MONTICELLO — City residents may see a rate hike in their utility bill over the next two years.
Two proposed ordinances would see residential water bills increase 25 percent while wastewater service would jump 33.1 percent, according to City Wastewater Superintendent Adam Downey.
But, instead of one large increase, the water rate would be raised 12.5 percent in 2020 and 12.5 percent in 2021, while wastewater increases would be halved at 15 percent for each those two years.
“The last time the water utility had a rate increase was 9½ percent in 2011. For wastewater, the last increase in 2014 was 56 percent,” he said. “It’s been a while since we’ve had a rate increase.”
They’re proposals the city’s ordinance committee has been working on for the last two years in what Downey said is an effort to minimize the impact residents will feel in their pocketbooks while ensuring the city is doing what is essential to provide “safe, reliable drinking water to everyone” while also meeting state and federal requirements.
Since the last rate increases, Downey said the daily cost for services has continually increased while the number of residents served over that same span has remained “relatively” stagnant.
Over the past several years, he said the water utility department has performed several projects that include new water mains on South Street, Cherrydale and Terry Ho in 2017; West Broadway water main extension near Walmart; utility extensions on South Street by the new fire station; and maintaining and repairing the existing systems throughout the city without “bonding,” or getting a loan.
The utility, Downey said, has also set aside the required match in anticipation of an Office of Community and Rural Affairs grant for the “RCA Neighborhood Project,” which involves replacing old and undersized water mains in the area roughly bounded by the railroad tracks to the south, Illinois Street to the east, Sixth Street to the west, and Ireland St to the north.
“We are hopeful that the utility will get this grant in 2020,” Downey said. “These projects have lowered cash reserves, which means any additional, significant projects moving forward would require a bond unless we act now to increase rates so that reserves can be replenished.”
While noting that the city’s water treatment plant is relatively new ¬ — it was built in 2002 — it is “already 18 years old.”
“It was built for a 20-year build-out, which we are nearing,” he said. “But because of the diligence of the water department, that plant is in great shape and has time.”
But the life expectancy of the city’s drinking water wells, Downey said, is diminishing and the area where they are located won’t allow for additional drilling of supply wells if any of the current ones were to fail.
“There simply isn’t room in that part of town,” he said.
Downey said plans are in the works to secure a new, productive well field, but it “is impossible to know exactly when this field will be needed.”
He said it is vital for the city to secure the land so that it is not contaminated by development. The proposed plan to increase water rates, he added, also takes this into account and will allow the water utility to save money for the acquisition of the well field without bonding the purchase.
The proposed plan to address water utility funds is to pass an ordinance increasing the water rates 12.5 percent ($2.45 per month for 4,000-gallons) to take effect March 1, 2020; and increase the rates again in 2021 as required to fully fund the plan.
The 2021 proposed rate increase will not be set by the current ordinance proposal, but it is anticipated, Downey said, that an additional 12 percent to 14 percent increase will be needed.
For wastewater, the last increase in 2014 was tied to Long Term Control Plan (LTCP) Projects 2b, the Maple Street Interceptor Project, and Project 3, the wastewater treatment plant expansion.
“In addition to the daily operation of the utility, and repair and replacement of the existing, aging infrastructure, the largest driver of the current cost to consumers is that the wastewater utility is progressing on the LTCP to mitigate combined sewer overflows,” Downey said. “This is an unfunded, federally driven mandate that has and is affecting at least 107 communities in Indiana.”
Downey said failure to adhere to the agreed order between the city and the Indiana Department of Environmental Management (IDEM) can result in significant fines and penalties.
Project 4 of the LTCP is currently under design and generally involves, Downey said, a large diameter pipe on Bluewater Drive between St. Mary Avenue and South Beach; a diversionary interceptor from Washington Street near First Merchants Bank down Bluff Street to Jefferson; a new 48-inch pipe from the treatment plant to Lake Freeman; and several smaller areas of pipe lining or replacement throughout the city.
“We have pipes of more than 100 years old that we’re still using,” he said.
Project 4 has an estimated construction cost of $7 million to $9 million.
Downey said the city’s lift stations are aging. For example, the lift station at City Park was built in 1972 (48 years old) while the North Sixth Street lift station was built in 1986 (34 years old).
“The pumps have been worked on, they’ve been maintained, they’re doing well … but at some point these lift stations will have to be replaced,” he said.
The proposed plan would increase rates 15 percent ($9.06 per month for 4,000-gallons of water consumption) to take effect March 1, 2020, alongside the water rate increase for a total of $11.51 combined.
Like the water rate hike, a 2021 wastewater increase would not be set in the current proposal. The city is awaiting bids for Project 4, which will be publicly bid in July 2020. Once those are received, the exact cost of the project will be known and the city can negotiate terms with the Indiana Finance Authority’s State Revolving Fund Loan Program to secure the most cost-effective bond to fund it.
“Once the terms of the bond are known, the city administration can then determine what additional rate increases are required and make the necessary adjustments to take effect in 2021 as the project begins construction,” Downey said.
The current average residential water bill is $19.62 for 4,000 gallons, plus an additional $5.39 for fire protection (fire hydrants and water mains, not the fire department). The current average residential wastewater bill is $60.40 based upon 4,000 gallons of water consumption.
“(The rate increases) sound like high numbers, but when you factor in the last rate increases that we had, 25 percent for water over the last nine years — that’s 3 percent per year,” he said. “Thirty-three percent for wastewater over the last six years is 6.4 percent per year because we haven’t had rate increases since the last big ones.
“I doubt the cable company has held their rates that low for the last eight years.”
Downey told the council he plans to suggest the ordinance committee ponder rate increases of between 2 percent to 4 percent per year instead of having one large increase every few years.
“Maybe we can keep up with inflation and avoid these big jumps,” he said.
The ordinances, as currently proposed, will come up for a first reading at the Nov. 18 city council meeting.