Redkey rates likely to rise (03/01/07)

REDKEY - Water rates here could be heading up - perhaps as much as doubling - as a result of efforts to replace the town's nearly 100-year-old water tank and tower replacing water mains in several areas of the community, a rate consultant told council members Wednesday night.

The accountant's report came during Wednesday night's special Redkey session which also focused on moving forward with plans to apply for grants and a loan to upgrade town water infrastructure.

Redkey council members unanimously agreed to apply for a state grant as well as federal loan assistance and another grant through the United States Department of Agriculture Rural Development Office to finance the proposed $1.7 million project.

Commonwealth Engineers Inc., Indianapolis, will be representing Redkey as its engineering firm on the project and also filing the loan application with USDA later this month.

Commonwealth vice president Vincent Sommers and project development representative Wayne Bailey spoke at Wednesday night's Redkey meeting, explaining the steps to be taken, as town council president Doug Stanley signed numerous papers as part of the application process.

Also addressing the town council Wednesday night was Scott Houser of Summers, Carroll, Whisler LLC Certified Public Accountants, Muncie.

Houser said that water rates will need to be increased as a result of this project, and town council members agreed to retain his firm as rate consultant.

Houser explained that the project will be workable for Redkey if it receives a $500,000 grant through the Indiana Office of Rural and Community Affairs as well as a $1.2 million loan through the USDA Rural Development Office. This would be a 40-year loan at an interest rate, between 4 and 5 percent, Houser said.

The town will need about $190,000 a year to make loan payments to the USDA, which is about twice as much as its current water billing income, Houser said.

Consequently, a substantial water rate increase will be needed, the accountant explained.

Houser said because the town's current water rates are low in comparison to other communities, Redkey would probably not qualify for the state grant or loan unless current water rates are increased immediately. Grant and loan officials would be concerned that the town's own water customers were not contributing enough income to make the necessary improvements possible, Houser and the Commonwealth representatives said.

The accountant recommended a two-step increase in water rates, one prior to applying for the state grant and USDA loan, and another afterwards - once the exact amounts of the loan payments are determined. According to Houser's estimates, if Redkey is successful in receiving the $500,000 grant from the state and $1.2 million in loan money from USDA, water bills in Redkey will approximately double. These estimates would be reduced if a USDA grant is also approved, however, Houser said.

Also Wednesday night, Stanley recommended that the town utilize the services of Jay County Community Developer Ami Huffman as grant administrator, rather than hiring a private individual.

Huffman has previously offered grant application/administration services to the town council.

Appointed to serve as the town's primary contacts on the project which is expected to last more than a year, were Redkey town utilities employee Violet Erlenbush and council president Stanley.[[In-content Ad]]