Marshalltown residents will likely see an 18 percent increase to their sanitary sewer rates for the next several years.
A consulting firm that determined how much sanitary sewer rates need to increase in order to ensure the sanitary sewer system stays fiscally solvent presented its study's finding at the Marshalltown City Council's Monday night meeting.
"We have known for some time that there would be a rate increase," Randy Wetmore, city administrator, said.
T-R PHOTO BY DAVID ALEXANDER
Deb Mathias, civil engineer with Stanley Consultants Inc., talks Monday night to the Marshalltown City Council at its weekly meeting about the rate study her company did for the city. The study recommends an 18 percent increase each year between 2013 and 2015.
The city has not increased sanitary sewer rates since 2009.
Debra Mathias, civil engineer with Stanley Consulting Inc., the firm hired to perform the rate study, said wastewater utility provides clean waterways, helps protect wildlife and contributes to healthy neighborhoods.
However, without a rate increase, the utility will begin running at a deficit. Should that happen, it would impede future capital improvement projects such as the east interceptor project, which the council approved as part of its consent agenda.
"If you don't raise rates, the only other option is to cut your expenses, which is pretty hard to do," said Maggie Burger, financial analyst with Speer Financial, who the city also hired as part of the study to handle the bond issuing.
An increase has become necessary because of inflation and increased maintenance costs, Mathias said.
According to the study, city contributors - residents who pay for sanitary sewer use - will see their rates increase 18 percent each year through 2015. The current rate is $10.27. That rate will increase to $12.12 in 2013, $14.31 in 2014 and finally to $16.89 in 2015.
This increase, according to the study, will place Marshalltown as the median rate for Iowa cities with populations more than 10,000 beginning in 2013.
Wetmore pointed out that the rates need make the sewer be viable since the city does not inject property tax earning into it.
"There is nothing else that makes this work," he said. "Rates have to cover the operation and capital improvements."
Burger said the city must keep a 1.1 coverage factor, meaning its net revenue must remain 1.1 times the city's payment amount on all bonds included in the rate.
The city is not required to have funds on-hand for debt service reserve, cash reserves a borrower sets aside to ensure payments to bond holders.
Despite not being required by the bank to have such a fund, Burger said Speer Financial recommends the city maintain around $1.9 million in debt service funds.
Following the council meeting, the city council held a closed session to discuss preliminary decisions on pursuing eminent domain as it relates to the sanitary sewer east interceptor project.
Curt Ward, city attorney, said he hopes such measures will not be necessary, but the council needs to be prepared in case they are.
The public hearing for that topic is set for Nov. 26.