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 Knightstown Council Will Seek Water Rate Increase

January 23, 2008 - The Knightstown Town Council voted last week to move forward with seeking a 47.8-percent increase in rates and charges for the town's water utility customers, the first increase since 1991.

The council voted 4-1 at its January 16 meeting to have an Indianapolis accounting firm, H.J. Umbaugh & Associates, prepare an application with the Indiana Utility Regulatory Commission seeking the increase. According to a study Umbaugh presented to the council in early December, the increase is needed for the utility to be able to meet its expenses and debt obligations, and for future capital improvements.

Scott Miller, an accountant with Umbaugh, told the council before last week’s vote that he expected he would have the paperwork ready for filing with the IURC within the next couple of weeks. He said the Office of the Utility Consumer Counselor, which represents utility customers' interests, will have 90 days to review the town's request, and that the IURC can take an additional three to six weeks after that to OK an increase.

Based on a review of financial records for the town's water utility from May 2006 through April 2007, Umbaugh's study said current rates fall about $94,000 short of meeting the estimated $346,815 annual revenue requirements.

Responding to a question from a member of the public, Miller said the higher rates would only guarantee that the water utility would be self-sustaining "for awhile." Miller said, ideally, rates should be reviewed every three to five years to see if adjustments are needed, and said more frequent, smaller increases are generally better accepted by customers.

Miller also told the council members last week not to expect the IURC to approve the full 47.8-percent increase.

"You will get less than what you initially request," Miller said. "I can almost guarantee that."

After Miller said the IURC would likely determine the requested increase to be too high, Clyde South, the council's vice president, asked what would happen if the council felt the increase was too high.

"You're the boss," said Miller. "This is my recommendation. If you want to do something different, that's the town's call."

Council member Steve Nelson said the infrastructure of the town's water utility is breaking down. In light of that and the utility's continued loss of money, he said he didn't think the council had any choice but to seek the proposed increase.

Council member Terry Guerin asked Miller about whether the town could implement the increase in intervals so that it would not hit customers all at once.

Miller said didn't know any reason why the IURC wouldn't consider a request like that, but recommended asking for the full increase when the application is initially filed with the IURC, amending it later if the council decides to phase in the increase.

South said he thought the 47.8-percent increase was more than what was needed. "I personally don't think (it's) the right number," he said. "I think the number is inflated - not grossly - but higher than what is needed."

Council President Valerie Trump said that was an issue for the IURC to decide. South said he thought the council should act responsibly and not rely on the IURC to police what the town does.

Guerin told South that Umbaugh had been hired to handle this matter due to their expertise in dealing with these issues. He said he didn't think the estimates in the accounting firm's study were that far off.

"The numbers speak for themselves," council member Bob Weber Council said. "We're losing money."

Trump said such a large increase is a "tough nut to swallow." However, she said thought it was an issue the council had to address.

While he said he agreed some increase was needed, South said he had questions about some of the estimates included in Umbaugh's study. He was the only council member who voted against seeking the 47.8-percent increase.

(More Knightstown Town Council news will be featured in next week’s Banner. -- Ed.)