A water and sewer rate hike has been proposed for the City of Clinton, with the average user expected to pay a few quarters more on their monthly bill — a move made in part to generate revenue for high-priced projects coming down the pipe.
Last week, City manager Shawn Purvis briefed City Council during a special budget workshop on the status of the Water and Sewer Fund, capital expenses proposed to be funded and the need to prepare for the future. While there is $387,000 in debt coming off the fund’s books in 2015-16, there is the need to set money aside for ongoing and upcoming projects.
Capital items range from vehicles, including a flat bed truck for $40,000 and two pickup trucks for a combined $46,000 to a trash pump for $35,000 and utility line cameras for $15,000. There are additionally various wastewater treatment plant capital items totaling $200,000, along with a proposed Environmental Program Tech position that would allow for more projects.
All of that doesn’t include the sweeping improvements that will come as part of the multi-million dollar water plant expansion, among other projects, notably the recently-approved Pierce Street utilities extension project being added to the N.C. 24 expansion. That comes with a $500,000 price tag alone — and the city plans to pay cash.
“The Pierce Street infrastructure will consume all of the debt service coming off but we will be able to pay cash rather than assuming more debt as a result,” Purvis explained.
City water and sewer projects, specifically the plant expansion, will put the city in a solid position for the future — the city’s bulk water purchases are expected to remain steady for 2015-16 but then are anticipated to decline up to 25 percent — but there is still a matter of revenue generation to offset the cost of those endeavors.
To that end, Purvis has recommended an increase in water and sewer fees by 1.5 percent, expected to yield an increase in estimated revenues of $60,000. The same hike was done last summer for the current budget.
“The slight increase helps us keep up with inflation and continue to prepare for upcoming projects,” Purvis stated. “We are also preparing financially for the upcoming debt obligation from the water production expansion ($4.8M), Southwood elevated tank ($1.7M), and utilities relocation for N.C. 24 ($2.5M).”
An adjustment allows the city to maintain pace with inflation for operating expenses such as chemicals, power and other costs.
“Even with the adjustment,” the city manager noted, “our water and sewer rates are still among the most affordable in the state. It is important that we are able to maintain our system properly in order to keep the rates low in the long term.”
The proposal, if approved, would bring water base rates from $12.37 to $12.56 and sewer base rates from $12.89 to $13.08. Similarly, water consumption rates would increase from $1.86 to $1.88 per 100 cubic feet and sewer consumption rates would rise from $1.80 to $1.83 per 100 cubic feet.
That means for the minimum bill, less than 300 cubic feet, the existing monthly bill of $30.64 would increase by 47 cents to $31.11. For an average household with a 800 cubic feet consumption, that would translate to a hike of 72 cents from $48.96 to $49.68. Large consumption households, at 1,600 cubic feet, would up bills by $1.12, from $78.24 to $79.36, according to city staff numbers.
In a memo to Council earlier this month, Purvis addressed what he deemed “revenue concerns,” saying that municipalities as a whole have taken a hit in revenues over the past couple of years with the expiration of the hold harmless sales tax and the removal of privilege licenses.
“For rural areas with slow growth, these losses are more pronounced,” Purvis stated, noting revenue losses to the tune of approximately $175,000 for the city due to hits in those areas. “This is the equivalent of 2.5 cents on the tax rate. The city has responded to fill the gap with modest sales tax growth, use of fund balance and expenditure cuts.”
The city will also lose $15,000 in the sale of recyclables, as well as see a slight decline in Powell Bill Funding. While modest growth in sales tax revenues and ad valorem should generate about $65,000 in revenue, Purvis said, that still leaves the city’s expected revenues for 2015-16 at $75,000 less than the current year.
“Coupled with the fact that the FY14-15 budget included a fund balance allocation of $150,000, we are beginning FY15-16 budget scenarios with $240,000 less in revenues,” Purvis pointed out. “This immediate deficit does not take into account departmental expenditures or other mandated expenses that may originate from the state or county.”
He has suggested a number of options for revenue generation, including the implementation of business registration fees to offset privilege license elimination. Purvis also said increasing the fire district tax by half-cent to 10 cents — in line with other county districts — would generate an additional $20,000. The Council asked Purvis to make that request to the county for the upcoming budget.
Last year, the city requested county commissioners consider the rate increase for the Clinton Fire District but the request never made its way to the agenda.
“Nearly a third of our responses are to calls outside the city limits,” the city manager said. “The increase in the district tax rate will produce revenue to cover a corresponding amount of the fire department’s budget.”
Increasing sanitation collection fees, last done for the 2013-14 budget, would generate approximately $9,000 for each quarter raised, while increasing the household bill by $3 per year. Residential rates currently stand at $15 a month.
“While not a desirable course of action to take,” Purvis noted, “increasing the property tax rate generates the largest revenue return. A penny on the tax rate is equal to $72,000.”
All options are on the table, and Purvis said the proposed budget is still a working document at this point. He said any rate increases are still subject to Council’s approval.
“At this point, we have not presented a formal General Fund budget proposal to Council. We have only informed them of some possible ways to help close the gap, which will have to be a balance of cost-cutting and revenue generation,” Purvis remarked. “This is the initial proposal to City Council and the actual budget is still subject to change based on Council’s evaluation of staff’s proposals.”