Adairsville to vote on water rate structure
by Matt Shinall
Dec 08, 2010 | 1500 views | 0 0 comments | 8 8 recommendations | email to a friend | print
The Adairsville City Council met Tuesday discussing a proposed water and sewer rate increase with the inclusion of a tiered rate structure.

A water rate increase has been discussed for some time with advances being made under former Interim City Manager Bill McCain. With the hiring of City Manager Pat Crook, research and proposals have developed quickly to be readied by year's end.

Several factors have led to the need for a rate increase, chiefly among them is ballooning overhead expenses. An aging system, such as Adairsville's, needs constant maintenance as well as heftier outlays for integral machinery. On top of that, federal and state government entities have handed down mandatory regulations for quality control, safety and environmental concerns -- each of which add to operating costs. Lastly, the tiered rate structure, which will be included in any increase, has been mandated statewide to encourage water conservation and failure to comply can keep the city from receiving certain state aid or financing.

Tuesday's work session began with City Finance Director Roger Freeman giving an overlook of the city's three main revenue funds with end of the year projections. The general and gas funds are both expected to basically break even, which in today's economy Freeman said is a "feat in itself." The water fund, however, is expected to come in about $187,000 below projections. That number increased from 2009's deficit of more than $140,000, after adjusting for one-time unexpected revenue such as a large insurance claim.

"We have been in the process of talking about this for several months now. Former City Manager Larry Pratt actually brought to my attention about this time last year, we probably needed to look at the water rate structure," said Mayor Evan King. "With Mr. McCain and Mrs. Crook, both being objective to this issue, we've had fresh eyes to give us an indication of what our situation is."

Crook has formulated three proposals, each offering the city different levels of revenue and each with their own inherent advantages and disadvantages. The base rate, currently at $9.53, would be reduced to $6.90. From there each option diverges on an increasing volumetric rate, currently at $1.50 per 1,000 gallons.

The lowest option would increase the volumetric rate to $2.50 per 1,000 gallons. This "break even" rate as Crook suggested would offer approximately $21,690 in revenue leaving little room to cope with unexpected disasters or capital outlays in the form of upgrades or expansion.

The middle option would increase the volumetric rate to $2.75 per 1,000 gallons. This would produce approximately $198,690 in revenue, providing more room for unexpected expenditures.

The last option, which was Crook's original suggestion and her professional recommendation, would increase the volumetric rate to $3.25 per 1,000 gallons. Revenue produced from this option would be about $274,190, leaving what she feels to be adequate protection for needed maintenance and expenditures, as well as being the preferable option for government financing of capital projects demanding a rate structure adequate to repay debt service.

"The least of the options -- the $2.50 -- is what I would call a break-even number, that's a risky number. Option two has some net income here, but if you have some unforeseen circumstances, it's a little less risky than the break-even number. And then option one is one that I felt safe with. With option one, if the need were to arise that the city was mandated to do some major system improvement or renovation by some other governmental agency, say [the Environmental Protection Division] for example, than we could go to [the Georgia Environmental Finance Authority] or the broad market and borrow the money. With options two and three, the lower rates, it would be difficult if even possible to borrow money," Crook said.

Although the mayor and Crook were strongly in favor of the originally proposed rate at $3.25 per 1,000 gallons, some councilmen were not thrilled with the proposal. Most vocally opposed to the highest proposed rate increase were Councilmen Allen Towe and Connie Morrow. Towe asked Crook and Freeman to again look over the proposed 2011 budget to cut expenses, allowing for a lower rate. The mayor insisted that the water department runs on a tight budget as it is and that cuts of 3 percent to 5 percent, as suggested by Towe, would not be likely without personnel loss.

In contrast, Councilman Buddy Bagley voiced his approval of Crook's suggestion at $3.25 per 1,000 gallons citing the need for a financial decision to be made in the city's best interest.

Crook noted that had increments been imposed when the issue was first broached the increase would not need to be so large and the city would in essence have to make up for lost time. She added that any time spent delaying an increase would only make the decision more difficult in the future.

"Had it been incrementally increased over the years, it would probably be at a higher rate than this [option] now. Having said that, the longer we postpone the inevitable, the bigger that impact is going to be. So it'll have to catch up one day, delaying it further could make it even increase," Crook said.

The council will vote on these options Thursday at their regular meeting along with two other agenda items.

Being voted on is group medical renewal with Blue Cross Blue Shield for city employee dental plans. This plan will be the same as last year with minor changes. For more information, contact city hall. Enrollment meetings will be held beginning next week.

Last on the agenda is a proposed budget revision for fiscal year 2010 to reflect the water fund deficit.

The Adairsville City Council will meet Thursday at 7 p.m. at city hall.