​What Does Wastewater Treatment Cost?

The 10th survey of sewer user charges in Wisconsin provides data that can support sound decision-making on rates and foster effective public communication

​What Does Wastewater Treatment Cost?

Pat Morrow

In my first newspaper jobs I covered a wide range of municipal organizations, including water and sewer utilities. One water utility had a small poster on a bulletin board next to where users paid their bills, comparing the cost of water to that of milk, beer, soda pop and other products. It listed the cost of water as: “Four gallons for one cent — delivered.”

That’s what I call a great piece of public communication. That utility’s water certainly costs more now (this was 40 years ago), but it’s surely still a terrific bargain next to, say, bottled water from the grocery store.

In any case, it’s wise to help people understand the cost/value ratio of water and wastewater services. To that end, the MSA Professional Services consulting firm produces the Wisconsin Sewer User Charge Survey. The company recently released its 10th such survey, drawing on information solicited from more than 700 WPDES permit holders.

The report gives utility departments a candid, comparative analysis of sewer rates. It’s designed to help communities when applying for funding or making decisions about infrastructure upgrades and resulting rate increases. It can also help them calm the waters when proposing rate increases to the public. Pat Morrow, P.E., wastewater team leader with MSA, talked about the report in an interview with Treatment Plant Operator.

TPO: What is the history of the Sewer User Charge Survey?

Morrow: We have been doing this report every three years or so since 1996, spearheaded by our CEO, Gil Hantzsch. It came out of a history of telling communities they needed to upgrade their treatment facilities to and increase their sewer rates to some number, based on the cost and their eligibility for loans and grants. In that process we were asked many times: Is this fair? Is this normal? What are other communities nearby paying? There was no body of evidence at the time that documented what communities were paying for clean water.

TPO: How is this report compiled?

Morrow: Historically we send a survey questionnaire to all municipalities in the state that have sewer rates. It started out small and kept growing. In 1996 we had just over 100 respondents. The responses peaked in 2010 with over 500. Then it started declining, and we have been maintaining at around the 300 mark. In December 2021 we sent out 778 surveys, and there were 310 respondents, which is almost 40%.

TPO: Who can get copies of the report?

Morrow: When municipalities return the questionnaire, we collect their data, and when the report is finished we offer them a free electronic download. For those that don’t return the survey, we have charged for a digital download or hard copy.

TPO: Does this survey cover industrial and commercial sewer rates?

Morrow: The study focuses on residential rates because the DNR and USDA Rural Development look at the cost of residential sewer rates when evaluating needs for funding. They don’t provide grants or low-interest loans to industrial or commercial users because those entities can increase the cost of their goods or services to make up for the rate increase. Residential users don’t have that kind of leverage.

TPO: Does this report have usefulness outside Wisconsin?

Morrow: We don’t solicit utilities from other states, but the sewer rate data is pretty applicable to neighboring states. We also have long-term aspirations to expand the survey, at least within the geographic region we serve. We have offices in Minnesota, Illinois and Iowa as well as Wisconsin.

TPO: What trends in sewer rates have you observed over the years?

Morrow: One trend that’s apparent is that people in smaller communities tend to pay more for wastewater treatment. It’s an economy of scale issue, but in addition, it’s because many smaller communities have to meet the same new and stricter regulations as bigger cities. The advanced technologies needed to accomplish that don’t scale down perfectly.

TPO: What about rates in very small communities?

Morrow: Communities with populations less than 500 have slightly lower average costs due to the prevalence of lagoon-based systems. They tend to have constructed those lagoons a long time ago, so they’ve already gone through the pain of elevated sewer rates. Often they haven’t had to increase their rates because the lagoons are still viable. But if a new WPDES permit is issued, those communities may receive stricter effluent limits. That can bring the largest rate increases, because the communities haven’t been raising their rates every couple of years; they haven’t needed to.

TPO: Generally speaking, what is happening to rates over time?

Morrow: In general, rates have increased 4-5% on average per year. One metric regulators use for affordability is a comparison between a community’s annual sewer service cost and the median annual household income. Historically, they have used a threshold of 2%, so that if the annual sewer service cost exceeds 2% of median household income, that’s too expensive and will cause economic hardship. In that event the community may be eligible for more funds by way of grants or low-interest loans.

TPO: What has been happening to that affordability metric over time?

Morrow: Sewer rates have been decreasing significantly as a percentage of household income. In recent years, median household incomes have increased faster than the sewer rates. That indicates municipalities perhaps are not increasing sewer rates maybe as much as they should. That contributes to the large rate increases we see when upgrades become necessary.

TPO: Would you say that communities are charging rates that reflect the value of the service and the needs of the infrastructure?

Morrow: I would say the answer is no. Clean water and safe drinking water historically have been undervalued, and municipalities have become really good at making do with what they have. Elected officials take a lot of pride in keeping rates affordable. Keeping the current rate structure is a big goal of many city councils and utility boards. But that does them a disservice when the upgrade is needed and they have to ask their residents for a 20%, or 30%, or 50%, or even 100% rate increase.

TPO: How do you convince utility officials to keep rates adjusted appropriately?

Morrow: I like to tell my clients about that the cable company doesn’t worry about increasing people’s bills. The gas company just makes an inflationary increase year to year. Providers of other basic services have no qualms about raising rates. Why should wastewater utilities be any different?

TPO: How would a utility use the information in this survey?

Morrow: It enables them to look at trends and see how they compare to their peers, while at the same time looking ahead to see where they are in terms of need for future upgrades. If they know things are wearing out and they need an upgrade in the next handful of years, they can use the data to help gauge where their rates ultimately need to be. Then they can decide to increase rates gradually and avoid a huge increase for the upgrade. That’s a lot less painful for customers, and the utility then has money in the bank to offset some of the principal on the loan they will need.

TPO: Does the rate survey information help utility leaders explain rate increases to users? 

Morrow: Absolutely. When we go to a community and say they need an upgrade and will have to increase sewer rates, one of the first questions is what the rates are in the community down the road that is about the same size, or in a community that just did a similar upgrade. With the survey data, we have that information.

TPO: What typically happens to the ranking of a community’s rates after an upgrade?

Morrow: The report shows that on average the closer they are to having done an upgrade, the higher their sewer rates are. Those that have done a treatment plant upgrade in the last five years tend to have the highest rates. They might start out in the lower 20% of all sewer rates, but after the upgrade they are likely to be in the 80th or 90th percentile. Then as they pay down their 20-year loan and other communities start having to upgrade, they slide toward the bottom again.

TPO: Have you seen communities use data from this report in a public meeting to help justify a rate increase?

Morrow: That is a very common practice. If you look on the web pages of utilities that are planning upgrades, you might find information from this very report. It’s good information to have at a public hearing. The data helps people realize that they’re not alone, that they’re not the only ones facing an increase.

TPO: How do sewer rates compare with those of other basic residential services?

Morrow: I often show a figure that compares what people spend on water and sewer to what they spend on things like mobile phones, satellite TV, natural gas, electricity and other critical and optional services. Ever since we’ve been doing this report, water and sewer is on the far end of the spectrum as the least expensive. Wastewater treatment is a highly sustainable practice, and it is undervalued and underappreciated in many cases.

TPO: Who has been instrumental in creating this report?

Morrow: For their assistance in providing data for this study, we are grateful to Steve Kemna, P.E., and Andrew Fisher of the Wisconsin Public Service Commission; Jeanne Cargill of the DNR; David Pawlisch of the Community Development Block Grant Program, and Julie Giese of USDA Rural Development. MSA team members Shelley Granberg, Susan Marcott, and Troy Weber played key roles in compiling the data and putting the report into an easy-to-read format. Finally, Tom Fitzwilliams, while no longer with the company, was instrumental in creating this and several previous editions of the report.


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