“Right now I know that the Water Department is really not in good shape,” Auvil said.
“You just don’t just snap your fingers and make a rate change,” Auvil said.
“It’ll be two or three months before you finally start digging out of the hole,” Auvil said.
By: Lydia Crawley
The Parsons Advocate
The City of Parsons Council discussed the need for a rate increase within the Water Department. The discussion came as part of the Council’s April 16th regular meeting. In the meeting, City Recorder Tim Auvil discussed the need for the rate increase due to a variety of factors including rising operation costs and insufficient funds for the Department requiring the City to provide additional funding from other sources. “Water needs a rate change more than sewer does,” Auvil said.
The discussion was part of a larger agenda item that approved the implementation of The Rodeheaver Group, CPA to evaluate Water and Sewer Rates and provide a proposal for any future needed rate adjustments and any possible employee pay increases. The
“Frankly, I know that this is the year that is for sewer, next year is actually for water,” Auvil said. “We need to invert those because water is in worse shape than sewer was.”
According to Auvil, the rate increases that the CPA group will evaluate can be implemented at different times, but by having both evaluated simultaneously, the City will save money. The dual evaluation will eliminate the need for a future CPA expense on the issue because the paperwork would already be complete, according to Auvil. “You can stagger those,” Auvil said. “By having the CPA do both of those Rule 42’s at the same time it will save money, but you don’t have to implement the rates at the same time. In other words, Water and Sewer all at once. You can implement the Water now and six months later you can implement the Sewer.”
City Attorney Tim Stranko said the City would need two rate increases on the Water. According to Stranko, the City needs a “Going Level Increase” to allow the City to break even on the Water Department and eliminate the need for the City to subsidize the budget of the Water Department with other budget categories. The second increase would come in the form of a “Project Related Increase” which would be related to bonds on any future projects.“It sounds like we need a Going Level just to break even if we’re in the red now and then to service the bonds that at some later time will be that second piece,” Stranko said.
According to Auvil, the City has been consistently subsidizing the Water Department with its regulatory required savings for bond payments. The Public Service Commission of West Virginia, according to Auvil, requires the City to maintain 115% of the amount of the City’s bond payments in savings. Auvil said the City has been having to subsidize the account to maintain the requirement. “The Sewer is kind of keeping up with it,” Auvil said. “But we have to maintain 115% in reserve in our savings to cover all of our bond payments. That’s mandatory by PSC regulation and that is what we have not been meeting because we have been having to take money out of the savings to pay the bills of the Water and Sewer Departments.”
Auvil also said the City needed to maintain rates that met 1.5% of Median Household Income in order to qualify for grant funding. “We also want to make certain that we meet 1.5% MHI, which is Median Household Income, otherwise we don’t qualify for any grants. Every half percentage you are up, you qualify for half a million dollars in grant funding in either department.”
Council Member Melissa Jones asked what time frame the last vote on rates set for changing the rates. Auvil said that while staggering implementation was discussed, the three year timeframe set was for re-evaluation of rates. “Every three years,” Auvil said. “It didn’t mean we were going to change, it meant we’re going to re-evaluate the rates on each department every three years and we were going to stagger them: one, one year; one the other year, instead of waiting eight, ten years and then just wham all of a sudden a massive increase.”
Auvil said that regardless of the time that has passed since the rates were re-evaluated, the Federal funding associated with the City’s Water and Sewer Projects would require the re-evaluation due to the grant funding. “Either way with the Water and the Sewer Improvements project, because you have Federal funds involved with that, it triggers an automatic rate evaluation anyway,” Auvil said. “In order to use Federal money you got to re-evaluate the rates, which basically once the project is near, I think it is 75 to 80 percent, that’s when the rate has to go into effect, during the completion, not during the bid process.”
Auvil said that while the requirement for implementation is tied to construction of the project, a rate increase can be implemented at any time in the process. The 75 to 80 percent requirement is a benchmark for rate implementation, according to Auvil. “We can implement it at any time, but right now I know that the Water Department is really not in good shape,” Auvil said.
“There’s been a lot of cost increase with chemicals like chlorine,” Auvil said. “
Jones asked Auvil about the Stabilization Fund for the Water Department and whether it existed to subsidize the Department’s financial shortfalls. According to Auvil, rate increases take time to show improvement in the finances. “That’s what that’s there for because right now we have to have that,” Auvil said. “Because you just don’t just snap your fingers and make a rate change and even once a rate is implemented, if there’s an increase, you’re not going to see any good from it for months until things start getting built back up. It doesn’t happen immediately just because you increase the rates today. It’ll be two or three months before you finally start digging out of the hole.”
A motion to approve the The Rodeheaver Group, CPA to “implement Rule 42 per PSC Regulations, to evaluate the Water and Sewer Rates and present a proposal for needed future rate adjustments, to include any upcoming bond payments for both departments and any possible employee pay increases” was passed by unanimous vote of the Council.
The next meeting of the City of Parsons Council will be held Tuesday, May 7th at 6 p.m. at the Charles W. “Bill” Rosenau Municipal Building located at 341 Second Street in Parsons.
