By DANIEL SUDDEATH
Since it was advertised as a work session, the New Albany Sewer Board was unable to vote on rate increases Thursday.
But the board’s approval is likely a formality, as sewer attorney Greg Fifer asked City Clerk Marcey Wisman to reserve space on the Feb. 18 City Council agenda for a 70 percent rate hike.
That’s assuming the board passes the rate adjustment during its regular meeting next Thursday. If OK’d, the ordinance would then move to the council for three readings.
The council would still have to hold a public hearing and the municipal billing office must notify all rate payers of the proposed increase in writing.
A week after first alerting the sewer board of the revenue shortfalls predicating the need for a rate increase, John Skomp of Crowe Horwath said nothing has changed in terms of new angles that would alleviate the need for the 70 percent jump.
“We’ve really only got one option at this time,” Skomp told the board, adding that phasing the 70 percent increase over a few years isn’t feasible.
“We don’t really have time where we can do half now and maybe half later.”
The utility is incurring operating expenses and paying debt requirements to the tune of $10.9 million a year while only taking in about $9.1 million annually.
About $5 million of the yearly expense is tied into the sewer board’s contract with Environmental Management Corp. for managing the day-to-day operations of the utility — a deal Skomp advised may have to be reviewed.
As stipulated by Indiana State Revolving Fund loan agreements, the utility is to budget two months worth of operating expenses, or about $1 million.
Already $1.6 million in the hole, the sewer board is looking at a $2.6 million gap between what it needs in its operating fund and what’s available.
The rate increase would allow the utility to properly fund the operating account by making $900,000 payments to it over the next three years, Skomp said.
The first step would be to make a $960,000 payment by March 1 to the fund. Economic Development Income Tax money to the tune of $870,000 is due to the utility this year to back the current rates.
Gary Brinkworth, vice chairman of the sewer board, asked City Controller Kay Garry to check if the EDIT stipend could be paid as soon as possible to the utility to help with March 1 payment.
Garry said at least part of the EDIT allotment may be paid to the utility within a few weeks. She added the sewer board has $725,000 to put to the operating fund, leaving it $235,000 short of the payment Skomp said is needed by the end of the month to keep the state happy.
There are also outstanding claims reported to be around $1.6 million owed by the utility.
Further complicating matters, Skomp and Garry said the insurer for some of the utility’s bonds has contacted them wanting an update on the situation. Skomp said that if the board doesn’t act quickly to show the state and the bond insurer that it’s trying to remedy the debt, they could demand the debt be paid since New Albany would be in violation of its loan contract.
Also, the sewer board won’t be able to take on anymore debt or remove the annual EDIT payment to the utility due to its financial standing, Skomp said.
Board member Ed Wilkinson said bonds have been taken out nearly every year since 1998, and the utility is looking at approximately $54 million in debt.
He said the loans, whether intentionally or as unintended consequence, served as a crutch to rates.
The board is now stuck between in seemingly a no-win situation, Wilkinson said, as it has projects to complete required by the Environmental Protection Agency but won’t be able to fund them with bonds due to the financial lapses.
Skomp said it could be at least a year before the board can expect to get major upgrades back on schedule, and that’s based on the rate increase being approved by the council.
“It’s just a matter of trying to pay the bills at this point,” Skomp said.
Development also threatened
Without being able to take on more debt, upgrades that would allow New Albany to issue more sewage credits to developers are also in limbo.
Basin 14, for example, must be improved to the tune of about $1.3 million in order for the EPA to sign-off on more credits. The lift station services Grant Line road near Indiana University Southeast and parts of Charlestown Road.
Among the developments depending on those basin 14 enhancements are the Grant Line West Industrial Park and a housing project called Stonecrest.
“Any large developments at this point would not be allowed,” said Wes Christmas, an engineer with the city-hired firm Clark-Dietz.
Large scale residential and commercial sewage customers seeking credits in Floyds Knobs are also likely to face delays in getting approved for New Albany’s system without more sizable projects.
Former sewer board member Bill Utz said abandoning the upgrades would cost the utility additional revenue and risk EPA scrutiny. But he added the board is in an unenviable situation because of the debt.
“We’re between a rock and a hard place,” he said.
