Monticello City Council approves 2013 utility fees

Monticello residential and industrial water and sewer rates will increase by 10 percent in 2013. City leaders approved the utility rate changes Dec. 10.
Finance Director Wayne Oberg said city residents will pay $6 a month more on the high end of the rate scale and about a dollar more on the low end.
The utility rate changes were reviewed during a discussion of the 2013 fee schedule.
According to Oberg, the big items in this year’s fee schedule were the increases in water and wastewater rates.
“I really don’t anticipate being back here next year asking for a rate increase,” Oberg said. The city periodically reviews its water and sewage to assure it is covering operations, capital replacement and debt service. Debt service related to both systems is financed with a mix of utility revenues, impact fees and the city’s overall tax levy. The finance mix depends on the availably of each, Oberg stated in a background memo. Typically, water and sewage utility bonds are designated as general obligation revenue bonds. While these bonds are backed by the full faith and credit of the city, the debt service payments are usually made from utility revenues.
Currently, Monticello is moving ahead with wastewater treatment plant improvements with estimated costs of $6.1 million, Oberg said. Historically low interest rates on municipal debt are a positive factor for moving forward at this time. The city will need to issue debt to finance the project; annual debt service on that debt is estimated at $520,000. Since current cash flows from operations are less than the annual debt service, wastewater rates need to rise to close the gap. Oberg said increased water and wastewater fund revenue would total $120,000 and $140,000, respectively.
Water access and sewer access funds also contribute money to pay for water and wastewater system improvements. These access funds are supported with impact fees from new developments, which help keep utility rates low.
According to Oberg, the city’s water access Fund is out of cash and the sewer Access Fund will be in a similar position at the end of 2014.
Oberg said the 10 percent increase in water and sewer rates would meet future system demands.
Kurt Zweifel, plant manager at Cargill Kitchen Solution, spoke briefly during the public hearing about the proposed increase to commercial and industrial rates.
Oberg said Cargill currently pays between $400,000 and $450,000 in water and sewage rates.
Zweifel told the council a 10 percent increase would mean an additional $17,000 to $18,000 in additional utility costs. “I’m hopeful we could look at more modest increases or a flat increase in line with inflation,” he said.
City officials met with Zweifel the week prior to the Dec. 10 meeting to discuss utility rates in general, Oberg said.
“We talked through a lot of issues regarding the wastewater treatment plant,” Oberg said, adding: “When it comes to sewer rates, those are billed basically two ways, by the amount that you create and the strength of that sewage. Right now, we are just looking at the rate, not how much treatment is required. The flow rate applies to everybody in the community.”
Oberg said there would be some increases in water meter and valve costs to match the cost paid by the city.
Once the new water and sewer rates are established, additional staff time will be required to import the new rates into the utility billing system.
Council members unanimously approved the rate changes.