Sewage rate hikes not needed

Sewage rate increases planned for this year and 2020 may be unnecessary. 

At its meeting Monday, Portland City Council heard that both the water and sewage utility funds are in good shape. 

It also approved construction to increase the capacity of utility lines in the brick alley adjacent to Community Resource Center.

Jeff Rowe of Baker Tilly, the city’s financial consultant, told council members Monday that both the water and sewage utility funds have good cash balances. 

In 2017, Portland was preparing to begin construction on a series of projects to remain in compliance with agreed orders with Indiana Department of Environmental Management to eliminate combined sewer overflows and reduce ammonia levels. 

Those improvements were estimated to cost between $16 and $20 million, requiring a large rate increase.

“It was determined at that time that the city would need a pretty significant rate adjustment,” Rowe said. “It was decided at that time that instead of jumping in all at once … those increases would be phased in over time.” 

The first of four sewage rate hikes went into effect in September 2017 and the second in 2018, each time increasing about $5.25 for the average customer. 

But Portland has made enough progress with its projects so far, such as new clarifiers at the plant and other improvements, that IDEM is allowing the city to take a step back and re-evaluate the best course of action. 

That could save taxpayers significant money. 

“One of the major reasons why we were pretty sure we were going to do this four rate increases was a $13 million oxidation ditch,” Portland Mayor Randy Geesaman said. “Based on what we’ve seen, it may not be necessary.” 

A new cost estimate for the remaining construction to comply with IDEM is about $6.6 million. If the sewage charges remain at the current rate, the city will be able to cover those costs, Rowe said. 

“Taking into account current operating costs, current revenue base … the city could afford to eliminate those next two phases and still be able to pay for that $6.6 million project,” Rowe said. 

Not only that, but the sewage fund cash balance is projected to increase over the next few years. At the end of 2017, the fund had about $900,000 above the state’s minimum reserve requirement. It increased to $1.36 million above by the end of 2018. 

Portland’s water fund is also in excellent shape, Rowe told council. Even though the city has not had a water rate increase since 2004, its cash balance remains strong at $2.8 million above the minimum reserve. 

The fund has actually decreased about $675,000 over the last few years because of capital improvements by the city, and Rowe projected it would spend about $1 million more on continuing construction. 

“The cash balances appear to be adequate to absorb that, and so the question then becomes, what is the amount of cash reserves that the city is comfortable with?” Rowe said.

“Assuming that the city would be comfortable working with cash reserves that are in the range of $2 million or so five years out, then it would be our recommendation to keep rates where they’re at.” 

Currently, a customer who uses 4,000 gallons of water pays $19.60.

In other similarly sized cities nearby, those same customers would pay about $25 a month, Rowe said.

He told council members that Baker Tilly will keep an eye on both utility funds and offer recommendations if rate increases for either are necessary in the future.

“Things can always change, so we’ll continue to monitor that,” Rowe said. 

Council did not take any action on either rate Monday. If it decides to cancel the two remaining sewage rate increases, it will have to vote for the rate reduction. 

Also on Monday, council approved construction work in the brick alley between Community Resource Center and Sharlette’s Fudgery.

HoosierBoy Smokehouse & Brew has received additional funding and a permit to proceed with construction after a financial setback earlier this spring, Geesaman said. The business, which is slated to open at 105. W. Main St., will require increased gas and sewage utility lines. Those lines lie underneath the brick alley. 

Portland Redevelopment Commission is considering funding a project to revamp the alley into a pedestrian space with restricted traffic. But council was not asked to vote on that project Monday — only to approve the construction, which it did unanimously. 

Ohio Valley Gas estimated it would take between 24 and 48 hours to install the new gas lines, and city employees will take about a day to place the new sewage lines. 

In other business, council members Judy Hedges, Bill Gibson, Judy Aker, Michele Brewster and Don Gillespie, absent Janet Powers and Kent McClung: 

•Tabled a decision on the city’s salary ordinance for 2020. 

The proposed ordinance includes a $2,000 raise for each city employee rather than a percentage increase.

•Heard a complaint from Mark Iliff about his neighbor, who had laid railroad ties on their property line to support his gravel driveway. 

Council was unsure whether it was a city council issue, a building and planning director problem or a civil matter. City attorney Bill Hinkle will draft a report for Iliff about his legal recourse by the next council meeting. 

•Learned that Geesaman will meet today with several area students about forming a youth council in Jay County. 

•Received commemorative T-shirts for the Portland Rockets’ 60th anniversary as thanks for funding part of the mural on the side of the Ritz Theatre.