By Ken de la Bastide
The Herald Bulletin
---- — ANDERSON — Despite objections from some members, the Anderson City Council Thursday night gave preliminary approval to a two-year phased-in rate increase for the Anderson Water Department.
The council voted 5-3 for passage on two readings of an ordinance to raise the water rates by 21.18 percent in both 2015 and 2016.
Council members voting against the increase were Rodney Chamberlain, Ollie H. Dixon, and Ty Bibbs, all Democrats.
By the same vote, the council approved on two readings an ordinance to issue $14.3 million in bonds for infrastructure improvements. The bond issue will be used for the construction of a new water treatment plant, replacement of water mains in the Homewood Addition and upgrading the city’s well fields.
Council members are expected to consider final approval of the rate increase and bond issue at their March 13 meeting.
Bibbs, Chamberlain and Dixon all wanted assurances that the rate increase would not be used to increase salaries of water department employees.
"Will there be no raises until the new treatment plant is completed?" Bibbs asked.
Pete Heuer, chairman of the Anderson Board of Public Works, said the rate request is based on the test year of 2012.
"I can't project raises or insurance cost increases," he said. "We're in contract negotiations."
Chamberlain wanted a guarantee that there would be no pay raises.
"I can't make that guarantee," Heuer said. "I will guarantee we will work to preserve the water utility."
John Skomp, an accountant with Crowe Horwath, said the phased-in rate increase will work for the water department to eliminate a projected $1 million deficit and to fund infrastructure improvement bonds.
"We want to get through the Indiana Utility Regulatory Commission process as quickly as possible," he said. "That will allow the start of the project (infrastructure improvements) to start in 2016, at the latest."
Skomp said the requested 47 percent increase over two years was the minimum amount needed to pay the water utility's current debt and to make necessary bond payments.
Several residents asked about the latest Indiana State Board of Accounts audit that questioned the city's use of utility revenues to fund city government operations.
Resident Tom Morgan said he was not opposed to a rate increase, but wanted the money to go to the utility and not city operations.
He suggested the council delay voting on the rate increase until changes were made in how much utility money goes toward city operations.
Controller Jason Fenwick said adjustments have been made in the past two years and more are taking place this year. He said the State Board of Accounts indicated the city lacked justification of the percentages coming from the water department for city government operations.
He said of the $500,000 going from the water department revenues to the city operations, the adjustment would be between $20,000 and $30,000, not enough to make the rate increase unnecessary.
Fenwick said he would report to the council by March 13 with a plan to make further adjustments in how utility funds are spent.
Council President Pam Jones said the council worked with the administration to ensure the city would have a safe and secure water utility in the future. She said the rate increase was needed to pay outstanding bills and the debt from a 2006 bond issue.
"The increase is needed to pay the bills," Councilman David Eicks said of the rate increase. "We're trying to achieve that."
The administration of Anderson Mayor Kevin Smith was seeking a one-time increase of 47 percent, but at the council’s February 13 meeting there was no support for the proposal.
An alternative was presented by the administration to raise the rates by 32 percent in 2015 and 11 percent in 2016. The council countered with the 21.18 percent increase over two years.
Skomp previously said the city started looking at a rate increase in 2009 and 2010.
He said if no rate increase was approved, the city won’t have the $833,000 needed to make a bond payment at the end of the year. Anderson issued $5.3 million in bonds for the water department in 2006 and the outstanding amount is $4.1 million.
Skomp said at the current funding levels the water utility would be $1 million in the red at the end of the year.
The utility had revenues of $7.64 million in 2012 and needs $9.94 million this year, he 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, Skomp said.
Follow Ken de la Bastide on Twitter @KendelaBastide, or call 640-4863.
The Anderson City Council approved a two-year phase in of an increase in water rates of 21.18 percent in 2015 and 2016. Council members will have to give final approval at the March 13 council meeting. If approved by the Indiana Utility Regulatory Commission the minimum user, less than 3,000 gallons per month, will increase from $13.36 to $19.62 per month. The average user, 5,000 gallons, would see their monthly bill climb from $18.98 to $27.87. The council also approved through two readings an ordinance to issue $14.3 million in bonds for infrastructure improvements for the Anderson Water Department.