Southern Delivery System: Rate payers shoulder the burden of paying for the project

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From the Colorado Springs Independent (J. Adrian Stanley):

This year, water rates jumped 41 percent. With ratepayers bearing SDS costs, rates should rise another 10 percent in 2010, 12 percent annually from 2011 to 2017, and about 4 percent in both 2018 and 2019. Taking inflation into account, that means the average monthly water bill would go from $34.80 in 2009 to a projected $91 in 2019.

Project director John Fredell notes that Utilities has cut $50 million off a price tag that had ballooned to $930 million for the first phase, which will cover the pipeline and the necessities that go with it, like a water treatment plant, permitting, land, mitigation and pump stations. Phase two, estimated to cost $520 million, will include two reservoirs and system expansion.

Chief planning and finance officer Bill Cherrier says Utilities also spread out costs as much as possible, while still making the progress needed to keep its hard-won permits. That meant water customers didn’t see 26 percent rate hikes two years in a row. And that Utilities maintains its enviable AA bond rating, which keeps interest rates on SDS loans low. If the rating fell two notches, interest could run an extra $15 million to $27 million a year, Cherrier says…

But the financial structuring does lead to uncertainty. The project will start before scores of needed permits are obtained, before land is purchased and before the project is fully engineered — which means costs could rise. As for rate hikes, if the city grows faster, you pay less. And if growth is sluggish, well …

More Southern Delivery System coverage here and here.

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