The Milan News-Leader
A Heritage Newspaper
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City to hike water, sewer rates
Residents to see 15 percent increase as city struggles
By Brian Cox, Staff Writer
PUBLISHED: January 11, 2007
Milan residents can expect to see an almost $6-per-month jump on their next water bill after Milan City Council approved a 15 percent increase Monday in water and sewer rates.
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The newly approved rate hike, which is retroactive to Jan. 1, will increase the average resident's quarterly water bill from $113.03 to $130.30, said City Administrator Dan Bishop.
A rate increase of 28 percent, which would have raised the average quarterly bill to $144.93, was originally proposed, but Bishop said it was thought an increase of that amount would be too much for residents to absorb at one time.
The rate increase comes at the recommendation of the consulting firm Tetra Tech, which at the request of the city re-evaluated its utility rate study in light of the city's struggle to make payments on a $13.6 million bond approved last year for the expansion of the wastewater treatment plant.
Money raised from the new rates will be used, in part, to help make the bond payments, Bishop told council, signaling a switch in strategy on funding future bond payments.
Payments on the bond for the wastewater treatment plant were originally planned to be made in large part through tap-in fees from new residential homes. At the time the bond was approved, the council reasoned that water and sewer fees from current residents would be used to pay 27 percent of the bond while the remaining 63 percent of the payments would be covered by new residents' tap-in fees.
With significant new growth on the immediate horizon, the council projected collecting some $750,000 annually in tap-in fees, but the downward spin of the state's economy brought residential development to a halt and left the city short of its projections. Only about $60,000 in tap-in fees was generated.
Choosing to be overly conservative in estimates this time around, Bishop instructed Tetra Tech to calculate the new water and sewer rates under the assumption that no connection fees would be collected.
"We have to anticipate zero growth for the next several years," he said Tuesday.
Of the $350,000 of new revenue generated annually from the water and sewer fee increase, Bishop said $250,000 would be put toward making next year's bond payment and $100,000 would be used for capital improvements, primarily the replacement over the coming years of aging underground water and sewer pipes. Some of the pipes are 80 to 100 years old, he said.
"What (the $100,000) will allow us to do is be more strategic about what pipes we replace," he said.
Mayor Owen Diaz proposed Monday that future tap-in fees be put into a capital improvement fund in anticipation of when the wastewater treatment plant next requires expanding.
"We should set aside some money to replace the system in the future," Diaz told council, "like saving up for a car."
Bishop concurred.
"That would be a way of making growth pay for growth," he said.
Staff Writer Brian Cox can be reached at 429-7380 or .
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