2007-03-31 / News

Sewer rate to increase to $37 per month

By Charles Prince

NEWARK - Licking County Commissioners are expected to approve a rate hike for the Buckeye Lake Sewer District next Monday morning. A rate resolution is being reviewed by the county prosecutor's office.

Commission President Tim Bubb and Commissioner Doug Smith agreed last Thursday to increase the monthly rate per EDU from $29 to $37, a 28 percent increase, and to increase the residential connection fee from $3,000 to $6,000. Commissioner Marcia Phelps didn't announce her position. Customers will first see the increase in their May bill which will be due June 15. The hike to $37 per month just covers the district's operating expenses.

The decision comes after two months of discussion and research highlighted by a three-hour plus public meeting at Lakewood High School on January 31. More than 450 sewer district customers turned out that night to protest a proposed 69 percent increase to $49 per EDU per month for 2007. Hundreds signed petitions objecting to the proposal.

The original proposal included annual rate increases for the next five years, taking the rate to $62.40 per month effective Jan. 1, 2012. That proposal increased rates a total of 115 percent, from $29 to $62.40.

The rate hike to be approved next week is the first since January 1, 2001. It is driven by increasing costs to operate the district and a consent decree signed with US EPA and Ohio EPA to build an expanded wastewater treatment plant. The district has been violating its permit for years after major storms by dumping untreated sewage mixed with storm water into the South Fork of the Licking River. The new plant costs about $10 million and increases treatment capacity from 1.2 million gallons per day to 2.0 million gallons per day. Since the public meeting, handful of customers have been researching the district's proposal and suggesting alternatives. The county proposal was based on using 30-year revenue bonds with a to-be-determined interest rate of about fivepercent to finance the expansion. The customer group proposed an Ohio EPAadministered Water Pollution Control Loan Fund (WPCLF) loan for 20 years at either one or 3.25 percent interest. The group believes the district meets the population and median family income requirements to qualify for the one percent loan. District customers save some $7-8 million in interest payments with a one percent loan compared to a 4.6-percent revenue bond.

County commissioners have agreed to pursue a WPCLF loan and Bubb signed the nomination form last Thursday. The nomination is the first step. Additional data is required and a final decision on the district's application won't be known until late December.

A number of suggestions made by the customer group have been accepted. The cost to repay the debt for the expanded plant will be shown separately on sewer bills. That cost is currently unknown since it is dependent on whether the district is awarded a WPCLF loan and at what interest rate - one or 3.25 percent, or is forced to issue revenue bonds. Licking County Finance Director Chad Fuller presented a detailed rate analysis to commissioners last Thursday. He listed the best case/worst case for a WPCLF loan as $10.75 per EDU per month/$13.50 per EDU per month. For revenue bonds, the best/worst cases are $12.50 per EDU per month/$14.25 per month. Whatever the debt retirement charge turns out to be, it would not increase for 20 years with a WPCLF loan and for 30 years with revenue bonds.

If the district receives a WPCLF loan, the first semi-annual payment won't be due until July 2009. In that case, the applicable debt repayment charge won't appear on customer bills until January 2009. If revenue bonds are issued, the debt repayment charge could show up earlier on customer bills.

Operating rates will continue to increase, but at relatively modest amounts. Fuller projects an operating rate increase to $38 per EDU per month for 2010, $39 for 2011 and $40 for 2012.

The customer group believes some of his projections are too conservative, particularly the projection that the delinquency rate will increase from the 6.16 percent average over the past fiveyears to 10 percent. Overdue bills are ultimately added to the property owner's property tax bill. The group believes the projected payment of delinquent bills is also too conservative.

Fuller wants to be conservative until a couple of years of data is collected under the new rate. "I have to err on the conservative side," he told commissioners Thursday. "We are in an evaluation phase."

Fuller believes the reductions in the annual increases for benefits/salaries and contracted services sought by the customers - from 9 to 6 percent and 4 to 3 respectively are too optimistic. However, the lower increases are incorporated in his projections.

Both Fuller and the customers group agreed to project only modest growth in EDU's - just 26 a year. More growth could postpone operating rate increases for months or years or offset unexpected cost increases elsewhere. Collections above the 90 percent projections and/or earlier payments of delinquent bills could have the same effect.

The customers group made a final pitch Thursday asking commissioners to include in the rate resolution their intent to establish a formal users group to advise the director and commissioners on district rates and policies. Bubb thought it unnecessary to include the language in the rate resolution. He said the events of the past two months demonstrated their willingness to listen to customers and evaluate options.

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