Rate hikes to fix Weston funding woes up for vote

Officials say proposed water and sewer rate increases are long overdue and necessary.

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Rising costs and miscommunication about budgeting the city’s USDA wastewater plant loan will come to a head Wednesday when Weston’s City Council votes whether to substantially increase water and sewer rates for the coming year.

The 2013-14 budget includes a proposed water rate of $25 per month, more than doubling the current $10 rate, and a sewer rate of $57.50, a $15 increase from the current $42.50.

The Council will meet at 6 p.m. Wednesday. The rate raises will be voted on before the city budget is adopted.

Increased operating costs for the water and sewer systems are driving the need for rate increases city officials say are necessary. The city’s two public works employees now spend most of their time on water and sewer systems, so 90 percent of their salaries would come out of those funds. In addition, Weston now has to set aside thousands of dollars per year in a reserve fund for a USDA loan on the city’s wastewater plant.

In previous years, the city had transferred money from the general fund to pay for some utility costs, but Mayor Duane Thul said these funds should be self-sustaining without spending down cash balances.

Thul said the rate increases for water and sewer are “overdue” and should have been increased on a schedule to keep pace with actual costs. He said he told the Council in 2009 that rates should be raised gradually, but the increases were never enacted due to citizen complaints.

Thul dropped the issue after that year, though he acknowledges he could have pushed harder to raise rates in subsequent years. But ultimately, he said, the issue now is that increases are necessary to correct past mistakes and adequately fund the sewer and water systems.

Reclassifying public works employees also means their fringe benefit costs will mostly come out of the sewer and water funds. The cost for water and sewer in the 2013-14 budget is $59,000, up from $46,000 last year.

“Unfortunately, it hits the water and sewer harder, but that’s where they should have been all along,” said Thul.

Full-time city employees also are budgeted to received a 2 percent raise.

Weston became aware of funding issues last November, after its USDA loan official told the city that water and sewer funds should be tracked separately, rather than lumped into a single utility fund. As a result of separating the funds, Thul said, the city realized that more than three-quarters of income from sewer rates was being used on debt service, for the USDA loan and a smaller loan for sewer pipes on Water Street. Only $43,600 of that income was left for maintenance and operations.

Exacerbating the issues, the city will be required to pay annually into a reserve fund for its USDA loan beginning next year. When Weston received the wastewater loan in 2008, it came with a letter of conditions that included a dedicated reserve fund with annual contributions of $8,793 for 10 years.

Denise Sampson, who worked as city recorder until she was fired in January 2012, said she set aside reserve money by budgeting an extra loan payment in the utility fund. The intent was for that extra money to stay in the utility fund as cash carryover from year to year and function as a reserve fund.

Although the USDA Letter of Conditions said the reserve fund should be in a dedicated account, Sampson said the USDA official she worked with, Janet Suter, allowed the city to use cash carryover instead.

Suter has since retired from the USDA and left no forwarding contact information. The Union-Bulletin was unable to reach her.

Thul, who took office in 2009, said he was never told that utility fund cash carryover was being used instead of a dedicated reserve fund. Sampson maintains that she told budget committee officers and city councillors about the fund at council meetings and while preparing the budget. That the cash carryover was to function as a reserve fund, however, is not explicitly mentioned in Sampson’s cover letters accompanying the 2009-10, 2010-11 and 2011-12 budgets.

For the 2012-13 budget, $175,878 was budgeted for loan payment, exactly double the amount actually owed to USDA. Thul said this money was presumably supposed to be rolled over as it had been in previous years, but added he was still unaware the city was required to have a dedicated reserve fund.

Thul said he learned of the requirement in November, after Suter retired and the city’s new USDA official, LaDonn McElligott, looked over the city’s records with the loan.

Thul said even if he had been aware that some of the utility fund’s cash carryover was supposed to be used for the reserve fund, the city simply doesn’t have enough money to pull tens of thousands of dollars out of the utility fund into the reserve fund.

Councilman Bill Boyd said the council wasn’t thrilled to be raising rates, but believed it was in the city’s best interests.

“It’s uncomfortable for all of us, but we do need to face realities,” he said.

Rachel Alexander can be reached at rachelalexander@wwub.com or 509-526-8363.

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