Friday, Aug. 15, 2008

Slowdown could mean rate increase

By MICHAEL HINES

News-Mirror Writer

Water and sewer projects may need to be juggled in light of a downturn in city funds.

City leaders are dealing with a slowdown in the number of entities connecting to the city’s water system. While residents aren’t likely to notice an issue, the change could mean holding off on some projects.

"That revenue has to come from some where," said Bud Ervin, utilities operations manager. "If we don’t raise the water/sewer rate, we will not be able to continue the capital improvement plan as it was originally presented to the council."

The situation results from the overall economic slowdown seen across the country and city. The city has seen 246 new connections to the system since October; 350 such connections are expected for the entire fiscal year. That number was 674 in fiscal year 2007. Back in 2003-04, that number hit 1,275.

"It can be in the millions of dollars," Ervin said of the city’s potential loss. "The cause and effect is that you have to reprioritize your project list."

The result could be millions of dollars in lost impact fees. That, in turn, could mean increasing the water/sewer rate to fund scheduled projects.

The city supports its utility fund based on the water/sewer rate and impact fees. Impact fees are charges to new customers connecting to the system. The fees pay for 48 percent of the cost of projects and are applied to new connections to the water system. That funding goes to handle efforts such as a lift station on Holland Road in the southeast of town. Lift stations pump water or wastewater from low-lying areas to the water system at higher elevations.

"A lot of the projects aren’t in the population centers," Ervin said.

Part of the slow down in impact fee revenue was actually due to some undeveloped areas, such as activity in The Reserve, a 3,000-acre project generally bounded by U.S. 287, East Broad Street and Texas 360."The growth has slowed down, so they’ve become less of an issue," Ervin said of water/sewer projects in that area.

But that doesn’t come without concerns. The lift station effort, for instance, could mean less access for future connections.

"We’ve got to stay on top of it because it’s going to be at capacity with waste water. It’ll still be operational and functional, but any reserve capacity is going to be used up," Ervin said, explaining that without that reserve, new space to handle new connections will have to be built.

Another worry becomes timing.

"Utility construction in general takes from months to years to complete," Ervin said. "You have to make sure your projections are absolutely correct."

What’s more, a water/sewer raise shouldn’t be that big of a surprise. A water rate study was completed in 2005 and pointed out that an increase would likely come in the next three to five years. Determining what needs to be done gets started with re-evaluation of what capital improvement projects remain and how much revenue will come in from water/sewer rates. City leaders will balance what projects need to be done compared with how much money is expected.

"If the needs are greater than the current revenue stream, it’ll require a rate increase," Ervin said.

The rate increase could come in late 2009.