With two major water projects set to begin construction later this year, and other upgrades on the horizon, a small hike in water and sewer rates is being proposed as part of the 2013-14 City of Clinton budget to prepare for the debt service from the sizable ventures.
As part of the recommended city budget, water and sewer rates are proposed to increase by 1.6 percent to keep up with inflation and ensure adequate funding for future capital improvement projects. For 2013-14, water base rates would rise from $12 to $12.19 and sewer base rates from $12.50 to $12.70. The water consumption rates would increase from $1.60 to $1.63 per $100 cubic feet and the sewer consumption rate would increase from $1.75 to $1.78 per $100 cubic feet.
The 1.6 percent rise is consistent with the Consumer Price Index for 2012.
“That’s just to keep it on pace with inflation,” assistant manager Shawn Purvis said to City Council at a Tuesday budget work session, the second in as many weeks. “The primary reason (for the proposed increase) is to begin preparing for upcoming projects.”
While 1.6 percent is nominal, he said, it will actually generate around $270,000 for the city.
“It will generate a good portion of revenue,” Purvis remarked. “The primary reason we’re requesting this is, while we do have this debt coming off, we do have large projects coming up. This money is to make sure we are preparing ourselves for projects.”
Among them are a $1.8 million water tank construction to serve Smithfield Packing and the surrounding area and a $5 million water plant expansion that will double the size of the city’s water treatment plant, as well as establish a redundant water line. There is also the work that would be required once Chemtex International Inc. makes a formal decision on its location in the N.C. 24 Clinton Industrial Rail Park, “which is still a potential,” Purvis noted, but would come with a $2 million price tag.
Revenue is expected in getting both Chemtex and Smithfield as city customers, however debt service is still required for the projects themselves. Additionally, the N.C. 24 expansion will also come at a cost in utilities replacement, which is estimated to be between $1.4 and $2 million.
“That’s just specific projects coming up,” Purvis said. “That doesn’t count the continual upgrades that need to be made to the wastewater plant and the continual upgrades that need to be made to the utility lines. So we’re trying to keep our rates where they need to be to make sure we offset those costs.”
Purvis said water and sewer rates have not been raised since 2010 —and he said the rate increase is not anticipated to hit residents too hard.
With the proposed rates, a minimum bill under 300 cubic feet water and sewer per month (individual or couple household) would mean an increase of about 30 cents per month. An average bill, with use of 643 cubic feet (equivalent to a household of four), would bring about a 70 cent monthly increase. An above average user, a large household that uses upwards of 1,600 cubic feet per month, would pay about $1.25 more each month.
Large industries that use 4.3 million cubic feet of sewer, and pay $75,155 on current bills would pay $76,443, an increase of $1,288 per month.
There is an additional technician position proposed for water production, at a $40,000 cost, to prepare for the expansion, which is expected to start later this year.
“We do anticipate starting the water (plant) expansion this year and the elevated tank project this year,” said Purvis. “Combined, you’re talking about close to $7 million in projects. The water (expansion) will end up being spread over two years; the tank potentially could be finished in the year and we would take on debt service the next year.”
There will be no impact on the budget in 2013-14, but in future years. As other large projects from previous years are paid for, however, that debt service is freed up for new projects.
Purvis has said that debt service payments will hover around $750,000 for the next couple years before coming offline, freeing up funds for other capital projects. The proposed debt service for the water plant expansion, financing the Smithfield water tank and upgrading the industrial park area, would bring $635,000 through 2025 and another $200,000 in subsequent years, based on a 40-year USDA loan, Purvis said at the beginning of this year.
“As those come off, these just go on and replaces it,” said Purvis. “So there’s not a large impact.”
The estimated fund balance in the Water and Sewer side is about 75 percent, a little over $3.5 million, which city officials said puts the city in a good position to grow and be able to pay for it with some wiggle room. The rate increase was simply to keep pace, Purvis said.
“All this money goes right back into infrastructure,” said Mayor Lew Starling.
“This is because of those projects, and just to maintain operations,” Purvis replied. “Fifty percent of this fund is operating, and then you have another 30 percent that is capital and debt service. Eighty percent of this fund is making sure these operations stay up and stay working. This is 80 percent non-personnel.”
Chris Berendt can be reached at 910-592-8137 ext. 121 or via email at email@example.com.