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Higher utility rates are a pain we must bear

Tarpon Springs residents pleaded with city commissioners not to raise water and sewer rates last week, telling commissioners they already are straining to pay the rising costs for food and gasoline.

However, responsible city officials have little alternative to raising those rates. Residents of other Pinellas communities should not be surprised to see their water and sewer rates escalating as well, for the same reasons.

City utilities usually operate as "enterprise funds." That is, the full cost of providing the service must be borne by the users of the service. Water, sewer and reclaimed water services usually are structured as enterprise funds, with users of the service not only paying the full cost of the service but also legally obligated to repay debt the system incurs to build new infrastructure.

Cities are finding it more expensive to deliver water and sewer services to their residents, with rising energy costs a big part of the problem. As the cost of supplying water to a home goes up, the homeowner's rate must go up to cover the full cost.

In addition, if the city borrows money to build a new water plant or lay new sewer lines, the bond documents will require rates to be structured so that the enterprise fund will raise enough money to pay off the indebtedness. If the rates are kept too low and the fund runs short, the local government can be found in default on its bonds.

Tarpon Springs officials know all that, and so with apologies to those who are struggling to get by, they voted unanimously to raise water and sewer rates by just over 4 percent per year for the next nine years. A required second vote will be taken at a future meeting.

A family that buys water and sewer services and uses about 6,500 gallons of water a month now pays $60.65. They will pay $86.13 by 2017 if the rate schedule approved on first reading by commissioners last week goes into effect. Households on septic tanks that buy only water will pay an average of about 8 percent more per year.

Rate increases were suggested by a consultant the city hired to study water and sewer rates and future revenue needs.

The Tarpon Springs situation is complicated by two additional factors:

• The city's utility budgets were based on the assumption that the number of customers would increase by 2 percent this year, but the number increased by only 0.5 percent, so less revenue was raised. The numbers reflect slowing growth and fewer housing starts.

• The city will soon issue bonds to build a $45-million reverse osmosis water plant and create its own standalone water system. (The city now buys its water from outside providers.) Tarpon Springs must have a water rate structure that provides the income to pay off those bonds.

Ironically, local governments also are increasing rates because their residents are doing a better job of conserving water. If less water is used, less revenue is collected, and systems that budgeted on the higher revenue base must raise rates to cover their obligations.

This would be a good time for the Tarpon Springs City Commission to do a soup-to-nuts review of its water plant plans. Growth is slowing and revenue is falling for all local governments — reasons enough to launch a review. But the city also lost City Manager Ellen Posivach, who was the primary planner and promoter of the idea of the city creating its own independent water system and whose expertise in public works allowed commissioners the luxury of not having to master every detail. Commissioners should take time to become more familiar with those details now, to make sure the project still fits with today's realities.

Higher utility rates are a pain we must bear 07/29/08 [Last modified: Thursday, July 31, 2008 2:57pm]
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