City to propose increase in water/sewer rates next month

By Thomas Wilson

STAR STAFF
twilson@starhq.com

   Mounting infrastructure projects and the loss of an industrial customer have prompted a state financing entity to order the city of Elizabethton to recommend an increase in the city's water and sewer rates, according to the city's Finance Department.
   "We have been instructed to raise our water and sewer rates to an amount sufficient to pay all of our operating costs, and full fund depreciation costs," said Bradley Moffitt, city director of Finance.
   The city's water/sewer fund had registered deficits in each of the last three years, Moffitt said, a streak that prompted the state's Waste Water Finance Board to summon Moffitt and City Manager Charles Stahl to appear before the board in November to discuss the system's financial structure.
   "They can direct us to do so because they are the folks under the state Economic and Community Development department," said Moffitt. "That is where we get our low interest loans from."
   Currently, the city charges $5.20 for the first 1,000 gallons of water used and $8.50 for water use up to 2,500 gallons. The city water and sewer system currently serves over 11,000 customers including the Siam, Chinquapin and North Elizabethton utility districts.
   Moffitt said he had reviewed the city's existing water/sewer rate structure as well as fees such as tap fees in an effort to cut costs. He said the city administration had not settled on an exact dollar increase of the water and sewer rates or which rate schedules would be effected.
   However, he indicated the $5.20 rate could rise by up to $1.
   According to Moffitt, four factors contributed to the city's rate increase proposal:
   * The closure of Alcoa Extrusions, a large water customer that cost the city roughly $200,000 in water/sewer fees.
   * A $2.2 million installation of a new water filtration system at the Big Springs Water Plant in Gap Creek, which was ordered by the state following high records of murkiness in the water after flooding occurred in the city last year. The project is expected to be completed later this year.
   * State and government regulations under the "GASBY 34" law requiring cities to fully fund all depreciation costs.
   * The $1.1 million construction costs for a sewer line connecting the West Interceptor to the sewage treatment plant.
   The project was initiated after the city became embroiled in a lawsuit with the North American Corporation over inaccessibility to the sewer line due to a landfill on North American property.
   "It's hard to make up $200,000," said Moffitt. "That and the waste water treatment plant, the pump stations involved in that project and the Big Springs project are major contributors."
   The city's 2002-2003 water/sewer budget was cut 33 percent, down from $5.3 million to $2.6 million The new budget postponed capital projects or the use of any fund balance at all. The city also refinanced debt to lower payments and extend them over 30 years.
   "We have frozen all vacant positions in the division and postponed all capital improvement expenditures for the utility system," said Moffitt. "The Waste Water Finance Board said it was not enough, and they said we did need to adjust our rates."
   The loans in questions have been used to fund the multi-million dollar expansion of the city's waste water treatment plant and the water filtration project at the Big Springs facility.
   "It is something we don't have a lot of control over," he said. "Technically, we would be in default of our loans."
   The city was forced to issue a boil order for water customers last year after flooding in the city kicked up the turbidity, or murkiness, of water coming from the Big Springs plant above levels considered acceptable by the state.
   Typically, the system's overwhelming majority of residential customers use the 1,000 gallon to 2,500 gallon range, said Moffitt. A handful of industries have sewer meters that gauge their costs, Moffitt said.
   He said he expected to present an ordinance requesting the utility rate increase to Elizabethton City Council at their next meeting on Jan. 9. If the council votes to pass the ordinance, the rate increase could take effect on Feb. 1, 2003, according to the ordinance draft.
   City administrators had referenced the possibility of revisiting the city's water and sewer rate schedule during the budget process in April.
   If the ordinance is passed by the Council, it would be the second water/sewer rate increase absorbed by city utility customers in the last 19 months. The Council passed a city-recommended rate increase in June 2001 under similar orders from the same board to fund the water/sewer budget.
   "We thought that would take care of everything for about two years," said Moffitt. "We did not anticipate Alcoa closing or the requirement to spend the $2.2 million on Big Springs."