City of Smithville water and sewer customers will likely be paying more for those services after July 1.
The mayor and aldermen held a budget workshop Thursday evening at city hall and discussed raising water rates 45% and sewer rates 35% with passage of the 2017-18 budget to offset the loss of revenue with the departure of the city’s largest water customer, the DeKalb Utility District. With its new water treatment plant up and running, DUD is prepared to go it alone without the city by next week.
The aldermen are poised to take first reading action on the new budget Monday night during its regular monthly meeting which will include an increase in water rates going from $5.00 per thousand gallons to $7.25 per thousand for customers inside the city and from $7.50 per thousand to $10.88 per thousand for customers outside the city. Sewer rates are to increase going from $5.00 per thousand gallons to $6.75 per thousand gallons.
The average customer using 5,000 gallons of water per month would see their bill go from $53.62 to $74.89 which includes an increase in water costs going from $25.00 to $36.25 and sewer charges jumping from $28.62 to $38.64.
The rate increases are expected to generate $682,250 in new money to help make up for $775,000 in water revenues the city received from DUD this past year but will no longer be getting. But because of the loss of DUD as a customer, the city is also anticipating that the costs of electricity at the water plant will drop from $273,000 this year to $175,000 next year; that chemicals will go from $75,000 to $45,000; and that water distribution supply expenses will decrease from $74,000 to $40,000 all of which would help get the water and sewer fund back to at least a break even point by June 30, 2018.
In January, Greg Davenport of the J.R. Wauford Engineering Company and Buddy Petty of Rate Studies Incorporated of Nashville shared with the mayor and aldermen the results of the latest water and sewer rate study which calls for the rate increases.
Janice Plemmons-Jackson, the city’s financial advisor quoted from that rate study report Thursday night during the budget workshop.
“DUD is Smithville’s largest water customer buying 64% of all water sold by the city providing about 50% of the city’s total water revenue. Now that DUD is no longer going to be a customer anymore, 64% of our water that we’ve pumped and sold is now not being sold and 50% of our revenue just stopped. That is a serious problem. Although operation costs will decrease slightly with a reduction in electrical costs and chemical usage, other fixed costs such as labor may not change”.
While the city has the option of implementing the rate increases in smaller percentages over the next four years, Jackson recommended the full rate hike be put in place all in one year. She warned that if smaller increases were enacted over time it would not be sufficient to get the city out of the red right away and should the water and sewer fund operate at a deficit for more than two years in a row, the state could set the rates for the city to put the water and sewer fund in the black.
“By law the state requires the water and sewer fund to not have a loss. If you have two consecutive years of losses, the state is going to come in and set your rates for you or they will call you in to meet with their review board to see what you are doing to fix this because you have to operate at a profit. You can’t run a business (utility) and keep it viable (with a deficit) so the state is trying to force people to make that water system operate so it can be long lived,” said Jackson.
According to the rate study, the City of Smithville, even with the increases, will continue to be competitive or cheaper than other area utilities including the DeKalb Utility District.
The Smithville Mayor and Aldermen will meet Monday night at 6:00 p.m. at city hall. WJLE plans LIVE coverage.
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