Ogden Water Rates Rising
Published On: June 12, 2024 Posted by: Jeremy Peterson
The last several years has seen a lot of public debate and policy action to deal with Utah’s ever scarcer water resources. The summers of 2020-2022 were particularly hot and dry which added to the concern. Many Ogden homeowners lost their green yards to water restrictions and many of us are still getting our lawns to recover from those restrictions. The silver lining to this was water consumption was down and so were the water bills.
Yesterday, Ogden entered the next chapter in ongoing water management efforts. The City Council unanimously approved a resolution to move the city forward with bonding for a new water delivery pipeline from Pineview Reservoir. Why now? There are a couple reasons. First, the city is finally in a financial position to take advantage of the best bond rates the market can offer. Second, and more importantly, our current pipeline (which delivers most of Ogden’s drinking water) is 90 years old and leaks like a sieve. Presently, the pipeline leaks 9 acre-feet or 3 million gallons of water PER DAY! That is a lot of leaks.
This move forward will affect property owners in Ogden City. As part of the provision of bonding, water rates will gradually go up by 25% over the next five years. On top of that, water bills will be inflation adjusted each year based on an index. While timing may be right to bond, this news is poorly timed for owners who are still adjusting to 40% insurance premium increases, increased gas and electric rates, and higher costs for building materials. For landlords, these new water costs will be passed through to tenants where possible.
But, like all expenses associated with real estate, they do impact the overall value of a property especially when looking at it from an income approach. If a landlord cannot raise rents equal to the increase in water rates, then that becomes a new operating expense for the property. That in turn affects the net profits the rental property generates and thus the price that an investor is willing to pay to receive those profits.
The average single family home in Ogden has a water bill around $100. The average value of a home is about $400,000 and the markets’s gross rent multiplier (price divided by monthly rent roll) is about 200. With all things being equal, if the water bill jumps $25 per month more than present, the correlating property values could expect to see a decline of $5,000 based on a gross rent multiplier approach. This isn’t exciting, but it’s also not devastating.
Of course, the alternative is to ignore the problem, eventually let the water main fail, and then everyone’s property values drop to zero as a mass exodus ensues. Instead, Ogden property owners will digest the cost increases as we carry the weight of civilization’s niceties and avoid the chamber pots and bucket trips to the river.
