Water rate discussions bubbled to the surface again Thursday as Iola City Council members continued looking at the city’s 2013 budget.
At issue for the Council is whether water rates should escalate again in order to further replenish reserves, and potentially transfer up to $200,000 into the city’s general fund.
Such a concept was proposed by City Administrator Carl Slaugh at Thursday’s budget workshop.
Over the past several years, the water fund had been hemorrhaging money, and required transfers from other utility reserves in order to stay out of the red.
Council members approved in September an 18-percent water rate hike — the first rate increase since 2005.
Slaugh said another rate adjustment is necessary because while the fund is no longer losing money, it has not grown enough to fund further repairs and upgrades to the water line system.
Further, Slaugh said the water fund should be on equal footing, responsibility-wise, for the city’s general fund.
The city supplements its general fund with utility reserves — such as natural gas, electricity and ideally, water — in order to keep property taxes lower than they otherwise would be.
Slaugh said transferring funds from the water fund reserves would reduce the city’s dependence on reserves from the other utility funds.
Slaugh’s explanation held little water for Council members Steve French, Kendall Callahan and Ken Rowe, who said any excess revenues should instead be earmarked for infrastructure and repairs.
Approving a budget with Slaugh’s water fund transfer would essentially be obligating the city to another water rate increase, Callahan said.
The proposal was just that, Slaugh said: a proposal. If council members subsequently decline to increase water rates, the transfer would not occur.
Mitch Phillips, Iola’s gas, water and wastewater department superintendent, said he was surprised to see the proposed transfer to the general fund, if for no other reason than any added revenues should go immediately into repairs and maintenance. “At first, I thought it was a typo,” Phillips said. “Then I realized it was supposed to be there.”
“We don’t have enough money” to do all the repairs necessary to the existing lines, Phillips said.
For example, the city spent $15,000 over the past year alone on water clamps to repair line breaks, Phillips said. He pointed to one water line that dates back to 1900.
