Utility rate review continues in Hillsboro

? Council OKs increase for two of four utilities.

The Hillsboro City Coun?cil approved new rates for electricity and sanitation utilities at its Jan. 7 meeting, but asked for additional information before deciding on new rates for water and sewer.

Not coincidently, the two rate proposals the council approved were the least complicated to process and had the smallest economic impact on customers.

For electricity, the base charge per customer will remain the same at $9 per month, while the quantity rate will increase from 9.9 to 10.9 cents per kilowatt hour.

City Administrator Larry Paine said a key reason for the modest increase is the electric utility had no debt, which affects the base rate. The unit, or quantity, rate is set by companies by power providers.

For sanitation service, the minimum service charge per residential customer will increase from $4.15 to $12.75 per month for up to one cubic yard of trash per pickup.

The rates for commercial customers also were adjusted upward, but with multiple options based on frequency of pickup and amount of material hauled off.

The council discussed whether to take action on sanitation rates because it will be evaluating the economics of continuing the service, which would require the purchase of a new truck?estimated to cost between $150,000 to $200,000?or contracting with a private provider.

Another decision to be made is whether to move to single-stream recycling or continue the city?s volunteer-based center that accepts fewer materials for recycling and requires residents to separate them accordingly.

In the end, the council moved ahead with the necessary ordinance.

Comparison review

Meanwhile, rate proposals for the two remaining utilities, water and sewer, continued to generate questions and occasionally energetic discussion.

Fueling both was a ?Central Kansas Water Survey? provided by Paine at the request of council members at the previous meeting.

Paine gathered water-rate information from 40 surrounding cities with the hope of comparing their base and unit rates with Hillsboro?s.

The survey covered the gamut in population (Wichita 361,420 to Florence 605), raw water origin (wells or lakes) and amount of water-plant debt.

Of the 40 cities queried, only about half supplied information in all requested categories.

Troubling to at least three of the city council members was that the current water rates for Hillsboro were the highest of any city on the list?with a proposal before them to increase the monthly base rate from $28.06 to $30 while lowering the unit rate from $4.82 per 1,000 gallons to $4.75.

It didn?t take long for the council to narrow the comparison to Hillsboro and Marion because of the similarity of their population, proximity, water source and upgraded water-plants.

The survey indicated Marion?s base rate is $26 per household. Marion officials did not report a unit rate, but Councilor Shelby Dirks figured it to be $2.50 per 1,000 gallons, based on a utility bill from a Marion resident.

Comparing rates for all four utilities, Dirks said Hillsboro?s rates are already 23 percent higher than Marion?s; adopting the proposed rates would increase the difference to 54 percent.

Rate reservations

In the light of that information, council members Marlene Fast, Dirks and Byron McCarty voiced concern about adopting significant utility rate increases, particularly for water and sewer.

One reason City Admini?strator Larry Paine had recommended higher rates was to build cash reserves for each of the four utilities in case of emergency repair or replacement.

But Fast argued that Hillsboro?s rates are already high, and another ?drastic? increase could keep people from moving here.

Drawing on her career as a real estate broker, Fast said potential house buyers ask about utility rates.

?I have lost deals on utilities,? she said. ?We do lose people.?

Fast said she knew of two people recently who ended up buying a house in Marion after comparing utility rates in Hillsboro.

Earlier in the meeting, Fast had suggested that the impact of the national housing recession in 2008 is finally making an impact locally.

Reflecting the comment of a local real estate broker, Fast said the majority of houses that sold in 2013 sold below market value.

Paine said the council would need to approve some increases simply to cover the cost of the services.

Fast said she had no problem with that.

?We have to pay our bills, but we need to be cautious about these (additional) increases,? she responded.

Paine said approving increases to build cash reserves could be put off a year, but if a situation would arise where the city lacks the cash to meet it, the city would be forced to use a ?no fund warrant? to pay for the recover and likely pay two to four times the interest to do so.

Paine said unlike the U.S. Congress, which can put off paying its bills, state law prohibits a city from doing so. Planning for adequate cash reserves is only sound fiscal management.

?At some point,the Pied Piper is coming to town and we?re going to have to pay his bill,? Paine said.

At that point, Council Bob Watson floated a recommendation that would raise the base rate for water to $29 and the unit rate to $4.92 per 1,000 gallons. The recommendation died for lack of a second.

The debt factor

In the end, the council delayed action on local water and sewer rates. They asked Paine to find out why utility rates are higher in Hillsboro than in Marion.

Paine said one reason may be because Hillsboro is carrying more debt on its water plant than Marion is. That would be the base rate, Paine said, since a base rate should pay for most fixed costs, which would include debt service.

That prompted some council members to ask why Hillsboro owes about $300,000 on its upgraded water plant while Paine?s water survey indicated that the debt carried by Marion is $86,241?considering the two cities get their raw water from ?the same hole? and theoretically would need to make the same plant upgrades to treat it.

Paine said he would research the issue for the council?s next meeting.

The council did approve a rate increase for water sold to the city of Peabody. It was recently discovered that Hills?boro had been charging $1.48 per 1,000 gallons when the actual cost of production is $1.77. The new rate will be $1.85.

Other business

In other business, the council:

? approved Fire Chief Ben Steketee?s recommendation to appoint Merlin Funk to the local fire department.

? heard from Paine that at the Jan. 21 meeting the council would be reviewing the city?s facility rental contract with HMC/CAH Con?soli?dated Inc., owners of Hills?boro Community Hos?pital.

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