By Scott Neal

While a public water utility is a complex business operation, the operating concept is not. The city pumps water out of the ground to a central water treatment plant where it is treated with chemicals to soften it and make it safe for human consumption. The treated water is then pumped to a storage tank or water tower where it waits to be distributed via a system of underground pipes.

Our water utility is financed by the customers of our system through user fees. Property taxes do not support our water utility operations. It’s an important distinction from other cities that cross-subsidize their water utility systems with tax dollars. These cities can get into financial trouble when taxpayers figure out they are paying more taxes than necessary in order to subsidize water customers who are paying lower water rates than they ought to, or vice-versa.

Some may wonder about the rationale the city uses to charge its customers for the water they consume. Why does the unit price for water go up as the amount consumed increases? What’s wrong with selling people as much water as they are willing to buy?

Water is unlike other commodities like gasoline, diamonds and wheat that are produced and sold in a private market. For a good to be produced and sold in a private market, consumers must have the option to buy it or not to buy it. Eden Prairie property owners do not have an option to buy our water. For public health reasons, the city mandates that every occupied building must have water. It’s the law.

Because water is a mandatory good, its price cannot be left to the marketplace, which would set prices at the intersection of supply and demand. Water rates are set by our City Council to finance the annual operations and the current/future capital needs of the water utility. There are no profits to be generated. No dividends to be paid.

The city cannot pump, treat and distribute an unlimited amount of water, regardless of customers’ desires. Three key parameters control how much water the city is able to produce and sell: natural, mechanical and regulatory.

The natural parameter is easy to understand. If there isn’t water in our 15 wells, we can’t pump it out of the ground. During the past three summers, we’ve seen well levels drop so much that we will have to reconstruct at least two of them to reach deeper into the ground for water. Minnesota is blessed with good water supplies – relative to other parts of the country – but water is not an unlimited resource.

The mechanical parameter refers to the capacity of our water treatment plant, wells, water towers and piping system. When operating at 100 percent of capacity, it can produce 22,500,000 gallons in a 24-hour period. To reach 100 percent production, we must operate every mechanical function at its full capacity, which stresses our production equipment (and staff) and creates a greater potential for mechanical failures, jeopardizing personal and emergency water use.

The final parameter is regulatory. The city is granted an allocation by the Minnesota Department of Natural Resources. The permit restricts the amount of water we are allowed to “draw” out of the earth on an annual basis. The city’s current permit is 3.45 billion gallons per year. In 2007 we actually pumped 3.56 billion gallons – in violation of our permit. We will continue to seek an addition to our allocation, but we must demonstrate to the DNR that we have a legitimate need to take more water from the reservoir we share with many other metro-area cities.

We know that the winter time average daily water consumption for Eden Prairie is about 6,000,000 gallons. During the growing season the daily consumption regularly rises to the mechanical maximum of 22,500,000 gallons per day – entirely attributable to outdoor watering.

To secure approval from the DNR for new wells cities must demonstrate that they are serious about water conservation. One requirement is to adopt and enforce a water conservation program, which charges user fees that discourage excessive water consumption through a progressive rate structure. We also reduce consumption with an odd/even watering system and a total ban from noon to 5 p.m. daily. House File No. 3238, currently proposed at the Legislature, would mandate that all water suppliers serving more than 1,000 customers have a “conservation rate structure” like ours.

It’s challenging to manage a city service which we know does not meet the desires of many of our customers. But first the city must manage its resources in a manner that is consistent with federal and state law, in the best interest of taxpayers and especially to meet priority needs for our water – household, commercial/industrial and fire protection. We must be good stewards of our natural resources and environment.

 Scott Neal is the city manager of Eden Prairie.