said. “We’re going to have to look at how to be fair about it.”

The city council will revisit the restructuring of water and sewer rates over the next several months. Leonard said it was possible a new rate structure could be in place as early as January.