Utility rate hikes due to inflation, sewer loans

Published 9:51 am Friday, August 31, 2012

Proposed increases to City of Bainbridge utility rates are partially due to the rising costs of inflation and partly to satisfy requirements of loans the City Council took out to fund its four-phase sewer master plan.

In a memorandum sent to the City Council on Friday, City Manager Chris Hobby said he had incorrectly stated the current city utility rates and what the proposed new rates are when he presented the city’s proposed 2012-2013 budget last Tuesday. However, correcting the errors will result in only marginally smaller proposed increases.

The City Council is set to hold a public hearing on the proposed budget at its regular meeting on Tuesday, Sept. 4, at 6:30 p.m. at the Potter Street Community Center.

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According to Hobby, the current water/sewer base rate is $10.36. The proposed new base rate is $15.36.

The current water/sewer volumetric rate is $1.59 per 1,000 gallons used. The proposed rate is $1.65 per 1,000 gallons.

If the Council approves the budget, the new water/sewer rates will raise the average customer’s utility bill by $68.87 per year.

The natural gas base rate is $3.25, and not $4.95, as Hobby had previously stated. The proposed new base rate is $3.38. Hobby said the error was due to a typo in a spreadsheet listing the base rates of various municipalities, like Bainbridge, who are a part of the Municipal Gas Authority of Georgia.

The water/sewer volumetric rate is tied to the government-reported Consumer Price Index. Hobby had stated the CPI had increased by 1.07 percent, but it had declined to 1.04 percent since June, so the proposed rate was adjusted.

The City Council had previously voted to tie utility usage rates to the annual rate of inflation, based on advice the city received when it commissioned a utility rate study around 2005-2006, Hobby said Friday. Before the Council did so, the city was actually losing money on its garbage pickup operation and having to borrow from its general fund to balance that enterprise fund.

As a result of the utility rate study, the city’s 2007-2008 budget raised water and sewer usage rates and trash pickup rates by four percent. The water/sewer base rate was $9.25 at the time.

In September 2008, city utility rates increased again. Trash pickup increased by 4.5 percent, which has helped build up reserve funds use to buy new garbage trucks and other equipment, according to Hobby.

As part of its 2008-2009 budget, the Bainbridge City Council voted to increase its annual Water and Sewer Fund revenues by $250,000. The increase was a condition of the first of two loans city leaders applied for to help pay for the cost of completing the city’s sewer master plan, according to previous reports. The loans, about $16 million total, are low-interest loans provided by the Georgia Environmental Facilities Authority (GEFA), which is funded by the state government.

The goal behind implementing the sewer master plan in four years, instead of the 20 years that had been previously anticpated it would take, was to reduce the usage of septic tanks within the city due to environmental concerns, Hobby said in 2007. The idea was also to save money, as the material and engineering costs of the sewer extensions would have increased over time, he said.

To produce the additional Water and Sewer Fund revenue, starting in 2008, the City of Bainbridge increased its monthly water and sewer base rate from $9.25 to $10.00 and its increase volumetric use charges from $1.35 per 1,000 gallons to $1.50 per 1,000 gallons.

The city also designated a minimum of $1,113,600 in annual receipts from SPLOST V, which was approved in Sept. 2008, to go toward repayment of the GEFA loans.

Hobby told the Council Tuesday that GEFA officials were concerned about the level of reserves that the water and sewer enterprise funds have. If for some reason local voters declined to renew SPLOST, having low utility fund reserves could result in the city being unable to make payments on the loans it took out from GEFA.

In December 2011, the City Council approved a resolution mandated by GEFA which essentially stated that the city would not raise its utility rates in order to perform maintainance of its water towers.