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Cash flow vs. water flow: Water rates to rise in East Carbon

Sun Advocate reporter

Residents in East Carbon should expect to see their water bills rise as the city council passed a resolution authorizing an increase in water rates to come into line with state requirements on Tuesday.

After a two-year period of researching and finding ways to implement changes to the water rates in East Carbon council members finally are putting the wheels of change into motion as area residents will see the changes in the cost of water starting Aug. 1.

The council passed a motion 4-0 choosing an option to raise the base rate for water to $24 starting in August and also implemented a change in the usage over 6,000 gallons a month. After 6,000 gallons, the city is charging $2 for every additional 1,000 gallons used.

The city council has been working closely with Jay Mashburn, a rural development specialist with the Rural Community Assistance Corporation, on trying to develop options for the city in raising water rates. Work over the last few months focused on different methods the city can implement such as raising the rates to $24 immediately or slowly raising the rates over a three to five-year period.

A public hearing was held during the meeting to have input from residents who had comments and concerns about the water rate increase. Mashburn and city council members explained to the audience that the city needs to raise rates to reach levels the state recognizes as where the rates should be. The current base rate charge of $15.50 is not enough to generate revenue to help cover the costs to maintain and replace the water system nor does it help the city build up a reserve fund in the case of an emergency, Mashburn explained.

"The city is not generating enough money right now to replace the system if things were to come up," he said.

Mashburn later added about the urgency of raising water rates saying, "As soon as something breaks, everything changes dramatically."

East Carbon was also put into a unique situation because the city has not raised taxes in the last nine years. Over that time, the city has not kept up with the normal utility rate increases as many other cities have had to endure from inflation and other factors including the recession. Over that time period, utility rates in many areas have gone up over 50 percent, Mashburn said.

According to the Department of Labor Bureau of Labor Statistics, the water, sewer and trash collection Consumer Price Index (CPI) percentages in 2002 were at 3.1 percent. In 2010 it was at 6 percent. Mashburn presented an equation at a previous meeting that took the cumulative percentages over the years (55.67 percent) for inflation of the services and found that the current base rate for East Carbon should be $24.19 ($15.50 x 1.5567 = $24.19).

Because the city has kept water rates below what the state believes they should be, funding from the state would not be made available to East Carbon for water projects until the rates were raised to their now current base rate of $24, Mashburn explained.

"We're in a bad position with this, especially if something with the system breaks," Councilman Andy Urbanik said.

Water rate equity is measured by the State of Utah Division of Drinking Water as a function of the Median Adjusted Gross Income (MAGI) per household. The reason for the median being used for incomes is so that there is not a dramatic difference that sways the average rate with people who have little or no income compared to people who may be millionaires.

In determining water rates another form of calculating the amount residents should be paying for water is the maximum affordable water bill. The Utah Division of Drinking Water evaluates projects for funding and in the process they find the maximum affordability by calculating the local MAGI by 1.75 percent for the year.

With East Carbon's MAGI in 2009 listed at $26,320, the maximum affordable water bill for residents per month was $38.38 ($26,320 x .0175 = 460.6 / 12 = $38.38). This figure, in addition to the MAGI's of other local cities, is much lower. The other lowest maximum affordable water bill in the area is Sunnyside at $50.73. Wellington is listed at $51.98, Price at $54.66 and Helper at $57.53. Utah's maximum affordable water bill in 2009 was at $53.46.

Other options the city looked at included a three and a five-year plan. The three-year plan would have seen rates rise from $18 in 2012 to $21 in 2013 to $24 in 2014. The five-year option is nearly identical to the three-year plan with the only difference showing the rate increase being implemented over the course of five years.

No matter which option the city decided to accept, its water system will run at a deficit for a period of time, Mashburn noted. He explained that the option the city decided on, raising rates directly to $24, would have the system reaching a deficit of $34,000 before coming back into the black over the course of about two years. The other options would have seen the water system facing a much high deficit before tapering off and reaching the black over a period of a few years.

Councilman David Avery said he thought with the knowledge of the city having to raise the base rate for water usage that more residents would have attended the meeting to express their opinions on the matter.

"I thought that the room would be packed for this meeting," he said. Avery and other council members said they expect the city will receive a lot of calls about the rate increase when it begins in August.

Residents that did attend the meeting discussed the positives and negatives of raising the rates to $24 starting next month. The council held a poll asking for the opinion of the audience in determining which way the city should go on the matter. While not official, residents seemed to be split between raising the rates to $24 now and raising the rates over a period of three years.

Council members were hesitant at first to pass a motion choosing an option for the city to increase water rates. After some discussion, Councilwoman Cheryl McFarland made a motion suggesting the city look at the three-year option for raising rates with the $2 per each thousand gallons after the use of the first 6,000 gallons.

"I feel it needs to be done," McFarland said. "We can't keep postponing this."

Because there was no second to support it from another council member, the motion was rejected. Councilman Urbanik finally made a motion suggesting the city choose option number one, raising rates to $24 immediately with the $2 per each thousand gallons after the first 6,000 gallons. The council later approved the motion. East Carbon City Mayor Orlando LaFontaine and Councilman James Wayman were not present at the meeting for the vote.

While it may not be easy for residents in the area to deal with the increase in rates, Urbanik equated the situation to removing a band aid really quick instead of slowly peeling it off the skin.

With many residents in the area living at or below the poverty line, the city council will need to work on a system that allows people to apply for a lifeline in helping cover the extra costs due to the increase. An application form will need to be created and the city will have to look at the qualifications for people trying to apply for the lifeline.

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