Danielsville will soon go up on its water and sewer rates for customers both inside and outside the city limits. The council discussed the proposed increases at a work session Monday night, saying that the city can no longer continue to operate in the red.
Mayor Todd Higdon said the city water system is “thousands in the hole” right now. City clerk Susan Payne said the city is $44,000 in the red revenue-wise as of right now, and about $100,000 in the red when an annual debt service payment due in January is factored in.
The council plans to increase water rates for water customers from an $8.25 base rate (0 – 2,000 gallons) to $10. Water rates for customers outside the city will increase from $15 to $26 (0 – 2,000 gallons). A comparative water rate study conducted by Rindt McDuff engineers showed that the city is $4 below the average base water rate for comparable to 12 cities with similar dynamics in Madison, Franklin and other nearby counties and about $6 below the average rate state-wide.
Mayor Higdon said a lot of city customers won’t notice much difference in their bills, but acknowledged that some higher volume customers will see a significant increase in their monthly bills.
The council is mindful of the fact that the previous administration raised water rates in 2010, increasing the base rate from $5.50 to $8.25. But that council also decreased the sewer rates at the same time, causing basically “a wash” as far as revenue went, Payne said.
“There is no evidence that any study was done to gauge the actual costs of producing water… there is just no rhyme or reason for what they did,” said city attorney Dale Perry.
SEWER INCREASES AND LEASE AGREEMENT
As far as sewer goes, the council plans a 15 percent increase “across the board” for all sewer customers, which will raise the base rate to $11.50.
In conjunction with this increase, the council plans to sign a lease agreement with the board of education for the water treatment pond behind the high school. The current 30-year lease expires Dec. 31, 2013. The BOE currently owns the treatment pond and the city operates it. In return, the school system has not been charged for sewer services in the past, but that is about to change with the proposed agreement.
A recent wastewater pond study done by Rindt McDuff Engineering and Environmental Consulting issued recommendations on the sewer price increase and the new lease proposal, which also includes mandatory upgrades to bring the system into compliance with the Environmental Protection Department (EPD).
In the new agreement, the BOE will agree to go ahead and pay for the cost of upgrading the system (an estimated cost of $103,000), which the city will pay back in an interest-free loan over 30 years at around $441 per month. The city will also be able to purchase the pond from the school system by paying $2,130 per month to the BOE over the next 30 years.
In return, the BOE will begin to pay for sewer services at an estimated cost of $3,383 per month.
“When we get through (with this lease) we will own that pond,” Perry said, pointing out that the city can then apply for grant money, something they cannot do now since they don’t own it under the current lease.
Mayor Higdon said these increases, along with the lease proposal with the BOE, would allow the city to clear approximately $50,000 per year, which can be applied to an outstanding balance on a loan for water infrastructure improvements taken out by the city’s administration in December 2006.
In discussing the loan, Perry said the current council has inherited a “mess.”
Perry said when he took over as city attorney in January 2011, he noted “some confusion and many questions” about the $610,000 government tax-exempt BB&T loan.
In a letter dated to the then council in March 2011, a copy of which was given to the current council, Perry outlined the terms of the loan, which is repayable in ten payments of $76,523 each due each January 1 from 2008 – 2017.
“The plan was to use $110,00 to pay off a 1982 loan from the USDA for earlier improvements to the water system,” Perry wrote. “$15,000 was to be paid as a bond fee for the closing attorney. The remaining funds were to be used for projects. It was made plain in the loan documents that the ‘loan has to be used in three years.’ The stated plan was to use approximately $85,000 in the first year for a first well, $42,500 in the second year for a second well and $375,500 in the third year for sewer lines.” Perry said the first well was completed, but a second well was not, nor were additional sewer lines (for a then-proposed development on Scout Hut Road) ever done.
The city was in violation of the terms of the loan, since the funds were not used for the specified purposes within the three-year time frame, Perry said. To help remedy this, last year’s council repaid what was left in city coffers (approximately $143,000) to BB&T to reduce the loan principal.
Perry went on to say that he does not know what most of the funds were actually used for, but suspects they were used, at least in the beginning, to repay the loan. More recently, he said SPLOST funds (designated by voters for water improvements) were used to repay the loan. He said none of this money should have been used for such a purpose. The current council recently refunded the SPLOST accounts by cashing in several certificates of deposit to bring the city back into compliance with the state.
But Higdon stressed that regardless of the loan issue, the city is still well behind on raising water rates to cover the cost of providing water and sewer service. He said the study shows the city has not been charging enough to provide these services.
“And we’re not going to kick the can further down the road,” Higdon said. “This has fell in our lap, so we’ll handle it.”
But Higdon acknowledged that he fears that any increase in the rates will “cause a panic.”
“Water rates have been cheap for so long, going up just a little bit can cause panic,” Higdon said, adding that the city is just bringing its costs in line with surrounding cities while working to meet its debt obligations.
“This (rate increase) is not an option, it is a necessity for Danielsville’s survival,” he said.
And he said he thinks the lease agreement with the BOE is more than fair and that he is thankful for their help in getting back on track. “The agreement included more than what we actually asked for,” he said.
The council plans to vote on the lease agreement and the proposed water and sewer increases at their regular business meeting Monday, Aug. 13. If the council approves the new rates, they will likely go into effect Sept. 1, Payne said.
