Source: Sherman Publications

Council OKs 1st reading of rate hikes

by CJ Carnacchio

July 16, 2014

It appears Oxford Village’s water and sewer rates are on track to increase on Oct. 1.

Last week, council voted 4-0 to approve the first reading of an ordinance amendment that would charge customers a flat, monthly base rate that’s determined by meter size, plus an increased rate for the amount of water and sewer that’s actually consumed and produced (see sidebard entitled, “What does the village charge now and what is it proposing?).

“You will not pay (for) any more than what you’re using,” said Councilman Elgin Nichols.

A second reading was scheduled for 6:30 p.m. Tuesday, Aug. 12 in the council chambers located at 22 W. Burdick St. Following the second reading, council may adopt the rate increases, if it so chooses.

Under the proposed rates, an average household that uses 4,000 gallons of water per month and has a ¾-inch meter would go from paying $47.77 to $68.29 on its monthly water/sewer bill. That’s an increase of $20.52 (or 43 percent).

An average household that uses 4,000 gallons of water each month and has a 1-inch meter would go from paying $47.77 to $72.11 on its monthly water/sewer bill. That’s an increase of $24.34 (or 51 percent).

Why are rate increases needed?

Village officials are planning to raise rates in order to cover costs so the water and sewer funds don’t continue to operate at a loss as they have been doing.

“The village cannot lawfully operate at a continued deficit,” explained village attorney Bob Davis. “The village has a legal right to charge for services (in order) to be made whole.”

According to figures supplied by village Manager Joe Young, based on the current rates, the municipality’s water and sewer funds are each projected to have operating losses of $195,190 and $208,863, respectively, for the current 2014-15 fiscal year.

The water and sewer funds lost $436,807 and $204,696, respectively, between 2010 and 2013, according to Young.

“We cannot continue to lose the amount of money that we’ve been losing every year,” Nichols said.

But it isn’t just operating losses the village has to worry about. It also has to charge customers enough to meet its significant debt obligations.

The water system has $420,000 in bond debt payments to make annually. On top of that, the village water fund owes the sewer fund $500,000 for cash transfers made to it in 2011 and 2012.

With regard to the sewer system, the Clinton-Oakland Sewage Disposal System, of which the village is a part, projects charging the municipality an average of $100,000 annually for capital outlays financed by bond issues over the next 19 years.

Davis emphasized that the proposed rates are simply meant to cover costs, not generate a profit. “There’s no gravy in this proposal,” he said.

Village resident Gwenn Stevenson expressed her concern about the possibility of the revenue from proposed rate increases being used for purposes other than water and sewer.

“How do we know that this increase that we’re all having to incur is actually going to go (toward) this debt that you’re telling us (and) not for other debts that the village has,” she asked.

“It has to, legally,” Nichols replied.

Davis explained both the water and sewer funds are “enterprise funds,” meaning they are self-sustaining and separate from the village’s general fund, so the fees charged to users for these services are “legally bound” to be expended for only those particular purposes. Monies can be borrowed from these funds for other purposes, but they must be repaid.

A long time coming

The last time the village increased sewer rates was 2001.

The last time the village increased water rates was in September 2008 when they went up 5 percent. The base rate increased from $17.20 to $18.10 per month while the flow rate increased from $3.25 to $3.41 per 1,000 gallons.

“Clearly, we went a long stretch of time now where we ignored what the costs (associated with the water and sewer systems) were and what we were charging residents,” said village resident Karen Kamyszek. “Now, we’re kind of having to make up for that.”

“I would take caution (against using) the word ‘ignored,’” Davis replied. “I think the village council worked fairly creatively over the years to not have to raise your rates by using other sources (of revenue) and other means. I don’t think there was a blind-eye.”

For example, the village sold the lease it held for a cellular antenna atop the water tower on S. Glaspie St. That sale generated $445,000 for the water fund.

The village realized a savings by out-sourcing the operation of its water plant to a private company in 2009, instead of continuing to staff it with full-time municipal employees, who received wages and benefits.

The village also transferred a total of $500,000 from its sewer fund, which used to be flush with $1 million in reserves, to its water fund in 2011 and 2012.

Councilwoman Maureen Helmuth explained that all this was done to help the village population, which had been struggling financially over the last few years.

“The whole town was broke,” she said. “Nobody had any money. Houses were vacant. People were getting foreclosed (on). So, we held off and held off (on raising the rates).”

But now, the village has basically run out of options to avoid raising the rates in order to meet its financial obligations.

“Those methods and those (magic tricks) are gone and it has to be reflected in the rates at this juncture,” Davis said.

Kamyszek asked if the village is going to periodically review its rates and costs so such large increases aren’t needed in the future.

“I just want to ensure that there is adequate oversight going forward on a regular basis,” she said. “Because it seems like if there was, we weren’t aware of it.”

Having to increase the rates so substantially now makes it appear as though the situation “wasn’t being, maybe, given the full attention that it should have (been),” according to Kamyszek.

“Whether that was the case or not, I think that’s the impression that a lot of us are receiving,” she said.

“We are going to continue to look at (the rates and costs) every year,” Helmuth replied. “Come November (after the new rates are in place), we’re going to make sure that the billing came out to the amount that we thought it should. And then, a year from now, we need to look at them again.”