A wastewater rate increase moves on to the New Albany City Council for consideration after the Sewer Board unanimously approved the suggestions of a Crowe Horwath study Thursday.

In addition to an immediate 70 percent hike, the board also passed a 3 percent increase for the next four years beginning in 2011 to account for cost-of-living adjustments.

The council will have three readings to determine what, if any, rate hike will be implemented.

The Crowe Horwath report released two weeks ago stated that without an immediate increase, the utility risked further violations of loan agreements with the state and its bond insurance company.

Beyond the deficit in the sewer operating fund, the utility also owes $1.6 million in outstanding claims to contractors and agencies it has hired. That doesn’t include other claims that were approved by the board Thursday.

Based on data from the U.S. Department of Labor Statistics, board member Ed Wilkinson said the utility has lost just less than $3 million over the past five years in cost-of-living expenses based on the Consumer Price Index.

“We know what we should do, but we keep not doing it,” he said.

City Controller Kay Garry was able to make a payment this week to an interest and bond sinking account to the tune of $900,000 that was required by March 1.

The money came from the utility’s annual allotment of Economic Development Income Tax revenue. The $875,000 payment was hurried to the utility, and Garry said that freed up $600,000 that she will use toward claims.

Just the mention of the EDIT subsidy drew a reaction out of Gary Brinkworth, vice chairman of the board. Under state statute, the sewer board and council is charged with setting a rate to cover the cost of operating the utility including bond payments.

Brinkworth said the EDIT backing has been a political crutch to keep rates lower than what is commanded by the state.

“Our council is hiding behind the EDIT funds,” he said.

Sewer board attorney Greg Fifer added the EDIT tax is coming from workers within the city limits. So their taxes are in essence keeping rates lower than what they should be for county and fringe sewer customers that aren’t paying the EDIT tax, he continued.

But in its summary, Crowe Horwath ruled out being able to remove the EDIT payment because the utility has missed interest payments and failed to satisfy other requirements of its loans.



Sanitation weighing on sewers

A total of $500,000 was shifted from the sewer fund to the sanitation account in 2008 and 2009 and was never paid back, Garry said.

That’s on top of about $5 million the sanitation department took from the utility in the 1980s and 1990s, she added.

Also, Garry is researching whether the final half of a $900,000 loan from wastewater to a tax-increment financing fund was paid back. In 2007 $450,000 was returned to the sewer fund but there’s no record the remaining half was returned.

City officials chose to borrow $2 million from sewers in 2003 to support the general fund, but that was paid back in 2004.

Sanitation is “the only fund that’s used any sewer money since 2003,” Garry said.

Of all the utilities, sanitation is the only one with a built-in annual increase for cost-of-living. The next round of bills will include that hike, and the council did approve a $2 increase in garbage rates last year to wean sanitation away from depending on sewer funding.

Mayor Doug England had suggested a higher increase of $5 a month for sanitation, but it was defeated on first two readings and amended to the $2 amount that was OK’d on third reading.

“Sanitation is a problem. I’ve talked about it since 1992,” Garry said.



What’s next?

Council President John Gonder said he’s “fairly sure” the rate increase will be on the agenda for a first reading next Thursday.

There isn’t a work session on the topic scheduled, but Gonder said a hearing could be slated after the initial ballot.

“I don’t think that we’re just going to vote it up or vote it down without further conversation on it,” he said. “We’ll address that probably at the meeting and see how people want to proceed with it.”



SO YOU KNOW

• Environmental Management Corp.’s contract with the sewer board is worth $3.6 million a year.