City of Athens Considers Increasing Water Rates

By Michael V. Hannigan

Athens water customers will likely see an increase in rates, probably by September (See Figures 1 and 2).

In October 2014, the council hired NewGen Strategies & Solutions to conduct a water and wastewater rate study. The city tries to complete a rate study every five years.

Last Wednesday, NewGen’s Grant Rabon presented some of the study’s findings to the council, including the fact that the city does not currently collect enough money with water and sewer rates to cover the system’s operation and maintenance plus debt service.

At the current rates, the city also cannot afford capital improvements, line and meter replacement, or adequate contingency and operating reserves. And make no mistake, some of the Athens water system needs serious attention.

Rabon told council members the following, according to Rich Flowers of the Athens Review:

“They just pulled a 100-year-old hydrant out of service. That’s well beyond the useful life of any hydrant manufacturer’s specs. You’ve got some areas of the system that are just beyond their useful life, and could use some financial attention.”

The increase suggested by NewGen would average about $20 a month for most residential customers (See Figure 3). With that money, the city can:

• Immediately align rates with the cost of service
• Start addressing capital needs
• Start replacing outdated lines and meters
• Build a contingency reserve
• Build the operating reserve up to the suggested level (about $1.5 million for Athens)

A schedule of lower rate increases was also presented by NewGen, but those rates would include very limited funding for capital improvement, no money for line replacements, and no contributions to the operating reserve.

While there has been no official action yet, council members directed city staff to prepare an ordinance regarding a rate increase.

How Did We Get Here

Why did NewGen propose a rate increase? In this case there are several reasons.

Because of last year’s political battle between the city and the Athens Municipal Water Authority, it could be easy to blame AMWA, but that wouldn’t be true. Yes there has been a transition of financial responsibilities from AMWA to the city, but that is only a small part of the equation. Plus, the new contract with AMWA includes money the city will use for capital improvement projects.

Where the switch from AMWA to the city is important is in the contingency fund, which was drained of more than $300,000 during the AMWA v. Athens legal battle. The city is now responsible for any major repairs at the water plant and needs to keep more money on hand for that possibility.

There is also the fact that the water rates have not increase since August 2012. Plus, the projection made at that time for revenue growth through the addition of customers never panned out — meaning less money coming in than originally planned.

And there is the condition of the water system itself. Very little in the way of capital improvements or line replacement has been done over the past several years in order to keep rates down. That strategy can only last so long, however, as Kemp learned in 2011 when the city had to turn off all water because of so many line breaks.