Urbandale’s decision to consider building its own water-treatment plant has set off a lively metrowide debate over forming a regional water utility.

It’s a high-stakes discussion that could mean lower water rates for some area residents and businesses and higher charges for others. A decision is likely to come after the summer deadline suggested by consultants Black & Veatch of Overland Park, Kan., who recently laid out possible scenarios for a Central Iowa Water Works.

A regional utility would give participating suburbs more of a say over operations at what is now Des Moines Water Works, which provides much of the water in the area. As it stands, the Des Moines Water Works board is appointed by the Des Moines mayor.

Not surprisingly, there is talk of shared ownership, efficiencies and better representation. Also not surprisingly, this is very much a political debate.

And before it’s over, it may be a legal one.

Bill Stowe, CEO and general manager of Des Moines Water Works, is in favor of the regional utility. It would be modeled loosely after the successful Metro Waste Authority, which runs the area landfill and recycling programs, and the regional sewer system, officially the Des Moines Metropolitan Wastewater Reclamation Authority. 

“I am a believer that regional economies of scale make sense,” said Stowe. Other metropolitan areas around the country, including Indianapolis and St. Petersburg, Fla., have successfully created regional water supplies, he added.

Stowe opposes a separate plant in Urbandale. 

In fact, he plans to challenge the suburb legally if it decides to withdraw water from the Des Moines River, because in Stowe’s estimation, that could leave Des Moines without enough water. 

Urbandale already has a state permit to take water from the Des Moines River. The Des Moines system gets much of its water from the Raccoon and Des Moines rivers.

When Des Moines Water Works heard of Urbandale’s discussions, the talk of a regional system began quickly. The Central Iowa Regional Drinking Water Commission, a group of Central Iowa water suppliers who meet to promote efficient operations, hired Black & Veatch eight months ago to complete the $100,000 study.

“Urbandale (representatives were) clear in their belief that they should be considering building their own water plant instead of buying from Des Moines,” Stowe said. “That is a problem for Des Moines, because we draw from the same river.”

There also were financial implications. 

“If your second-biggest customer is going to bolt, that’s a problem,” Stowe said. The city of Des Moines is Des Moines Water Works’ biggest customer by volume, followed by Urbandale and Ankeny. 

Urbandale bought 200 acres of sand quarries in Johnston in 2013. The pits would provide enough water for 90 days, and Urbandale could pull more from the river if it had its own plant, said Dale Acheson, general manager of the Urbandale Water Utility.

Acheson said no decision has been made on a potential Urbandale plant. He added that the suburb wanted to weigh its options in part because of what he called “dramatic” rate increases by Des Moines Water Works over the past several years.

“I am not going to comment on those,” Acheson added.

McClure Engineering Co. completed a feasibility study for Urbandale, separate from the Black & Veatch report, on an initial plant with a capacity of 8 million gallons a day, with possible expansion to 20 million gallons a day. Peak demand in Urbandale now is 11 million gallons a day. 

But Acheson said the utility hasn’t discussed the suburban plant in detail because he wants to pursue the debate over a regional plant first. And, in any case, it is a good possibility Urbandale would remain a customer of Des Moines Water Works, he added. At this point, Urbandale gets all its tap water from Des Moines Water Works.

“We’ve had a great relationship with Des Moines Water Works in the past,” Acheson said. “We have no intentions of leaving them totally. But we are looking for expansion to the west, and we want to keep up with demand.”

The advantage to Urbandale would be a seat on the board and a say on the rates that will be charged for water now coming from Des Moines Water Works when the suburb’s contract to buy from Des Moines expires in 30 years, Stowe said. 

That is one big reason Urbandale is considering the regional utility, Acheson said. “We need a stronger voice,” he said. 

In addition, Acheson said the current systems in the area could have trouble meeting demand. The Black & Veatch report found that at peak demand, the combined systems would only have a few million gallons a day to spare – a thin margin.

Stowe guesses there is a 50-50 chance a regional utility will be approved by the 14 water utilities or departments included in the study. The advantage would be a board that gives suburbs power over operations that they don’t have now. The regional entity would likely have a better chance of addressing problems and making purchases at a lower price too, Stowe said.

It could be months, maybe years, before all elements of this debate are decided.

Financially, the debate is complicated, Stowe acknowledged. 

“The reality is it’s a mixed bag,” he said. “For Des Moines, it would free up money to hold down rates. For others, probably not. West Des Moines and Des Moines would get a chunk of cash. Others would have to pay in.”

Even if the utility is approved, it probably won’t include all 14 members of the Central Iowa Regional Drinking Water Commission that produce or store water, Stowe noted.

And there remain technical questions. For example, Stowe said the water works’ bonds can’t legally be paid off early. However, there may be a way to transfer the bonds to the new entity, he added.

What’s next?

Black & Veatch hopes to incorporate changes requested by the water utilities into a final report by the end of February. Water utility representatives said they would then check with their respective city councils before voting independently on whether their systems should participate in the proposed Central Iowa Water Works. Those discussions are expected by summer, but a decision could come months later, some utility representatives said. That is in part due to the complexity of the financial negotiations, and also because of legal questions surrounding how to handle existing bonds.

What the study found

The Black & Veatch study, expected to be completed later this month, looks at how creating Central Iowa Water Works would affect the 14 members of the Central Iowa Regional Drinking Water Commission that have water production or storage facilities.

A regional utility would take control of the water treatment plants and set a base water rate to cover expenses. The individual cities would keep their water boards, which would set rates for their residents, and would maintain the pipes and related distribution equipment.

At a meeting on Feb. 9, Black & Veatch laid out a scenario in which those 14 suburban systems would pay $110 million to Des Moines Water Works for a stake in the utility, in return for representation on a regional board. West Des Moines Water Works would be paid $5.3 million. Other suburbs would have to pay. The idea is to even out the ownership. 

The resulting effect on wholesale water rates — those paid by the water departments – would be an 18 to 27 percent increase in some cases. What the cities choose to charge customers could be more or less, noted Bill Stowe, CEO and general manager of Des Moines Water Works. Some may choose to offset property taxes by charging more for water, while others might discount water rates.

The draft Black & Veatch report revealed a lot you may not know about the operations that deliver tap water to more than 500,000 people in Central Iowa. Here’s a look:
• Many of the utilities owe Des Moines Water Works money for deals that helped ensure that they would have enough water, and at a discounted rate. The total: $34 million. The report calls for that to be paid back.
• As it stands, Des Moines Water Works holds 69 percent of the net value of what would be in the regional system, but only 45 percent of the total capacity. 
• A new board would run the new utility, with one member per community and perhaps a weighted vote when requested. That is similar to other regional boards in Polk County. 
• The Central Iowa utility would have a capacity of 134 million gallons 
a day in a perfect case, perhaps 118 million gallons if a plant or two were off-line for repairs. 
• Black and Veatch suggested charging new members of the regional utility $1.5 million for each million gallons a day of capacity. Johnston, for example, would make a payment in the range of approximately $10 million.
• Des Moines Water Works is worth $365 million on a replacement basis, counting depreciation. West Des Moines’ system is worth $34 million, and 
the others (Ankeny, Altoona and Urbandale), a combined $14 million.

What is the Central Iowa Regional Drinking Water Commission?

The Central Iowa Regional Drinking Water Commission is a group of public water suppliers working together to coordinate planning and to promote efficient operations that deliver safe, affordable water. 

Member organizations include the water works boards in Des Moines, Indianola, Urbandale and West Des Moines; the cities of Altoona, Ankeny, Bondurant, Carlisle, Clive, Cumming, Johnston, Mitchellville, New Virginia, Norwalk, Pleasant Hill, Polk City, St. Charles, Waukee and Windsor Heights; Warren Water District; Xenia Rural Water District; and the Polk County Board of Supervisors. 

The 14 commission members included in the analysis of a possible regional water utility, because they own water production or storage facilities, are: Des Moines Water Works, Polk County, Berwick Water Association, Urbandale Water Utility, West Des Moines Water Works, Ankeny, Clive, Waukee, Warren Water District, Xenia Rural Water District, Norwalk, Bondurant, Altoona and Polk City.