Water Industry News

Charlestown, IN will increase sewer, water fees

Staff Writer

Charlestown's city council made the tough decision Monday to raise sewer and water utility rates that until now have been among the lowest in the region.

The council passed two ordinances that would raise sewer and water rates for a typical family using 5,000 gallons of water a month 112 and 108 percent, respectively. Councilman Jeff Aaron was the only member who voted against both measures.

The ordinances now will be published and a public hearing will be held at city hall at 7 p.m. Monday, June 27, before the council can act for final adoption.

The actions were taken to eliminate continuing operating deficits at both city-owned utilities and a looming November deadline to pay $3.1 million in short-term debt for the sewer operation left over by a prior administration.

"Rates have been way too low for way too long," said John Skomp, a rate specialist with Indianapolis-based financial consultancy firm Crowe Chizek. "You have been right at the bottom of what is typically charged. The rate increase brings you up to where the state average is."

Under the ordinances adopted Monday monthly fees for 5,000-gallon users would go from $8.80 to $18.30 for water and from $23.25 to $49.30 for sewer service. Combined monthly rates would go from $32.05, the lowest among 11 regional providers, to $67.60.

Smaller households, presumably including retired people and those on fixed incomes, will see their rates for the minimum of 2,000 gallons per month go from $3.52 to $7.32 for water and from $6.95 to $14.73 for sewer service.

Sewer users outside the city limits would pay 1 1/2 times the rates charged to in-town customers. No surcharge would be added to the water rates.

Last night was Skomp's fifth appearance before the council since Mayor Mike Hall took office in January 2004.

Crowe Chizek was called in to advise how the city could deal with $545,000 in sewer system upgrades demanded by state regulators and $3.1 million in short term debt the utility was rolling over each year in an instrument called a bond anticipation note or BAN. The firm also looked into how the water utility could stop losing money and proceed with necessary system upgrades and expansions.

If the ordinances are adopted as presented, they will result in the city issuing bonds of $4 million and $1.7 million, respectively, for the sewer and water utilities.

"These will allow you to get a base rate that meets your operating and maintenance expenses, make some necessary improvements and fund depreciation expense so that you that you can make necessary upgrades and repairs and not have to wait until you are confronted by an emergency situation," Skomp said.

Bond proceeds will be used to upgrade lift stations and make state-mandated inspections and repairs to eliminate sewer system infiltration and inflows that are causing overflows during heavy rain events. The water system will see upgrades to its distribution system, the construction of a new 750,000-gallon elevated storage tank, and preliminary design work done for a water plant upgrade.

The rate hikes are also calculated to eliminate operating deficits that totaled $421,741 for both utilities in 2004, up from $227,616 in 2003.

Last month, Skomp recommended the council also repay money used to prop up utility operations that had been borrowed from a fund from the sale of the hospital in 1999, but the council refused. The city has used $119,463 of the hospital fund money to subsidize the sewer utility and $569,696 for water operations.

In addition to forgiving the operating subsidy loans, the council asked about paying down the BAN when 2003 payable 2004 tax revenues are finally received in June or July, or even refusing to pay the BAN, a move Skomp cautioned could make each council man personally liable.

"You have $3 million that needs to be paid now. I'd like to see you pay the bill and take control of your own destiny," Skomp said. "If you don't the case will be referred to the EPA and you, not just the town, will become personally liable to address it. If we wait until June or July, you're getting down to the wire to pay off the BAN. This BAN cannot be rolled over again."

At the public hearing, the public will be presented with all the detailed information the council received and be able to comment.

Before being approved, the water rate increases will be submitted to the Indiana Utility Regulatory Commission for review. A consumer advocate, the Office of Utility Consumer Counsel, will advocate for rate payers in IURC proceedings.

Skomp said the IURC could conclude its action and review in two to four months, giving the city time to issue the necessary bonds through the Indiana Bond Bank before the end of the year.