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NL to consider water, sewer rate increases

By Lori Lindner
North Liberty Leader

NORTH LIBERTY– As North Liberty’s population continues to rise, increasing the number of customers for which the city provides sewer and water services, it’s not enough to keep up with demand.
At least, not when the demand is for new or expanded facilities for both utilities.
Therefore, the North Liberty City Council will consider proposed rate increases for both services. If approved, water bills would increase by 5 percent in both the base rate and the per-gallon rates, and sewer rates would go up 8 percent on both levels as well, effective July 1.
It means the average consumer using 3,000 gallons of water per month will pay about $1.16 more for water, and $2.56 per month additional
for sewer.
North Liberty City Administrator Ryan Heair told the council during its May 13 meeting that estimates of revenues and expenses for providing services from the city’s January 2014 budget discussions were still on track. Costs for the wastewater facility expansion was estimated by Fox Engineering at $15.3 million, after the firm completed its facility study and presented to the council last June. The estimate for the new water plant was $13.2 million.
Heair provided a spreadsheet showing the expected costs of upgrading the city’s membrane bioreactor wastewater system and building a new water plant, slated for construction in fiscal year 2016, and the projected user rate increases needed to fund them.
“We see the fund balances growing substantially,” said Heiar. “What we need to be aware of when we borrow for these projects is our debt service coverage. That will determine our best interest rate.”
Council member Terry Donahue said he compared North Liberty’s proposed new rates with communities of similar growth rates. Coralville had the lowest rates, with $10.60 on 3,000 gallons used per month, while the town of Spencer came in the highest, at $32.
“Ours is proposed to be $24.31, which is starting to hit the higher end, but I’m not that concerned about it right now,” said Donahue. His comparison of sewer rates showed Coralville’s were lowest, at $12.54 per 3,000 gallons, and Boone’s were highest, at $38.40. North Liberty’s proposed new rates would be $32.05 per 3,000 gallons. Both water and sewer rates are anticipated to go up each year over the next few years as well.
Donahue suggested the city consider funding at least part of the projects with means other than loans. In addition to constructing a new water plant, the city plans to extend a water main on the east side of town, replace aging water mains elsewhere, build a new water tower and dig a new Jordan well, all projects to be phased in over the next several years.
“With the escalations we are facing, I’m worried we are pricing ourselves so that we will be unattractive to possible commercial developers. The more we can kick out of the State Revolving Fund loan and user rate series and flip it over to TIF like we do roads, it helps give our people a break and helps stabilize rates a little,” Donahue said.
“Maybe we should look at TIF financing, because we are going into brand new areas and won’t be hurting anybody’s tax rate.” TIF (Tax Increment Financing) is a funding mechanism, available to cities to pay for infrastructure upgrades or economic development projects, capturing all the new property tax generated when an area is developed for a specified amount of time, rather than having to share it with other local taxing entities.
Heiar said the concern over using TIF revenues to pay for such projects in mostly residential areas is that the city would then be required by law to fund a portion of what is spent on low- and moderate-income housing subsidies.
“That would be something we’d have to iron out,” said Heiar.
Donahue also suggested combining and averaging the proposed hikes in sewer rates for fiscal years 2014, 2015 and 2016– projected at 8, 15 and 10 percent respectively– and implementing a fixed increase now and in future years instead.
“That way there is some stability from year to year,” Donahue said. “We forward-fund it to some degree.”
Council member Chris Hoffman said ramping the increases up gradually makes sense.
“You don’t like surprises if there is going to be such a dramatic increase,” said Hoffman.
No council action was required on the rate increase last week. Heiar said he would bring more funding options back to May 27 meeting for further consideration.