Researchers at Michigan State University have concluded that water may become unaffordable for one in three American households in the next five years.
If water costs continue to rise at the same rate they did nationally in the last five years, then water bills could be beyond the means of about 40 million people, the researchers found.
So what does that sobering statistic mean for Denver?
Lower rates, smaller increases
First, the good news: Denver water rates are significantly lower than the national average and are increasing at a slower rate.
In the study, published in January 2017, the Michigan State University researchers used an American Water Works Association survey of water utilities to set a price of $120 for an average monthly consumption of 12,000 gallons of water for a family of four in 2014.
Based on those numbers, about 14 million households — just under 12 percent — couldn’t afford to pay their water bills that year.
In Denver, the picture looks a bit different. Even under 2017 rates, city customers would pay an average of $56 for the same amount of water (though our average customer uses less). Outside the city limits, customers would pay between $60 and $70 a month. (Learn Why Denver water costs more in the ‘burbs.)
And while water bills nationally rose an average of 41 percent between 2010 and 2015, Denver rates have increased 33.8 percent.
“The mission of the board is to keep rates as low as possible,” said Paula Herzmark, president of the Denver Board of Water Commissioners. “At the same time, we recognize the importance of balancing this with maintaining our infrastructure and meeting the growing needs of our community.”
According to a 2010 infrastructure report from American Water Works Association, drinking water infrastructure needs an investment of more than $1 trillion nationwide.
From replacing an average of 60,000 feet of pipe each year to rehabilitating aging dams and storage tanks, Denver Water has always taken an aggressive and strategic approach to upgrading infrastructure.
This proactive work will continue into the future as engineers are planning $2 billion in infrastructure improvements over the next 10 years.
“The pioneers who built Denver Water’s system had a lot of foresight that allows us to provide safe, reliable drinking water for our customers today,” said Bob Mahoney, Denver Water’s chief engineering officer. “Denver Water continues to think long-term while prioritizing necessary projects to keep water affordable today and well into the future.”
Fortunately, Denver has been able to maintain lower rates while dealing with these rising costs. As a result, the Brookings Institution ranked Denver Water 5th nationally in water investment performance.
Here are some of the reasons why:
- Governance: In 1918, Denver residents voted to create a Board of Water Commissioners, separating itself from city government to ensure a clear focus only on the water system. The city of Denver has no access to the water works fund, so all revenue generated is invested right back into Denver Water’s ultimate mission of providing clean, safe drinking water at the most inexpensive rate as good service will allow.
- Credit rating: Denver Water has AAA credit ratings from all three rating agencies, which means lower interest rates to finance capital projects through bond sales. The millions of dollars saved are passed on to customers since this is money we don’t have to recover from rates. Cash reserves also help Denver Water operate and maintain the system when revenues fall during periods of lower water use.
- Rate structure: In 2016, Denver Water moved to a more individualized rate structure. The first of three tiers is now determined by the amount each individual household uses in the winter, which represents indoor use. These rates are Denver Water’s lowest because indoor water use is for essential needs, such as drinking, cooking and hygiene.
“To be the same excellent stewards of this precious resource as our predecessors, we will continue to balance the mission of today with the needs of the future,” said Herzmark.