Note: This story was updated at 10:38 a.m.
The Oak Ridge City Council will consider increases in the water and sewer rates that would go into effect in January 2017 and January 2018 during a regular meeting tonight (Monday, September 12). Council will also consider a trash fee increase that members endorsed during budget deliberations in June.
A 6 percent increase has been proposed for both water and sewer rates starting January 1, 2017. The next year, effective January 1, 2018, a 4 percent increase has been proposed for water rates and a 6 percent increase has been proposed for sewer rates.
A home that uses the minimum amount would pay an extra $2.26 per month for water and sewer starting in 2017 and an additional $2.17 per month in 2018.
A home that uses 5,000 gallons per month would pay $5.33 more per month for both water and sewer in 2017 and another $4.87 in 2018.
“Both the water and wastewater rate increases are required to continue to operate and maintain these systems, perform necessary capital improvements, and meet our contractual and debt service obligations,” Oak Ridge Finance Director Janice McGinnis said in a September 6 memo to City Manager Mark Watson.
Money from the water and sewer bills is used to operate and maintain more than 251 miles of water lines and 262 miles of sewer lines, and it’s also used to operate pumping systems and the water and wastewater treatment plants, McGinnis said.
“In order to continue to meet EPA (Environmental Protection Agency) requirements, annual sewer line replacement and/or system improvements will be required,” she said. “An annual water line replacement plan is being developed by the Public Works Department that may require additional annual capital funding requirements above that level anticipated in the rate study.”
The percentage increase to be considered by City Council would be the same for all customers, except for water sold to the U.S. Department of Energy at Oak Ridge National Laboratory and Y-12 National Security Complex. An additional rate tier for use above 20 million gallons per month has been proposed; it would apply only to monthly water use at ORNL and Y-12—if water billing rates were established under city ordinances rather than contract. No one would currently be affected by the new tier, which has a proposed 25 percent increase from 2017 to 2018. (That proposed increase was related to funding of debt for capital improvements in the water plant.)
The city’s current contract with DOE is through March 31, 2017. The proposed new rate tier was set up to generate revenues that were estimated to be required from DOE during contract negotiations in late 2015 to early 2016, McGinnis said.
A study presented to City Council in 2013 anticipated water and sewer rate increases on January 1 each year through fiscal year 2019, starting in January 2014, McGinnis said. That was based on capital and debt service requirements, operating expenses, and inflation, among other funding considerations, McGinnis said.
“The projected rate increases were spread across the years of the study with a goal of building much-needed cash reserve levels and funding the anticipated capital and ongoing operations of the water and wastewater activities,” she said.
Rate increases planned for January 2016 were delayed to January 2017, so the expected rate increases from 2016 to 2019 would be extended one year to 2017 through 2020.
There will be a rate review conducted in the summer of 2017.
McGinnis said the water and sewer rates continue to be affected by low-volume customer use and declining consumption levels due to conservation efforts and better efficiencies because of technological improvements.
About 40 percent of customers are billed at the minimum rate, 70 percent are billed for only 4,000 gallons or less per month, and more than 90 percent of water and wastewater billings are for 10,000 gallons or less per month.
Also on tonight’s agenda is a $3.50 increase in the monthly residential trash fee, raising it from $10.50 to $14 per month. The fee will increase city revenues by about $375,000 for fiscal year 2017.
The trash fee increase was endorsed by the Oak Ridge City Council earlier this year when the city budget was approved. City Council also endorsed an increase last year.
The two-step trash fee increase first started in 2015, when it went up from $7 per month for residential customers to $10.50.
Oak Ridge officials have said the city’s general fund used to subsidize about half of a resident’s trash fee, meaning the city essentially covered about half of the $14 monthly fee and residents paid the other $7. If the trash fee is increased tonight, then residents will pay the entire $14 per month.
The water and sewer rate increases were also anticipated in the budget passed by City Council in June.
Also tonight, the City Council will consider passing on a wholesale electric rate increase from the Tennessee Valley Authority starting October 1.
The TVA wholesale rate increase is 2.36 percent, Oak Ridge Electric Jack Suggs said. The impact on retail customers in Oak Ridge will be 1.36 percent, he said.
The actual cost will vary widely based on use, Suggs said. For an average residential customer, the cost of power will increase about $1.50 per month total.
“Other users will see proportional increases,” Suggs said.
He said TVA expects to use the new funds to reduce debt and for capital maintenance on its system.
“It is part of a long-term overall financial plan to prepare TVA for the future,” Suggs said.
“A number of strategies to reduce purchase power cost are under consideration and development at the (city) staff level,” Suggs said. “Regardless of the success of these future efforts, however, the cost increase cannot be absorbed and must therefore be passed on to customers.”
Tonight’s City Council meeting starts at 7 p.m. in the Oak Ridge Municipal Building Courtroom. See the agenda here.
More information will be added as it becomes available.
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