COLUMBIA CITY — Columbia City’s Common Council heard from Utility Rate Advisory Board President Lee Baatz at its meeting last week to discuss a likely upcoming water rate increase.
Baatz is part of a five-member board that was re-established with the city exited the Indiana Utility Regulatory Commission. The board includes one individual representing each district in the city, and another non-resident utility customer.
Baatz does not live in the city limits, but is a city electric customer.
The committee met with Mayor Ryan Daniel and a consultant to review the financial status of the city utilities, particularly the water utility, which is in need of increased funds.
The water utility generates about $2 million each year, but more than 20 percent of those funds go toward debt service. Almost all of the rest is spent on operation and maintenance of the utility, and there is little money in reserve for emergencies.
As a condition of the bonds, the city is supposed to have extra funds in reserve, but that is not the case.
“The water utility is in technical default of bond coverage ratios,” Baatz said. “It has made its payments, but it doesn’t have sufficient reserves.”
Not having that cash on-hand can put the city in a bind, affecting credit scores and potentially preventing the city from obtaining more bonds in the future. Additionally, it may be difficult to fund emergencies, such as large-scale water main breaks.
“If something severe breaks, you could have a mess on your hands,” Baatz said. “You need to build up some funds. You need to be able to respond.”
Because of this, the Utility Rate Advisory Board is suggesting a 25% increase.
Though 25% may sound hefty, the cost is about $5 for the average user — about 4,000 gallons of water per month.
The increase is not 25% of customers’ overall utility bill, rather, just the water portion.
“Outside of trash, water is the cheapest. It takes less to clean it before we give it to you than after,” Daniel said, referring to sewage bills.
Baatz indicated that the increase is largely a cost-of-living increase, as prices of materials, such as pipes and well replacements are on the rise.
“This is an inflationary catch up,” Baatz said.
Fortunately for city utility customers, the impending water increase will likely “carry us through for a number of years,” Baatz said.
The water utility has bonds that will be paid off in 2022 and 2027, giving the utility several hundred thousand dollars more per year to utilize on upcoming expenses.
“I won’t say we’ll have no increase, but we’ll be paying out less and have less debt,” Daniel said.
Mike Shoda, water department superintendent, has a list of items that need completed, and won’t be possible without more funding.
The list includes repairing, and eventually replacing a well, redoing expensive filters (mandated by the Indiana Department of Environmental Management), installing smart water meters, and adding phosphorus to the water, which helps coat lead pipes — most of which are privately owned by homeowners.
Daniel intends to mail letters to residents who would be affected by the increase, and a public hearing will be held. It is unclear when the rate increase will be on the council’s agenda or when the increase would go into effect.
“At the end of the day, the percentage sounds bad, but it’s not a huge amount,” Councilwoman Jennifer Romano said.