Sewer rate would see largest increase
By Bert Lehman
In order to fund all the proposed utility projects in the city over the next five years, rate increases would be needed.
That is what representatives of Ehlers, the city’s financial advisor, presented to the Clintonville City Council on July 27.
Prior to the presentation interim City Administrator Chuck Kell advised the council to listen carefully to the presentation and ask questions. He asked that the council consider the impact on tax rates and utility rates.
Kell told the council it wasn’t being asked to approve anything yet. Those decisions will be made in the future.
Sewer
Jon Cameron, municipal advisor for Ehlers, said the sewer amounts to the largest portion of the cost for the utilities in the proposed Capital Improvement Plan over the next five years.
“The bulk of that is with the wastewater treatment facility project,” Cameron said.
He said the current plan is for the wastewater treatment facility upgrade project to take place in 2016. He said it was also his understanding that the city is planning to secure financing in 2017 for the project through the USDA Rural Development Loan Program, which is a 40 year loan program.
This will require interim financing of $9.9 million “to bridge the gap” from the time construction is started to the time permanent financing is secured with USDA, he said.
“What we’re projecting is a rate increase, an increase in total [sewer utility] revenues of 25 percent that would have to take place going into the first of 2016, to essentially get ready for debt service payment that would start in 2017,” Cameron said.
The 25 percent increase would give the sewer utility an additional $182,000 in cash, Cameron said.
He said another 20 percent increase would be needed in 2017.
Starting in 2018, the increase would be an inflationary increase of 2.5 percent each year.
These increases would allow the sewer utility to pay on the debt and maintain a positive cash flow.
Cameron said the goal should be to shorten the lifespan of the 40 year USDA loan.
“Forty years is a long time, you could potentially be in a position where you need another treatment facility upgrade much sooner than that 40 year time horizon. Ideally you don’t want that debt hanging out there,” Cameron said.
Water
Cameron recommended that the water utility use $79,583 this year to pay toward the unfunded pension liability.
In 2016 he recommended issuing a $1.28 million water revenue bond. This would fund a portion of the 2016-18 capital improvement projects. In 2019-20, an additional $335,000 of capital improvement projects would be paid by water utility funds on hand.
Water rate increases would be significantly less than the sewer increases, Cameron said. He suggested a rate increase of six percent in 2017 and another six percent rate increase in 2020. These rate increases would need to be approved by the Public Service Commission, which regulates the water utility.
Kell said the majority of the water utility debt would be for a new well that is proposed to be constructed in 2016, which is about a $1 million project.
Electric
Cameron said Ehlers did not include a detailed review of the city’s electric utility or a projection of rates or cash flows. The review was limited to development of revenue bond sizings and testing of coverage based on currently available revenues for debt service per the draft 2014 audit.
The Capital Improvement Plan included the need for a $1.2 million electric system revenue bond in 2016 to fund projects in 2016, 2017 and 2018. A $1.16 million electric system bond would then be issued in 2019 to fund projects in 2019 and 2020, Cameron said.
“We’re showing that you would need to look at rate increases, at least starting in 2017,” Cameron said.
Rate analysis
Todd Taves, senior municipal advisor/principal for Ehlers presented the council with an example of how the general obligation debt service schedule and rate increases would impact the public. In his example, he cited a residential property with an equalized value of $100,000 and using 4,000 gallons of water per month.
Using this example the annual water utility bill would increase from $477 per year to $505 in 2017. It would stay at $505 per year until 2020 when it would increase to $535.
The sewer utility charge increases the most. Using this example, the sewer utility charge would increase from its current rate of $289 per year, to $361 in 2016 when the 25 percent increase is proposed. It would increase to $433 in 2017 when the 20 percent increase is proposed. It increases roughly $11 each year after that through 2020.
The total increase in the property tax bill for debt service, and water and sewer utility increases would equate to an increase of $71 in 2016, another $101 in 2017, $7 in 2018, $16 in 2019 and $43 in 2020.
Taves said these proposed increases do not include tax increases due to the general operating budget of the city.