By KEVIN NEVERS

How great a shortfall in capital project funds would the Chesterton Utility experience in 2009 were the Town Council to enact a two-phased sanitary sewer rate hike of 7 percent next year and 7 percent in 2010?

Would it be only around $54,000, as the Utility’s own rate consultant, H.J. Umbaugh and Associates, indicated in a memo dated Aug. 21?

Or would it be much more, as Utility Service Board President Larry Brandt believes, $250,000 in 2009 and $250,000 more in 2010?

That discrepancy—a curious one, to be sure—prompted the council at its meeting Monday night to instruct Brandt, his colleagues, and staff to go back to their calculators and return on Sept. 22 with something like a more definitive number.

In the meantime, members voted 4-1 to reject a motion which would have enacted the two-phase rate hike. President Jim Ton, R-1st, voted in favor of the motion and made it absolutely clear that under no circumstances would he ever vote for a single-phase 14-percent hike. Member Sharon Darnell, D-4th, made it just as clear that she remains in favor of the single-phaser. Meanwhile, members Jeff Trout, R-2nd, Dave Cincoski, R-3rd, and Emerson DeLaney, R-5th, without committing themselves to either the two-phase or single-phase increase, all indicated that, in their view, Brandt’s calculations warrant a more detailed review of capital project funding before they act on either rate hike.

The groundwork for what became as contentious a discussion as the council has had in some time was laid at its last meeting, when members asked Umbaugh to prepare an estimate of the funds which would be available in 2009 for capital projects under a two-phase hike. Umbaugh concluded that next year, under the two-phaser, the Utility’s estimated revenues would total $3,382,910 from all sources, including an additional $230,893 from the rate increase. Of that sum, $385,202 would be available for a capital project budget of $440,062, for a shortfall of $54,862.

As part of its calculations, however, as Brandt contended from the floor, Umbaugh included a number of revenue sources which it did not include in the biennial rate study which is the basis for the Service Board’s proposed increase next year of 14-percent. Umbaugh also over-estimated the revenues from other sources, he said, such as $130,182 from tap-on fees. “We haven’t gotten those for years.”

Utility Superintendent Steve Yagelski observed at this point that to earn that much from tap-on fees, approximately 100 new homes would have to be built next year in the Town of Chesterton.

The upshot, Brandt said: the Utility’s reserve of $428,000 at the beginning of 2008 went down the hole in Porter Ave., following the discovery of a badly corroded force main. “That money is now gone,” and a two-phase hike would leave the Utility on the order of $500,000 short over the next two years for ongoing capital projects. “If we break even next near, just doing nothing, we’d probably be pretty lucky.”

“Larry, we get a lot of gloom and doom from you,” Ton responded. “This is a very tough economy for people. If you are going to break even, then maybe you can cut back, but under no circumstances will I support a full 14-percent.”

Darnell followed with a prepared statement in reply to concerns raised by her colleagues at their last meeting. “The increase that was originally proposed was based on a study our paid consultants conducted on the increase in materials and energy costs which we have no control over,” she read. “It was also based on a list of projects that our Utility and Engineer feel necessary to keep us in good working order to meet the demands of our working system and current with the State of Indiana. It is based on the costs of keeping our town employees at the Utility covered with the ever increasing insurance needs.”

“The costly event that happened at Porter Ave.,” Darnell continued, “could not have been predicted. Yet the Utility has depleted its reserves to repair it to within working condition. We no longer have the reserve. Are we willing to gamble with a 100-year plus system? I am not.”

Trout, DeLaney, and Cincoski, in contrast, expressed some surprise at the discrepancy in numbers. Trout called Brandt’s calculations “a completely different set of circumstances and numbers than I thought we were dealing with.”

DeLaney, echoing Trout, said that he wants the Utility to “tighten its numbers.”

Cincoski said that he wants tightened numbers but also asked the Utility to submit its 2008 and 2009 budgets and to estimate how a two-phase hike would affect the situation in 2010.

At this point in the discussion Ton allowed himself to express a certain impatience. “It’s interesting to watch people back away from their positions, which is what I’m seeing,” he said. “I don’t know why we should be surprised that they come back with figures that make it even worse. I don’t expect anyone to come back with a brighter picture, because they want the 14 percent. The people who have communicated to me are vehemently opposed to any rate increase. They could barely tolerate the 7 percent.”

Both Trout and DeLaney urged the Utility to tighten its belt and look under rocks for new efficiencies, to which Brandt replied that an “element of risk” would accompany any such efficiencies. “We can make a recommendation to cut costs. We can lay people off. We can cut back on lift station maintenance. But we have to understand the cost/risk relationship.”

Under the single-phase 14-percent increase sought by a majority of the Utility Service Board, the average residential household currently paying $66 every two months would pay $75.25, a hike of $9.25 or about $4.63 every month.

A 14-percent increase would follow a 34-percent hike which took effect in 2007. That 34-percent increase followed a two-phaser which increased rates by 5.8 percent in 2005 and then by 5 percent in 2006. Brass tacks: in 2004 the average residential household was paying $44.30 every two months for sanitary sewer service; in 2009 it could be paying $75.25. That figure would represent a total increase of nearly 70 percent in just five years.

Posted 8/26/2008