The Highland City Council on Monday unanimously rejected a plan to raise water rates over the next 10 years to help repair a deficit in the water fund and pay for upgrades on the city’s aging mains.
The City Council voted 4-0 against the proposed rate hike, which would have gone into effect immediately.
Mayor Joe Michealis also opposed the plan.
“It’s too long,” he said. “In today’s volatile economy, it’s even more of a challenge.”
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A typical single-family household, which uses 4,500 gallons of water a month, would have seen their monthly water bill increase by 16 percent in the first two years under the proposed plan. They would have then seen a 3 percent increase for years three through 10.
Currently, that typical household pays $27.21 for water. The plan that was rejected would have had that same family paying $31.57 a month over the next year. In year two, that bill would have been $36.62 a month. In a decade, the price would have been $46.39.
In addition to serving Highland, the city supplies water to Grantfork, Pierron and St. Jacob.
Joe Gillespie, the city’s director of Public Works, said the higher upfront cost in the rate hike was being proposed because the city “has not been keeping up with the times.”
“We’re now trying to bring our water system back where it should be,” he said. “We are not implementing this to pad our account.”
Gillespie said he will bring a modified three-year proposal back to the City Council for its consideration on Jan. 19.
After a three-year plan is approved, Gillespie said the City Council will have to reevaluate what they will do from years four on.
Gillespie suspects some of the city’s original cast iron water mains might be close to 80 years old, if not older.
“We are in dire need of water main replacements of our oldest cast iron pipes to improve reliability and limit disruption to our customers,” he said.
Gillespie said the city’s water revenue fund is also projected to finish the current fiscal year with a $140,000 deficit.
Gillespie said there have been a number of things that have contributed to the water revenue fund’s loss in recent years. Among other things, the chemicals used to treat the water have increased in cost.
“And our summers have been cooler and wetter in the last few years,” he said. “That has caused our water usage to be down.”
Gillespie hoped the water main replacement project will be completed in 10 years or less. But it might take longer, depending on what issues arise, he said.
The city’s last water main improvement project was in 2006.
But the water department has been able to make a number of improvements in recent years without a rate increase, Highland City Manager Mark Latham said.
He pointed out that the city built a new stand pipe water tower, costing around $1.5 million. The city also spent more than $2 million to put in a low-level outlet.
“So, we have spent a lot of money without increasing rates or bonding,” he said.
Highland retained the consulting engineering firm of Hurst-Roche Inc. of Hillsboro, Ill., to evaluate the revenue from the current water rates for consumption of water in comparison to the expenses for operation, maintenance and cost of capital improvements of the water system.
Hurst-Roche has since recommended to the city that they increase its service charges, volume charges and fire protection charges, so that the water system may once again operate in the black.
“Our revenues have slowly and steadily declined, while our expenses have steadily increased since 2007,” Gillespie said.
Gillespie said he now plans to hire Hurst-Roche to create a water main master plan to prioritize improvements. Once that master plan is completed, Gillespie said the City Council will have to decide what they will do in years four and beyond.
“Once we get the master plan together, then we can see what kind of dollars we are matched up against,” he said.
Latham said it’s the city’s goal to bring the water fund to a positive fund balance. According to the city’s most recently completed audit, the water fund generated $1.95 million in revenue.
“Although one of thing the public needs to know, while the water revenue fund is in the red, that includes almost $700,000 depreciation costs,” he said.