Central Arkansas Water
In July, Little Rock and North Little Rock, Ark., merged their water departments into Central Arkansas Water. The state’s first consolidation of municipal water systems grew from an impasse over water rates and the need for a future water source for the region.
The two cities had been struggling over water issues for years. Little Rock and North Little Rock had a century-old water supplier-customer relationship. North Little Rock was a master-metered or “wholesale” water customer that bought water from Little Rock and then sold and distributed the water to its own service jurisdiction. Little Rock supplied nearly 30 percent of its 24 billion gallon total water supply to North Little Rock in 2000.
Little Rock had consistent rates for almost 15 years, but in 1999 it faced rising costs that squeezed revenue. The city hired Kansas City, Mo.-based Black & Veatch to assess revenue requirements, the rate schedule, and the cost of providing service to the various classes of customers (domestic, commercial, master-metered, etc.).
The consultant concluded that, through rates, some customers were paying more than their share of costs while others, particularly master-metered customers, were not paying an equivalent share. It recommended that the utility begin the transition to a cost-of-service schedule. (The cost-of-service methodology determines the cost the utility is incurring in providing service to a customer class based on how it uses the water system. That cost allocation is then converted into a rate.)
The Little Rock Water Commission refined the consultant’s original proposal into a phased two-year plan and sent it to the Little Rock Board of Directors. North Little Rock and other master-metered customers rejected the proposed rates as excessive. The Little Rock board voted to implement the first phase of the Little Rock water utility’s rate adjustment in 2000 and gave the two water utilities 12 months to resolve any outstanding issues.
North Little Rock had the choice of either accepting the rates or developing its own water source, which would take years and would be expensive. Little Rock already had implemented $31 million worth of capital improvements to increase its treatment capacity.
To help end the standstill, elected officials and water commissioners from both cities called on the University of Arkansas at Little Rock (UALR) to consider issues such as costs, relationships, future needs and rates. A report prepared in the summer of 2000 by UALR led to a major change in the cities’ relationship.
In its findings, UALR’s Water Study Task Force concluded that the goals of both cities were the same: to provide and guarantee affordable and dependable water service for the future. The task force said a merger of the utilities would eliminate the dividing issues.
After the study, water utility representatives and officials from both cities formed a planning group. They drafted a consolidation agreement and submitted it to Little Rock’s Board of Directors, North Little Rock’s city council, and both cities’ water commissions. Each approved the consolidation.
Agencies/companies involved: Black & Veatch, Kansas City, Mo.; Water commission; University of Arkansas at Little Rock; Little Rock Regional Chamber of Commerce; ALLTEL, Little Rock; (from the state) Department of Health and Secretary of State. City Attorney’s Offices; Little Rock City Manager’s Office; North Little Rock Mayor’s Office; Wright Lindsey & Jennings Attorneys. Little Rock; and John B. Thurman Attorneys, North Little Rock.
