Consultant says Siloam Springs utilities face funding gaps; recommends multi-year rate increases

David Nommen, project manager for 1898 & Co. (part of Burns & McDonnell), told the Siloam Springs Commission on Oct. 2 that all four municipal utilities — electric, water, sewer and solid waste — show funding shortfalls driven by inflation, regulatory capital needs and stagnant rates.

The consultant said national Bureau of Labor Statistics indices show household water, sewer and trash costs have risen roughly 4–4.5% annually and energy about 3%, both outpacing general CPI. He told the commission Siloam Springs’ residential rates are generally at or slightly below the regional average for water and sewer, slightly above average for a 96‑gallon solid‑waste service, and near the average for electricity on a cents‑per‑kilowatt‑hour basis.

Nommen said the study’s financial‑planning phase projects that, under baseline assumptions (about 3% annual growth, 3–6% O&M inflation), the city will need systemwide revenue increases of about 4% per year for electric and water and similar increases phased for sewer. The sewer utility faces a larger near‑term burden because of a multiyear headworks project; the consultant estimated the wastewater capital program at about $44.5 million for 2025–2030, including roughly $7 million for the headworks facility.

The consultant presented capital investment estimates for 2025–2030 of roughly $29 million for electric, $11 million for water, $44.5 million for wastewater and about $725,000 for solid waste. He said the electric utility still shows an outstanding obligation of about $2.9 million to the general fund that the utility must repay over coming years, and that reserve balances are currently insufficient to meet the city’s 90‑day reserve target under the modeled scenarios.

On solid waste, Nommen presented two scenarios: a front‑loaded plan that raises revenues more in the early years and an alternate more uniform scenario (an illustrative uniform example was about an 8.5% annual increase). He said the team will continue refining the solid‑waste approach and may propose a less front‑loaded path when the presentation goes to the board next week.

Using the modeled revenue paths and a pricing placeholder that treats increases as systemwide percent changes, the consultant projected the combined average monthly residential bill across the four services at about $22 in 2025 and said modeled scenarios produce multi‑year growth (he cited an illustrative projection out to 2030 under the scenarios used in the slides). Nommen warned the actual customer‑level impacts will depend on the cost‑of‑service and rate‑design phase, which could allocate increases differently between fixed charges and volumetric fees and between commercial and residential customers.

Commissioners pressed the consultant on whether the city’s rapid population growth would reduce the increase each customer sees. Nommen said growth does provide relief because fixed costs are spread among more customers — “every percent increase in growth will give you a percent relief off your increase in your bills,” he said — but he warned that new capacity needs tied to growth can eventually increase capital requirements.

Commissioners also discussed the role of sales tax as a potential partial offset for wastewater capital and the city’s prior practice of a CPI‑based automatic adjustment before 2021. City staff (identified in discussion as Christina) and the consultant said the pause of CPI escalators after 2021 contributed to several years of static rates while costs rose.

An onsite participant identified as Adam Young, the consultant team’s electric expert, reiterated the electric fund is not generating surplus and that the $2.9 million general‑fund balance remains a near‑term financial pressure. Commissioners also referenced the city’s historic switch of power suppliers and described substantial procurement savings from the current supplier (GRDA) compared with earlier service from SWEPCO.

Nommen said the team will return to present revised financial plans and move into cost allocation and rate design in later phases; he is scheduled to present a refined version to the Board of Directors next Tuesday. The commission made and seconded a motion to adjourn after the presentation; no rate changes were adopted at the meeting.