Friday, May 16 – Fears of Sewer Rate Hike Allayed

BERLIN – Sewer customers in Berlin dreading a rate increase this summer can relax, at least until the improved and expanded plant is built and operating in fall 2010, Berlin’s consultants on financing the sewer plant construction said this week, but they also said the special connection fee for new sewer hook-ups should still go up this summer.

“It’s not necessary for you to increase your user rate until you start up your facility,” said Russ Tatman of URS Corp. Monday night, reporting on the finances of the wastewater plant work. “There is no need to have a rate rise at this time.”

The consultants said earlier this year that sewer user rates could go up as early as July. However, the special connection fee for new users needs to almost double, said Tatman, from the current $8,000 to $14,929.

“Where we get the big significant change in is the special connection charges, because it’s based on the number of special connections,” said Tatman.

This fee should actually be called a system development fee or impact fee, he said.

“It should recover some or all of the construction of the expansion or future wastewater facilities and avoid having the burden of the cost of expansion on the [current] users,” Tatman said.

The special connection fee divides the costs of the expansion between the new users who will benefit from it. If Berlin does not increase the special connection fee, or if there are fewer connections than planned for, the $500,000 contingency URS has included in its projections would take up the slack in paying loan costs. There are many uncertainties at this point in the process.

The number of new connections will be controlled at a certain level per year, to preclude runaway growth in the town, but those connections must remain at that level to continue funding the debt service for the plant. New EDU connections, however, have fallen off sharply in the last 18 months.

“It dropped off a cliff last year to 12 EDUs,” said Mark Prouty of URS. “This year, you’ve had five.”

Berlin cannot pay for the expansion and improvement of the plant at one new EDU connection per month. Calculations use either 30 or 40 new EDU connections per year, along with an assumption that the nearly stalled housing market will pick up speed once again. Costs, said Tatman, are substantially increased if the growth rate is just 30 new connections annually.

The town has four sources of income for the sewer utility: user rates; special connection fees; ready to serve fees, and hauler’s fees. The only ones likely to increase are the special connection fees and rates paid by users.

If the peak EDU hook-up years 2004-2006 are thrown out, Berlin averages about 23 EDUs connected yearly over the last decade. With the peak years, wherein 81, 100, and 108 EDUs were connected, the average is about 48.

“We’re never going to be comfortable with three digits again,” said interim Berlin Mayor Gee Williams.

The numbers generated by Tatman show a $10.8 million price tag for the plant work, with another $9.9 million for the new spray site, which must be online by 2013, to accommodate the increased usage. All amounts are in 2008 dollars.

“We’re unable to guess what inflation will be, what the cost will be,” said Tatman. He also pointed out that rising costs for electricity, or other materials or services like concrete could add unexpected higher costs to the project.

The numbers will become more refined as the project progresses, however, and there could be ways to reduce the town’s debt on the work.

“There is a significant change in this model if we could get some grant money,” Tatman said. “We’ve got to find ways to make less risk to the town of Berlin.”