Bigger increase likely for water rates
November 21, 2011 · Updated 1:21 PM
However the City Council decides to pay for a $1 million remedy for water quality problems in certain parts of town, water rates that were going up anyway will be higher than anticipated.
That unsettling news came out of Tuesday night’s study session, when the council discussed the options of depleting a reserve account to pay for fixing problems with Well 9 or going with a revenue bond to do so.
“Either way we’re going to have to ask the ratepayers to pay more,” Councilman John Clauson said.
There was no disagreement about the urgent need to correct the problem that has left some city residents with brown, unpalatable water coming out of their faucets intermittently for about a year.
The problem is caused by hydrogen sulfide and manganese, and fixing it will require a combination of filtration and scrubbing and flushing out affected water lines, will require a combination of filtration and scrubbing and flushing out affected water lines,according to Councilman Rob Putaansuu, chair of the council’s utilities committee.
“The water quality is poor, and we need to do this now,” Putaansuu said.
Paying for the project with a revenue bond would cost the city a considerable amount in interest.
But using most of the $1.2 million in the water/sewer reserve fund would leave the city unable to pay for other potential significant repairs for the next three years, until the fund is built back up by revenue from higher water rates.
A plan to implement a $4 increase in monthly water rates every other year over the next six years — the so-called “4/4/4 plan” — would not be sufficient to repay reserve funds if those are used to pay for the Well 9 fix, nor to pay the interest on a revenue bond.
Council members discussed setting the first two phases of the water rate increases at $6 to offset the cost of resolving the water quality problem, whichever funding source is used.
“I don’t see how you can get away from at least six dollars,” said Clauson, who chairs the council’s finance committee.
“How much do you want to have in reasonable reserves?” city treasurer Allan Martin asked council members during their discussion about a possible combination of reserve funds and a revenue bond to pay for the project. “I think that’s what you’ve got to answer first.”
The utilities committee will meet Dec. 1 to consider more precise cost estimates from Martin, and make a recommendation for the council to consider at its regular meeting Dec. 13.