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Mount Vernon residents will likely see a $10.17 monthly increase to their water bills by the end of summer, following the city’s decision to move ahead with the rate hike April 13.
The figure is actually the combination of two new increases.
“This is a case of two things coming together at the same time,” said City Attorney Beth McFadin-Higgins. “We didn’t really have a choice on either of these.”
The smaller $1.85 amount will pay for debt services associated with the Water Department’s most recent construction project, while the larger $8.32 sum funds work mandated by federal phosphorous regulations at the wastewater plant.
The rate increases were introduced to the Water Utility Board and City Council on Thursday, and a public hearing will be held on the matter May 11 at City Hall.
“Unfunded federal mandate” – What the $8.32 increase pays for
In February 2016, Indiana told Mount Vernon it needed to make drastic changes to phosphorous filtration at its wastewater treatment plant, or face costly penalties.
A January 2019 construction deadline was also set.
McFadin-Higgins and other officials say it is a case of federal rules without federal dollars.
“The government tells the state to enforce these regulations, and then the state tells us,” McFadin-Higgins said. “But no one gives us money to do it. That’s why it is an unfunded federal mandate.”
Phosphorous is a relatively safe mineral to humans, but in excess, it can be lethal to plants and wildlife.
Water/Wastewater Superintendent Chuck Gray said run off from agricultural fertilizers, manure and organic waste is the leading cause of the excess phosphorous in the sewer system.
“But we have no way to regulate that farm run off,” he said. “So, we have to pay for a way to filter it out instead.”
Those upgrades and improvements come with a $2.59 million price tag. The city plans to pay for this through a low-interest loan from the state, but in doing so, it must also find a way to pay the money back.
The $8.32 monthly consumer increase is expected to generate those repayment funds over the next 20 years.
The project is under a tight deadline. All upgrades must be complete in less than two years, and construction bids are set to go out April 25.
Scott Miller, of Umbaugh and Associates, the certified public accounting group that reported its sewer rate study to the Council, said he must lock in the low-interest loan rate no later than May 31.
What the $1.85 increase pays for
City Council members chose the lowest rate increase available to consumers during the Water Utility Board meeting.
The two figures presented to the Council reflected rate increases associated with mandatory debt repayment schedules.
In 2015, the Water Department reached out to the City. It needed major upgrades to meet consumer demand and government standards. It also needed to get the work done quickly.
The lengthy to-do list included the purchase of a backup filtration system, an elevated water storage tank for the distribution system, upgrades to the electrical system and the construction of a new water tower.
The projects ultimately totaled $11.2 million.
The City of Mount Vernon didn’t have that much money on hand, so it issued what is known as bond anticipation notes (BANs).
BANs are small, short-term bonds that supply funds for specific projects. Now that most of the work is complete, the city can issue a full bond sale, but it must still pay off interest from its BANs.
Mount Vernon raised rates just two years ago in order to pay for the initial BANs purchase.
The Council had to decide last week whether to put off selling the full bonds another year and incur more interest in the process, or finally put all the bonds up for sale.
They chose the latter.
If the city charged residents a few dollars more each month, it could ultimately save $1.8 million in interest over the next two decades.
The other option charges everyone a lower rate of $1.85, but ends costing the city $1.8 million in interest.
Councilman Larry Williams made the first motion to approve the last choice, the cheapest option for consumers. A unanimous roll call vote followed.
Why the quick deadlines?
Many Mount Vernon residents have voiced frustration over the proposed water bill increases around the city and on social media sites, like Facebook.
“A 20 percent increase is a bit much,” Mount Vernon resident Randy Adams stated, “especially on a fixed income.”
But government officials say that the impending rate hike is mild compared to other nearby communities, like Evansville.
Back in October, Evansville’s City Council held a similar meeting where the members unanimously approved to increase water/sewer rates, but the hikes were steeper and longer lasting.
“No one likes rate increases because we all have to pay them,” said Mount Vernon Mayor Bill Curtis. “But there are cities all across the country struggling with big projects that need to happen because the federal and state government is mandating that they happen, but the cities don’t have the current funds on hand to maybe pay for everything all at once. We’re going through a little of that right now, but there are plenty of places where it’s much worse.”
During the May 11 public hearing meetings on proposed rate increases, Miller will compare Mount Vernon’s proposed hikes to other towns and cities. Residents and consumers will have an opportunity to ask questions of Miller and the Council.