Debt planning agency reviews East Carbon's bond payments
During the May 22 East Carbon council meeting, Jay Mashburn of the Utah Rural Community Assistance Corporation approached officials concerning the management of the city's water bond payments.
Due to recent restructuring of the municipality's debt, the city will be paying $139,078 instead of the original $190,887.
The decrease comes from an interest rate reduction on two state loans that was approved earlier in the year.
The need to restructure the loans came in response to the drastic reduction in tippage fee payments that the city is receiving from East Carbon Development Corporation.
Mashburn provided the council with options for assuring that the loan payments are met regardless of the income received from the ECDC landfill.
Mashburn's central topic for increased water rate income focused on the city's vacant lot charge.
The current loan payment of $139,078 averages out to 14.08 per water connection when coupled with the operation and maintenance cost for the connections at $11.01 per connection, the sum total cost equals $25.09.
According to Mashburn, when the $4 per month fee for vacant lot water service is subtracted, the city is losing $21.09 per connection per month.
"It is my conclusion that the rate for vacant lots must be evaluated by this council," said Mashburn. "I liken the situation to owning a car that you don't drive in the winter. When you don't drive that car, you still have to make the same payment that you make on it in the summer. But with the water system, when citizens are paying a decreased rate for vacant connections in the winter, it is their neighbors who are eating the costs."
Mashburn further commented that, East Carbon City is not currently running at a profit. For example:
The $4 rates are being subsidized by ECDC tippage fees to make debt payments on the $14.08 average connection.
The $4 rates are being subsidized by the 640 water customers in the form of debt for current operation and maintenance costs.
About 183 of East Carbon's customers are on the vacant rate. This represents a loss of $25,254 for the city.
Councilmember David Maggio defended the city's monthly water service rate for vacant lots.
"I have worked in sales and what happens when we price ourselves out of the market," said Maggio. "Sixty eight percent of our town's citizens are on a fixed income with many of the those people below the state poverty level. I don't want to see us gouge these people right out of the water system. I don't want to see us become a town that has no bushes or trees. A town with brown dying lawns everywhere.
Maggio along with councilmembers Darlene Kuhns, Joyce Caviness and Terry Harrison did however agree that the vacant water fee was too low.
In reaction Mashburn presented data concerning the maximum affordable water bill from the Utah Department of Environmental Quality. When a project is evaluated for funding, an attempt is made to determine the "maximum affordable water bill," for the water system. The Median Adjusted Gross Income (MAGI) of the applicant's service area is considered in this determination.
The department's rule is that 1.17 percent of the MAGI be charged per year for water. So according the their data the maximum affordable water charge for the city of East Carbon based on a $23,401 median income could be as high as $34.13 per month. Mashburn further pointed out that while inflation continues to increase operation costs for East Carbon the city has failed to adjust for that in their water charges.
Mashburn concluded by stating that he was only at this meeting to get the debt payment conversation started.
"You need to figure out just who these 183 connections are and what the fairness issues associated with them are, the important thing is that you have started a conversation that will in time lead to solutions for the cities debt," concluded Mashburn.