Portland council updated utility reserves

Reserves are strong for Portland’s wastewater and water departments.

Capital improvement projects planned in the next five years may require some rate increases to keep them in good shape.

Portland City Council got a look at the financial status of its wastewater and water utilities Monday as Ross Hagen of consulting firm Baker Tilly presented the results of its study.

Hagen said the study indicates that both utilities have seen increases in their year-end balances recently, with wastewater going from $2.71 million in 2018 to $3.39 million now and water from $3.5 million in 2018 to $3.9 million now. Both funds are well over their required (committed via bonds) and recommended (by accounting best practices) reserve levels.

He noted two planned projects — a raw pump station, equalizing basin and other upgrades in 2022 at a cost of $5.4 million and the second phase of wastewater treatment plant upgrades in 2025 at a cost of $9.6 million — will likely required bonds. (The projects are required as part of the city’s long-term control agreement with Indiana Department of Environmental Management.) Without a rate increase, he said, paying back those bonds would drain the reserves to the point that they would barely reach the recommended level.

City council in 2017 approved a series of four annual sewage rate increases, with the first going into effect in September 2017 and the second in 2018. (Each of those was for about $5.25 per month.)

It has since delayed the other increases — about $5.75 per month for an average customer — because it determined they were not yet needed.

Hagen suggested those increases, each of which would bring in about $330,000 in additional revenue annually, may need to be put in to place to cover the costs of the upgrades. (Receiving other funding, such as grants, could mitigate that need, he added.)

“As is, if we move forward with these projects as they’re slated and we didn’t receive any grant money, I think we would be looking at tackling some of these rate increases over this five-year period,” he said.

While capital improvements are also planned for the water department, they are not nearly as costly as those for the wastewater department, ranging from about $350,000 this year to $900,000 in 2024. Even with those expenditures, the study projects the water reserves to stay at more than $2 million, which is still well over the recommended reserve level.

Hagen said the city could consider a water rate hike — it has not been increased since 2004 — if it would like to bolster those reserves.

“We’re looking at pretty significant decreases in fund balances,” he said. “You have built up a large cash reserve, so you are able to withstand those decreases. … But I do think if we see those capital improvements done and that budget spent down … it might be prudent for the council to consider at least looking at the water rates.”

He noted that Portland’s combined water and wastewater rates are about equal to the state average for city’s of a similar size.

The report from Baker Tilly was for informational purposes only. Council did not take any action.

Council members Kent McClung, Janet Powers, Don Gillespie, Michele Brewster, Mike Aker, Matt Goldsworthy and Dave Golden also authorized submitting an application for a $600,000 Indiana Office of Community and Rural Affairs grant for the proposed Meridian Street stormwater project. The deadline to apply for the grant is June 25, and the city hopes to hear back by late summer.

The project, which is planned for 2022 and involves a new storm sewer line below Meridian Street in an effort to mitigate downtown flooding, is estimated at a construction cost of $1.2 million. (Portland Mayor John Boggs has said he expects the cost to be higher because of the increased price of construction materials.) Portland Redevelopment Commission has committed $350,000 toward the project, with an additional $125,000 from Portland Board of Works to cover engineering costs.

Council also tabled proposed 2022 pay raises for full-time city employees in order to receive and review additional information. Boggs proposed a raise of $1 per employee, which is an average of a 4.5% increase. (The total cost of the increase is about $118,000).

Council members discussed other options, including an average 2% raise (about 44 cents per hour) and a 50-cent per hour raise, and asked to be provided with a range of different options and their impacts. They also suggested amending the range of salaries for employees — it currently starts at $7.25 per hour — to reflect the reality that no one is being hired on at minimum wage.

In other business, council:

•OK’d a one-year tax abatement for Joyce Dayton on $228,000 in new equipment. The abatement is expected to save the company about $2,700. Also OK’d a one-year extension for an abatement approved last year for Priority Plastics because the coronavirus pandemic delayed delivery of equipment.

•Heard a suggestion from McClung that council revisit the golf cart registration ordinance Boggs suggested last year.

•Approved an update to the payroll ordinance setting pay for lifeguards at Portland Water Park at $9 with a 25-cent increase for one year of experience, an additional 50-cent increase for two years of experience and an additional 25-cent increase for each subsequent year of experien5

ce. (By ordinance, the maximum is $11.)

•Heard the following from Boggs: several parties have expressed interest in the Sheller-Globe south building since the termination of a previous sale contract; and the mayor’s golf outing is scheduled for July 9 with proceeds going to local non-profit organizations.