MOUNT VERNON — Mount Vernon’s utilities commission approved a 5% water rate increase effective March 1, 2023. The last rate increase was in 2017.
Commission members discussed the increase at their November and December meetings.
At the November meeting, contract engineer Emily Platt said that with maintenance and planned projects, the city needs to implement a 5% rate increase — ideally for the next three years — in order to avoid a deficit in 2027. The cost projections include an estimated inflation rate of 10%, 8%, and 6% for years 2023-25, respectively.
City Council member Tammy Woods, an ex-officio member of the commission, felt those numbers were “pretty aggressive” since the 10% inflation level has not yet been reached. She favored a 3% or 4% rate increase.
Platt said that with a 3% increase for 2023, the water utility would hit a deficit in 2026.
Noting that the commission is currently doing a capacity rate study and has previously done tap fee and other studies before making changes, Woods recommended an independent rate study.
“I think we owe it to the citizens to confirm what you found internally,” she told the commission on Wednesday.
An independent study would take four to six months. Safety-service Director and Commission Chair Richard Dzik said his concern was the effect waiting six months for the study and another three months to give residents a “heads up” would have on the budget.
“I think any data we can get off of a separate rate study would guide us for 2024,” he said. “I am comfortable using the rate study we’ve used for the last 20 years to determine rate increases, at least for next year.”
City Engineer and commission member Brian Ball pointed to the increased cost of materials and labor over the past few years. He said that with an increase only in 2023, the utility will face a deficit in 2027.
That assumes the city can haul its lime sludge to farmers’ fields rather than a landfill and that no emergency occurs. If either of those scenarios occur, the water utility will reach a deficit much sooner. Hauling the lime to a landfill will cost around $2 million versus the $350,000 budgeted for 2023.
The Ohio Environmental Protection Agency has ordered the city to remove 7,500 tons of lime by Dec. 31 and another 7,500 tons by Mar. 31, 2023. The remaining 27,500 must be removed by Dec. 31, 2023.
As of Nov. 21, the city has removed 11,767 tons of lime.
The city is appealing the OEPA order. It is not known whether the OEPA will enforce the deadlines. Ball said if the OEPA does enforce the deadlines, that is an expense the city potentially cannot meet.
“My opinion is I’d rather not hold an increase for 2023 and then have a balloon increase in 2024,” Dzik said. “After five years, there needs to be something.”
Commission member Mike Miller also favored an increase now, noting that the commission has discussed it before but not moved forward.
“We need to resolve it,” he said.
The commission ultimately approved a 5% increase for 2023 and will work with an independent consultant to have a rate study completed for future years.
‘Growth pays for growth’
Mark Rufener of K.E. McCartney presented the results of a capacity fee analysis for water and wastewater. The capacity fee is a one-time fee charged to new customers who connect to the water and wastewater systems.
The fee does not affect existing users unless they increase the size of their water tap due to expansion or upgrades.
Rufener said the concept is that “growth pays for growth.” New development pays for what infrastructure the city needs to put in to accommodate new customers.
Several developments are either under construction or in the planning stages. Developments include Gilchrist Estates (under construction) and Rockford Homes (The Retreat at Mount Vernon) on the city’s east side, the Ohio Eastern Star Home expansion, the former school at 301 N. Mulberry St., and Liberty Crossing on south Newark Road.
On the wastewater side, estimated project costs stand at $42.75 million. Of that, $26.26 million is related to expanding capacity for new customers.
On the water side, the estimated cost for projects is $49.83 million. Expansion costs account for $46.33 million.
Current capacity fees vary based on size of line used. As an example, a complete installation for a 5/8-inch water line is $3,310.08. The rate study recommends a $5,300 fee for water and $4,200 for wastewater. These fees are what the developer would pay to connect to the city’s water/wastewater system.
Rufener said these numbers are somewhat low compared to other areas. Galena just raised its wastewater fee to $9,000; the last time the municipality raised its rates was 2008.
Sunbury’s rates are $9,000-$9,500 and indexed either to a 3% annual increase or the cost of inflation.
Ball said the commission needs to consider whether to phase in higher capacity fees as some developments are already in the pipeline and close to the permitting phase.
“We want to think about the fairest way to roll this out,” he said. “We don’t want to wait too long, because the direction we’ve gone is growth paying for growth.”
The flip side is that many developers have already run their numbers based on current fees.
“Part of me thinks do these projects fall apart if we increase the fees; the other part of me thinks this is exactly what we’re trying to capture,” Dzik said.
Ball suggested a small increment right away so that it’s not a painful increase.
“Maybe we can phase it in and set it on automatic. We publish a scale so that the developers know that the sooner you come, the sooner you get started and pay your fee, the better the deal is,” he suggested.
Commission members made no final decision but agreed they want to have something in place by January 2023. Ball encouraged community members to contact the city between now and then to offer comments.
