Where: Keno, Oregon

Issue: The water system was undercharging customers and was unable to pay for its operational and maintenance expenses, forcing it to rely on its reserves

Outcome: RCAC staff analyzed Keno’s water rates and assisted board members in passing a rate increase

Keno is a rural, incorporated area in southern Oregon. Its water utility serves 102 active connections. A volunteer board manages the district and contracts with an operator and a bookkeeping service. The population is, on average, lower income and is a mix of residents that have lived there for decades or generations and people who have moved there for retirement, often from California.

In 2010, Keno received a U.S. Department of Agriculture Rural Development (USDA RD) loan to replace and repair its well, pumps and treatment system. The loan requirements included conducting an annual audit, but in 2015, Keno Water Company requested that this requirement be waived because the audit would cost approximately $8,000, or 5.9 percent of the community’s annual expenses. Moreover, Keno’s reserve balances were slowly depleting and would only sustain the community for a few more years.

This lack of financial sustainability resulted in poor financial ratios and USDA RD could not approve their request to waive the annual audit requirement. USDA noted that Keno’s water rates were insufficient to cover the system’s annual expenses.

USDA RD referred the community to Rural Community Assistance Corporation, which analyzed Keno’s 2016 water rates and consequently advised that the board approve a $10 per month increase in drinking water rates. These went into effect in 2017. After the rate increase and a review of Keno’s finances, USDA RD agreed to remove the audit requirement.

RCAC has also worked with Keno on a long-term financial sustainability plan. Board members have discussed what they need to do to keep their rates at pace with inflation and how best to plan for small and large infra- structure maintenance and improvements. RCAC also assisted Keno with a process to get residents to support regular rate adjustments, to establish financial reserves and to be proactive in their asset management. This plan will be discussed in more detail during 2018.