Lin­coln Coun­cil To Consider New Wa­ter Sur­charge

REV­ENUE WILL PAY FOR $4.5-MIL­LION WA­TER TANK

Washington County Enterprise-Leader - - FRONT PAGE - By Lynn Kut­ter

LIN­COLN — Lin­coln City Coun­cil plans to consider an or­di­nance at its Jan­uary meet­ing to as­sess a rate in­crease on city wa­ter bills to pay the costs for a new wa­ter stor­age tank to hold two mil­lion gal­lons of wa­ter.

The ex­act amount of the in­crease has not yet been de­ter­mined but some op­tions were dis­cussed at a meet­ing held in late Novem­ber.

The city is con­tract­ing with Crist En­gi­neers Inc., of Lit­tle Rock, for a new el­e­vated wa­ter stor­age tank and pump­ing sta­tion to im­prove the city’s wa­ter dis­tri­bu­tion sys­tem. The tank will be lo­cated on two acres on the east side of North Jack­son High­way. The city pur­chased the land from Thomas Lee and Glo­ria Jean Hun­ton for $50,000.

The city con­tracted with An­der­son En­gi­neer­ing Con­sul­tants to con­duct a geotech­ni­cal sur­vey of the land and this anal­y­sis found the site suit­able for a wa­ter stor­age tank.

In a city meet­ing held Nov. 27, Matthew Dunn, vice pres­i­dent with Crist, gave an up­date on the project and dis­cussed sev­eral op­tions on a rate in­crease to gen­er­ate enough rev­enue to pay for the project.

Dunn said the de­sign plans have been sub­mit­ted for ap­proval to the Arkansas Health Depart­ment. He hopes the Health Depart­ment will ap­prove the plans in early Jan­uary. The city will then ad­ver­tise for bids to build and in­stall the tank in Jan­uary, with a ten­ta­tive bid open­ing in mid Fe­bru­ary.

The city is work­ing with Stephens Inc., of Fayet­teville, and Fri­day, El­dredge & Clark law firm on the fi­nan­cial side of the project. The city plans to is­sue up to $5 mil­lion in rev­enue bonds to pay for the land and the stor­age tank project. Dunn es­ti­mates the project will cost $4.5 mil­lion.

Dunn said his staff looked at more than two years of monthly wa­ter con­sump­tion re­ports to

de­ter­mine the rate in­crease needed to pay off the rev­enue bonds.

“We wanted to build a model of your wa­ter us­age from all your cus­tomers to project the rate changes needed to gen­er­ate the ad­di­tional income,” Dunn said.

For the model, Dunn said the firm only looked at rev­enue com­ing in, not the rev­enue that should come in be­cause not ev­ery­one pays. The model was based on 2,343 cus­tomers.

Dunn of­fered sev­eral op­tions for bring­ing in rev­enue to re­tire the new debt, de­pend­ing on whether the city wanted to as­sess a flat sur­charge for all cus­tomers or base the rate in­crease on wa­ter us­age.

On the av­er­age, the wa­ter depart­ment’s op­er­at­ing bud­get has been about $1.9 mil­lion per year for the past three years, Dunn said. The av­er­age income for the same pe­riod is $1.88 mil­lion an­nu­ally, with data show­ing the trend line is slightly up on monthly rev­enues.

Dunn did not rec­om­mend bas­ing a rate in­crease on an­tic­i­pated growth in cus­tomers and us­age. If the city’s rev­enue in­creases, he said the city would just “bank” that ad­di­tional income to pay off the debt sooner.

Dunn es­ti­mates the city’s an­nual debt cost will be about $300,000 or $25,000 per month for the wa­ter stor­age tank project. He rec­om­mended a rate in­crease or sur­charge that would bring in about $375,000 per year.

Those at the meet­ing, which in­cluded city staff and mem­bers of the City Coun­cil and Plan­ning Com­mis­sion, dis­cussed whether to go with a flat fee in­crease for all cus­tomers or a sur­charge that is a com­bi­na­tion of flat fee in­crease plus a per­cent­age in­crease based on us­age.

Dunn said a flat fee in­crease or sur­charge of $13 per month per cus­tomer would bring in $300,000 an­nu­ally and a $13.50 sur­charge per month per cus­tomer would gen­er­ate $379,000. For the av­er­age city cus­tomer us­ing 4,000 gal­lons of wa­ter each month, wa­ter bills would go up from $47.02 to $60.50 with a $13.50 flat sur­charge, Dunn said.

An­other op­tion, he said, could be a $10 sur­charge per cus­tomer per month and then a 9 per­cent in­crease on each unit rate. This would bring in about $381,000 per year. For ex­am­ple, un­der this op­tion, a city cus­tomer’s av­er­age bill for 4,000 gal­lons would go up $12.58 per month.

Terry Bryson, who will be­come a new Coun­cil mem­ber in Jan­uary, said the most fair method prob­a­bly would be to base part of the rate in­crease on wa­ter us­age.

How­ever, Rhonda Hulse, city busi­ness man­ager, pointed out the rate in­crease has to bring in the rev­enue needed to make the bond pay­ment.

“If wa­ter us­age is down, rev­enue may not come in,” Hulse said, adding, “We’ve seen very up years and very down years. One bad year could be a huge prob­lem.”

Hulse said an­other con­sid­er­a­tion for a flat fee is that Lin­coln charges dif­fer­ent rates for five user groups on the city’s wa­ter sys­tem. These are agri­cul­tural, county, city, south­east wa­ter and ru­ral west. The unit rates for some of these user groups are much higher. If the city in­creased the unit rate per gal­lon by 9 per­cent, some of those groups would see a much higher in­crease than other groups, Hulse said.

Look­ing at the bud­get, Hulse said she pre­ferred a flat sur­charge per cus­tomer, not­ing, “I’ve seen it (wa­ter us­age) fluc­tu­at­ing so much.”

The con­sen­sus at the meet­ing was to rec­om­mend the City Coun­cil ap­prove a flat fee for the wa­ter stor­age tank project, with the prom­ise the sur­charge would cease af­ter the debt is paid off. An­other sug­ges­tion at the meet­ing was that the city cre­ate a sep­a­rate es­crow ac­count for the rev­enue gen­er­ated by the sur­charge.

Mon­day, Rhonda Hulse said the ex­act amount for the fee in­crease “ob­vi­ously” is a de­ci­sion that will have to be dis­cussed and de­bated by the City Coun­cil and the way to as­sess the fee in­crease also will have to be de­cided by Coun­cil mem­bers.

For ex­am­ple, Hulse said the city could in­crease the base fee for the first 1,000 gal­lons of wa­ter used by all cus­tomers by the same amount or just put in a line item wa­ter tank sur­charge on ev­ery­one’s bill.

She said the city may try to sched­ule an­other pub­lic meet­ing on the wa­ter tank be­fore the Jan. 15 Coun­cil meet­ing.

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