Lincoln aldermen decide new sewerage rate structure

 

[November 29, 2018] 

LINCOLN 

At the Tuesday evening Lincoln City Council Committee of the Whole, aldermen instructed city attorney John Hoblit to draft ordinance documents that would impact 2019 billing structure for city sewerage services. Hoblit would draft an ordinance adopting a new rate structure for sewerage bills. He would also draft a document to repeal the sewerage rate increase of $1 every two years that was previously in place.

The decisions on the rate structure for sewerage billing has been the topic of discussion over the last several weeks. Questions arose concerning the number of homes that were not currently paying water bills and why.

Aldermen asked City Clerk Peggy Bateman to look into the number of homes that are considered “snowbird” homes, where that residents leave down during the winter months. They were also interested in knowing how many vacant homes were in the city that were not receiving water bills at the moment.

This week Bateman provided those answers. There is an estimated 800 residential properties in Lincoln that are currently not paying water bills. The majority of these houses are vacant properties year-round, and Bateman reported there are about 20 homes in the city that are vacant during the winter months while residents spend the winter in warmer climates.

The reason these questions were important was to understand what impact these homes were going to have on the annual revenue from sewer bills.

On Tuesday evening, Christy Crites and Shannon Smith of Crawford Murphy and Tilly were on hand to answer questions about the billing structure and hopefully put to rest some of the concerns of the aldermen.

They explained that the rate structure was designed to pay regular operating costs of the Lincoln sewerage treatment plant, maintenance costs, and also to cover the cost of loan or bond payments. The city will need to secure funding for the EPA mandated “Long Term Control Plan (LTCP).”

Crites, assisted by Alderman Ron Fleshman and Clerk Bateman, explained that the billing structure was based on 4,665 monthly water bills issued by Illinois American Water (IAW). While the 20 snowbirds may impact that total, the approximately 800 homes that are currently not paying a water bill were not included in the formula for establishing the rates.

Alderman Tracy Welch spent a good deal of time trying to drill down to the issues that could arise with the new rate structure. His concerns started with the 800 locations, but evolved into questions about how many people are being billed for water that are not paying their bills, and how many are currently being billed for sewerage services that are not paying their bills.

Crites and Bateman explained that for those who fall behind in their payments there are late fees attached and also if water and sewer are ‘disconnected” there are re-connection fees. None of that money has been included in the plan to repay the LTCP loans, so in the end, it should all balance out.

They explained that late fees on sewer are assessed at $5 the first day late and $25 per month for each 30 day period after that. That money, once collected, will help make up for the bills that go unpaid, and will also provide an opportunity for extra money in the city sewer account from time to time.

In setting the rate, the city has looked at a number of challenging scenarios. Questions about the number of snowbird and vacant homes were satisfied.

Another question concerned utilizing the months of October, November and December to acquire a three-month average to set each residential billing rate.

There are snowbird accounts where homeowners leave town in that fourth quarter of the year. In other cases, some of those unoccupied homes could become occupied after the three-month average dates and would need a rate assigned.

Fleshman said that after much consideration he would recommend that the city adopt a “cover-all” statement that says any home that is unable to establish a three-month average during the months of October, November, and December will automatically be charged the level two sewerage rate of $35 per month.

Fleshman said that looking at the total water usage figures provided by IAW, about 60 percent of all water customers fall in level two. He said it seemed to be a fair and equitable way to establish the rate. In the case of vacant homes becoming occupied he said that the rate would apply until the resident passed the three month period, then the rate would be established based on actual water consumption.

The $35 rate would be applied to the snowbirds, unoccupied properties that became occupied after the three-month average period, and also to residences with shared water meters.

Bateman had brought up the question of the shared water meters in a previous meeting saying that some of the rental properties had shared water meters. The landlords dealt with that from the water usage perspective, but how would the city address it? She was asked how it was addressed now and said that the landlord received sewerage bills for each residence. So if the property were a duplex with a shared water meter, the landlord still received two sewer bills for that property. Aldermen said then that would still be the case with the new structure. Because there is no way to figure an average water consumption per residence, the “cover all” would apply here as well.

Welch said he was concerned about the consistency of the billing with all these variables. Had Crawford Murphy and Tilly taken into consideration unoccupied homes, snowbirds, and other scenarios that could reduce the projected revenue?

 

Crites said that the 4,665 customers used in the formula were confirmed active accounts, and that the unoccupied homes had not been included in the projects. Therefore, if any of those homes became occupied, it would be additional revenue for the city.

Welch asked if the formula had taken into consideration the accounts that are active but delinquent in their payments. Crites said it did not, but again there are the late fees and reconnect fees that are also not considered in the projections.

Alderwoman Heidi Browne said that the 4,665 is not going to be a constant, that there is always going to be changes going on in the city that impact that number. Michelle Bauer drew on a comment made earlier in the evening by Crites that the figures presented are a “snapshot” of what revenues could or should be, but that it is never going to be a consistent figure, it will vary from month to month.

Welch said his concern is, with so many variables, is CMT sure there will be enough money to pay the debt. Crites pointed out that the firm has prepared a “Three Tier Rate Structure” that will call for $5 per month rate increases across the board in 2020 and 2021.

She explained that the rate increase in 2020 will certainly be needed. However, the rate increase in 2021 will be implemented only if necessary. She said that by 2021 the city should know what the final costs of the long-term control plan are, the amount of money borrowed, and the pay-back on that money. The city can then determine, do they need to make another $5 per month increase, or maybe only a portion of that $5, or perhaps nothing at all. Basically the third tier proposed by CMT is the insurance policy to assure that the city will have the money it needs.

Moving on, Welch wanted to know if the city needed to keep the $1 per month increase every two years that is currently in place. He said he would like to see that go away considering the size of increase Lincoln residents are going to be facing when the new structure takes effect.

Crites defended the $1 rate increase saying that the city needed to look at the sewer bill as going into three separate pots of money. Pot one is the original $19 per month customers currently pay. That pot covers the costs of daily operations and maintenance at the waste treatment plant. The second pot is the $1 increase and that covers inflation. She said that would help cover increases in fuel and electric costs and other operating increases due to inflation. The third pot then is the difference between the new rate and the old. She said pot three was going to hold the money that pays the loan payments for the LTCP. Crites noted, in her opinion all three pots are needed and the $1 increase should not go away.
 

Welch said he did not agree, and Fleshman suggested that the city could do away with the $1 increase until after 2021. Welch said he would go along with that.

At the end of the discussions Hoblit was instructed on writing up drafts of the ordinance for the new rate structure as well as a document to rescind the $1 rate increase currently in place. Fleshman said he would work with Hoblit on the draft. That draft will then be brought back to the council at the new committee of the whole meeting on December 11th and could be voted on at the December 17th meeting.

It should be noted that CMT’s recommendations include an effective date of January 1, 2019. That date needs to be adhered to in order to keep the actual revenue close to the projections. HOWEVER, aldermen have not discussed the effective date that the new rates would begin, and that may be dependent upon how quickly the ordinances can be passed once the drafts are approved.

[Nila Smith]