Sometimes paying a little more helps to keep up with the times.
In a special meeting Thursday, the Common Council of the City of Brazil heard a preliminary proposal for the possibility of an increase in the wastewater utility rates.
Dan Hedden, CPA Principal for Umbaugh and Associates, Indianapolis, presented an analysis of the current status of the city's wastewater utility, which encompasses Brazil and the K&H Sewer District, and three separate rate increase proposals.
"After conducting a 12-month analysis of the financial activity, we found a 32.7 percent gap between the revenue requirements and available revenues," Hedden said. "In dollar figures, that amounts to $666,300."
He provided potential reasons for the current shortfall, the biggest of which was that the last rate increase occurred in 1996, with no incremental increases since.
"According to the Consumer Price Index, inflation has grown 36.67 percent since 1996," he said. "There could have been small increases during the past 12 years, but there is nothing we can do about that now."
Inflation, combined with the Energy Savings Performance Contract -- a payment cost of $231,500 per year -- accounts for 79.87 percent ($532,208) of the shortfall components.
Hedden also said the city is also receiving less revenue from collection compared to 1996.
"In 1996, the city collected $2,161,277, but in 2008 it was $2,036,200," he said. "There are numerous possibilities for this drop including water conservation efforts, fewer customers or a loss of a large consumer."
The three increase proposals Hedden introduced included one which was the minimum to accomplish current needs for operation (which he recommended), another which also allowed for the payment of capital additions needed in the next five years, and the third was the midpoint between the two.
The rate increase proposals were based on the average city usage of 5,000 gallons per month (see table, Page 1).
"Even with the proposed increases, Brazil would still be in the middle of the road compared to other cities and towns in the area," Hedden said. "The bad news is there is the need to make an adjustment to the structure of the rates for the wastewater utility."
Council member Pat Heffner asked what would happen to those who would be unable to afford the increase, such as the elderly.
"Unfortunately, there is no good answer for those who can't pay their bill," Hedden responded. "The best option the city can do to move forward is to start looking at incremental increases more regularly to prevent the need for larger 'headache' increases."
Wanting to look into other options which may lessen the hit on the residents, Mayor Ann Bradshaw asked Hedden what the effect would be if the city sold off the utility.
"Either way, there would have to be an increase, but you have to remember that most companies are out for profit," Hedden said. "It's not very frequent when a municipality sells a utility to a company to know the true effect, but there is a different motivation."
Hedden elaborated about the proposal by saying the proposed future capital investments would not be top-of-the-line, but would be very good quality.
"Based on information from a City and Consulting Engineer, it averages out to be a need for about $690,000 per year to cover the costs of upcoming capital needs," he said. "The fact is, you can't truly project what all will be needed in the next five years because other things happen, like a lift station can go out or trucks may need to be replaced."
Overall, Hedden emphasized the fact that smaller incremental increases are needed in the future to protect citizens from taking a large hit all at once.
"There's not a lot of other bills that have stayed the same in the last 12 years," he said.
A public hearing on the matter will be set at a later date. In the meantime, Hedden said the financial aspects can be reviewed further to try and find cost-saving measures.
The next regular meeting of the Common Council of the City of Brazil will be Tuesday, March 10, at 7 p.m., in the Council Chambers at City Hall.
The following table outlines current wastewater (sewer) rates for Indiana cities and towns and the proposed rates for Brazil from accounting firm Umbaugh:
Terre Haute $16.49
Brazil (1996) $43.55
Brazil (alt. 1) $57.78
Brazil (alt. 2) $61.32
Brazil (alt. 3) $64.86
Clay City $76.24