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Knightstown May See Water Rate Hike
Dec. 12, 2007 - Having gone 16 years without a rate increase, the Knightstown water utility now finds itself struggling to keep afloat, its expenses exceeding revenue.
To correct this problem, an Indianapolis accounting firm has proposed that Knightstown's water utility needs to raise its water rates and service charges 47.8 percent to meet current and anticipated future expenses. The Knightstown Council, briefed at a special meeting last Thursday on the results of recently completed rate study, are expected to give further consideration to the potential increase at next Wednesday's regular monthly meeting.
At last week's special meeting, Scott Miller of H.J. Umbaugh & Assiociates reviewed his firm's report on the town's water utility with council members. According to Umbaugh, the water utility needs $346,815 to cover its yearly operation and maintenance expenses, debt service requirements and capital improvements, nearly $94,000 more than its projected available revenue.
Although Umbaugh's report proposed a 47.8 percent "across-the-board increase in total present rates and charges," customers’ water bills would actually rise more than 47.8 percent. That is because customers would also see an 84.3 percent increase in a monthly fire protection charge added to their bills to cover the expense of the town renting its fire hydrants from the water utility.
Currently, 998 Knightstown water utility customers with 5/8 inch meters pay $2.35 a month for the fire protection fee. In their report, Umbaugh proposed increasing that amount to $4.33, with the utility's other 23 customers paying between $6.50 and $64.95 a month, depending on the size of their meter.
Should the proposed increases for all rates and charges go through, a water customer using 4,000 gallons of water a month would see the water portion of their utility bill go from $17.38 to $26.56, a 52.8 percent increase. The bill for a customer using 7,000 gallons a month would rise 51.1 percent, from $21.63 to $31.99, while a 10,000 gallon a month user would see a 50.6 percent spike, from $31.66 to $47.68.
Miller told the council that Umbaugh also proposed an increase in the water utility's $330 tap fee, which he said was too low. Considering materials and labor, he said the actual cost was $706.50 and that Umbaugh proposed setting the fee at $705, a 114-percent increase.
Umbaugh's rate study was based on the utility's financial information from March 1, 2006, through April 30, 2007. Miller explained at last week's meeting, however, that further adjustments were made in anticipation of future needs, considering such things as employee pay raises, periodic maintenance and insurance costs.
Miller told the council that Umbaugh considered a proposed five-year capital improvement based on discussions with Mel Matlock, the town's works manager. Future acquisitions listed as part of that plan included a high service pump ($20,000), a backhoe ($50,000), a truck ($30,000), water mains ($40,000) and a lawnmower ($10,000).
Minutes from last Thursday's meeting reflect that Clyde South, Ward One council member-elect, was the only person to offer public comment. South questioned the need to purchase a new backhoe and mower, and also asked about salaries and the fire protection fee charged to water customers.
In addition to reviewing Umbaugh's report, Miller also left the council with copies of a resolution to pass and a legal notice to publish if they choose to seek the proposed increase. Should the council give its go-ahead, Umbaugh will, as part of its $5,000 fee, file the necessary paperwork with the Indiana Utility Regulatory Commission, which will have to OK any increase. Miller said it could take the IURC three to four months to process the application.
The town council voted unanimously last Thursday to take Umbaugh's rate study under advisement. The issue is expected to be reconsidered at the December 19 meeting, which starts at 7 p.m. and will be held in the council chambers at Knightstown Town Hall, 26 S. Washington St.
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