Although Creston Water Works is losing it’s biggest customer in a couple of years, an independent audit forecast shows Creston Water Works will still be a profitable entity.
Southern Iowa Rural Water Association, which has purchases water from Creston Water Works, has begun construction of its own water treatment plant east of Creston. Depending upon construction, completion is not expected until 2023. About 85% of SIRWA water is from Twelve Mile Lake. SIRWA has the water rights to Three Mile Lake. SIRWA was also paying about 75% of all expenses at the Creston water treatment plant, which encouraged SIRWA to build its own.
To prepare for SIRWA’s exit, the financial firm of Piper Sandler researched Creston Water Works’ finances without rural water’s revenue over the next few years. Fiscal year 2023, which ends June 30, 2023, Creston Water Works is expected to have a surplus of $997,626. Fiscal year 2024, the surplus is estimated at $1.7 million.
Creston Water Works will have $1 million less in expenses, which were paid by SIRWA. Rural water is planning to pay Creston Water Works $1.55 million in a contract-release agreement. That is scheduled to happen in in fiscal year 2024.
Creston Water Works is planning a 4.5% rate increase July 1 and another 4% in July 2023. Now, the minimum water bill is $19.88 a month for 2,100 gallons.
Another 4% rate increase for Creston Water Works is possible for fiscal year 2025, but the board has not taken action. If it is approved, Creston Water Works’ operating surplus in fiscal year 2025 will be about $232,000.
Water works’ revenue after SIRWA leaves is estimated to be from $3.2 million to $3.4 million years after. That is more than $1 million less than with SIRWA. Expenses will range from $3 million to $3.2 million.
“We will keep reserves because of the unknowns without SIRWA,” said Creston Water Works General Manager Steve Guthrie.
Guthrie said he expects to eliminate two or three positions at the water plant after SIRWA leaves. But those may happen through retirement. Guthrie said he is licensed to do related work as well.
“There are some decisions. We are going to have one year where we don’t do a heck of a lot to see where all the costs shake out,” he said.
Last fall, knowing SIRWA was going to build its plant and eventually break the agreement it has with Creston Water Works, the works created a committee. Board members Dawn Loudon, Kyle Huck and Guthrie will help prepare for the transition without SIRWA with SIRWA representatives.
“We’ve never done anything like this before, between the two,” Guthrie said when the committee was created. “Once agreements are done, this committee will go away.”
Guthrie said there are other rural water organizations in Iowa that have operational agreements with municipal water services.
“Each agreement is based on what each wants and wants to accomplish. How much notification do we need? We may have to ramp up production? When do we have to sell water? What will be the price? We want that price set in stone so all we have to do is flip some valves around,” Guthrie said about all the factors.