Consultant warns Siloam Springs utilities are "financially fragile," recommends multi-year rate increases

A city-hired consultant told the Siloam Springs Board of Directors on Tuesday that the city's utility finances are "quite frankly pretty weak" and outlined multi-year rate adjustments to cover operating and capital shortfalls.

"Your current utility financial status is quite frankly pretty weak. You haven't had rate increases since 2021," consultant Dave Nman of 1898 & Company (part of Burns & McDonald) told the board as he presented preliminary results of a comprehensive rate study. Nman said household utility costs nationally have outpaced general inflation and that Siloam Springs' cash reserves and liquidity have been eroded by past equipment purchases and transfers from the general fund.

The presentation outlined capital needs over the next five years estimated at roughly $29 million for electric, $11 million for water, $44 million for wastewater and about $420,000 for solid waste. The consultant said a planned wastewater headworks project would be financed by an internal general-fund loan repaid over 15 years at 0% interest in the model he presented.

To restore stability, Nman recommended a suite of revenue actions that include an example scenario of 4% annual adjustments for electric, water and sewer and a larger, up-front increase for the solid waste utility (the consultant cited a possible 20% increase in 2026 with smaller increases thereafter). He said those changes would narrow projected deficits and move reserves toward policy targets within five years.

Community Services Director Jason Davis told the board staff is considering adjustments to transfer-station pricing to distinguish in-town and out-of-town users and said the city is working to craft a rate structure that is "palatable for the citizen" while discouraging county residents from hauling trash into Siloam Springs.

Board members asked about distributional effects and the timing of public outreach. Nman acknowledged the analysis shown to the board used a uniform-percent approach for preliminary benchmarking and said the next step is a cost-of-service analysis that will apportion costs by customer class and produce proposed rate designs.

The consultants said a typical household could see a preliminary impact on combined utility bills of about $12 per month in 2026 under the sample scenario (roughly a 5.7% change from the baseline example presented), with solid waste representing the largest single component of that first-year change.

Staff said the rate-design phase and proposed rates will be returned to the utility commission and the board for further public hearings and formal adoption; the consultant said they plan to return to the utility commission at the end of the month and the board in early November.

The board did not take any vote on rates at the meeting; the presentation concluded with a request for feedback and direction to proceed to rate design and cost-of-service work.