Chesterton households will see a sanitary sewer rate hike of around 6 percent on their bimonthly bills next year.

At its meeting Monday night, the Town Council voted 4-0 to approve on first reading an ordinance raising the rate, 4-0 to suspend the rules, then 4-0 to approve the ordinance on final reading.

The hike will take effect on Jan. 1.

Under the increase, the average residential household using 10,000 gallons of water per month will see its bimonthly bill rise from $76.80 to $81.26: a hike of $4.46 or $2.23 per month or 5.81 percent.

The Utility Service Board previously endorsed the rate hike, needed to pay for the long term control plan to reduce combined sewage overflows into the Little Calumet River. The plan—mandated by the U.S. Environmental Protection Agency and administered by the Indiana Department of Environmental Management—provides for the construction of a 1.2-million storage tank to hold stormwater in the system during heavy rain events. The estimated cost of the tank and associated upgrades to the wastewater treatment plant and to the collection system: $14.9 million.

The Service Board is seeking to finance that project through a loan from the State Revolving Fund and will repay that loan with the proceeds of the rate hike.

Ted Sommer of London Witte Group, the Utility’s contracted rate consultant, made a couple of points at Tuesday’s public hearing on the proposed hike.

The first is that the long term control plan—or LTCP—is an “unfunded mandate.” The Utility has no choice in the matter, the LTCP must be implemented, and the 1.2-million tank must be built, Sommer said.

Sommer’s second point was this: one might have expected a rate hike much larger than 6 percent, given the $15 million in new debt which the Utility is about to assume. But the Utility, Sommer emphasized, has made great strides in cutting operating expenses since 2009. “I believe you have a utility that is watching its dollars and cents and operating better now than it was a couple of years ago,” he said.

Only one person spoke on the proposed hike during the public hearing: Paul Tharp, who voiced his support of it. “The Utility is handcuffed,” he said. In any case, “I want to see them stop bypassing.”

Member Emerson DeLaney, R-5th, later in the meeting revisited Sommer’s point about the mandated nature of the LTCP. “This is a mandated, unfunded project to keep our water clean,” he said. “Somebody has to pay for it.”

“I want to commend the Utility Board on its management, so we could keep this rate increase to a minimum,” added Member Jim Ton, R-1st.

The most recent sanitary sewer rate hike went into effect on April 1, 2011: one of 2 percent, enacted to offset the costs of maintaining the Town of Chesterton’s collection system.

Two years before that, on Jan. 1, 2009, a 14-percent rate hike went into effect, to support the 2009 bond issue. That hike did have the effect of improving the Utility’s cash position, one of the factors which President Larry Brandt has said is keeping this most recent rate hike lower than it might otherwise have had to be.

A final reason for the lower requested rate hike is that the $14.9 million debt assumed for the LTCP will be “wrapped,” that is, larger payments on that debt will be backloaded to later years, when other sewer bonds are due to retire. That will have the effect, as Sommer has put it, of “levelizing” the debt.

Posted 11/14/2012