ANDERSON — After a lengthy debate Thursday night, the Anderson City Council voted to table a proposed water rate increase, making it clear they were opposed to a one-time increase of 47 percent.
Following a caucus, the seven Democrats on the council indicated support for implementing a rate increase for the city's water utility over a two-year period. Council members discussed a 21.18 percent increase in 2015 and 2016. The accountant hired by the city recommended a two-year phase-in of 32 and 11 percent that would compound to 47 percent.
The council will meet in special session once the final numbers of the phased-in rate increase are determined. It appears that a public hearing on the rate increase and a $14.3 million bond issue for infrastructure improvements will be set for the council's meeting on March 13 to consider passage.
City Controller Jason Fenwick said if the council adopts the 21.18 percent increase for 2015 and 2016 the city will be required to borrow $1 million from the Indiana Bond Bank to eliminate a projected deficit at the end of 2014.
Accountant John Skomp of Crowe Horwath said the $1 million borrowed from the bond bank won't be repaid until 2017 if the rate increase is 21.18 percent, but could be repaid by 2016 at the 32 percent increase the first year.
"I'm comfortable with the 32 percent and 11 percent rate increase," Skomp said. "The 21.18 percent wouldn't cover the negative balance at the end of 2014."
Without a rate increase the Anderson Water Department will be $1 million in the red at the end of the year, Skomp told the City Council.
The council chambers were packed and an overflow crowd was standing in the lobby. Several local residents and business owners spoke for and against the increase.
The proposed 47 percent increase will raise the minimum charge for up to 3,000 gallons from $13.36 to $19.62 per month and for the average customer from $18.98 to $27.88 for using up to 5,000 gallons. What the rate increase would be at 21.18 or 32 percent in 2015 was not known.
City officials said 31 percent of the proposed 47 percent rate increase will go toward general operating and maintenance expenses with the remainder going toward paying off the bond issue.
Skomp said the city started looking at a rate increase in 2009 and 2010.
“We checked every option so the city would be making the best decision,” he said.
Skomp said at the current funding levels the water utility will be $830,000 short of making the required bond payment.
The utility had revenues of $7.64 million in 2012 and needs $9.94 million this year.
“The city would continue not to do any major capital improvements and do just needed maintenance,” Skomp said.
If nothing is done in terms of a rate increase, the utility could be $5 million in the red in the next five years, he said.
Skomp said any rate increase would not take effect until 2015 and the proposed $14.3 million bond issue could not be sought until 2016 when there was an operating balance of $1.2 million.
Skomp said he did look at the phase-in of the rate increase, recommending a phase-in of 32 percent in 2015 and 11 percent in 2016, which when compounded would equal 47 percent.
He said a phase-in of 15 percent in 2014, 2016 and 2018 would delay the capital improvement project until 2019 or 2020.
Tom Brewer, superintendent of the Water Department, said the city uses 10 million gallons of water daily and the two plants currently in operation can’t meet the daily demand.
“We can only take a plant down for short periods of time,” he said. “If we lose pressure we can’t certify the quality of the water to the food processors.”
Brewer said the $14.3 million bond issue to replace the Lafayette treatment plant would allow it to provide 10 million gallons per day. The improvement also calls for the replacement of four wells.
The bond issue will be used for the construction of a new water treatment plant, replacement of water mains and upgrading the city’s well fields.
Anderson issued $5.3 million in bonds for the water department in 2006 and the outstanding amount is $4.1 million.
Follow Ken de la Bastide on Twitter @KendelaBastide, or call 640-4863.