Suburbs facing water rate hikes

June 25 public hearing set for proposed rate hike by Milwaukee

May 20, 2014

West Allis — Although the large requested water rate hike affecting West Allis and other municipalities is due partly to a $12 million payment in lieu of taxes that the Milwaukee Water Works gives to the city of Milwaukee, other utilities also give such payments to their home communities.

The West Allis water utility gives a $770,000 payment in lieu of taxes to the city of West Allis to use as it wants.

State statutes allow water utilities to provide payments in lieu of taxes to compensate communities for the property tax revenue they lose by having the utilities within their borders. The size of the allowable payment is calculated annually.

While the West Allis utility does give a payment in lieu of taxes, it has never given a surplus to the city as the Milwaukee Water Works gave a $3 million surplus to the city of Milwaukee some years ago, said Paul Ziehler, West Allis city administrator.

In the pending rate case, West Allis is looking at a proposed 21.3 percent rate hike, according to documents filed with the Wisconsin Public Service Commission last week.

The West Allis total is actually at the lower end of proposed rate hikes for suburban municipalities that buy water from Milwaukee. Greendale faces a nearly 37 percent water rate hike and Wauwatosa a 27 percent increase.

Unlike those other communities that are wholesale customers of the Milwaukee Water Works, Greenfield is a retail customer and is looking at a proposed 5.6 average residential rate increase. Commercial users in Greenfield would have larger increases.

A public hearing will be held June 25 on the proposed rate increase. West Allis and other wholesale customers have formed a coalition to fight it.

With the payment in lieu of taxes, the proposed increase would give the Milwaukee Water Works a 4.63 percent return on investment. Currently, the PSC allows up to a 6.25 percent return on investment, said David Prochaska of the PSC.

That proposed 4.63 rate of return is a blend of a 4.5 percent rate of return from retail customers and a 5.5 percent from wholesale water customers, according to documents filed with the PSC.

The West Allis rate of return currently is below 3 percent. The utility will apply for a rate increase of its own to get the rate of return closer to 6 percent, said Michael Wyss, comptroller.

"We need to capture enough value to keep our infrastructure in line so there are no breaks," in water mains such as Milwaukee is experiencing, Wyss said.

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