Iola City Council members rejected a proposed hike to the city’s water rates, vowing instead to make sure every other avenue to balance the water budget has been exhausted before they agree to any kind of increase.
On the table Monday was a recommendation from City Administrator Judy Brigham for a 30-percent increase in water usage rates for large-scale industrial customers, 25 percent for other commercial users and 24 percent for private residents. The proposal failed 6-2, with councilmen Jim Kilby and Don Becker the only two in favor.
The city is in a bit of a pickle, Brigham explained, because the water fund has operated at a deficit for the past several years and relied on transfers from sewer fund reserves to function and continue paying its annual $700,000 loan payment. The city will pay off the loan — utilized to build Iola’s $13 million water plant in 2005 — in another 14 years.
The fund is expected to wind up about $300,000 in the red this year, Brigham said, and has averaged about $300,000 in losses since 2007. The fund “lost” only about $30,000 in 2010, she noted, but that was because the city made two loan payments in 2009.
“It just worked out that our payment was made in December 2009 instead of January 2010,” Brigham said.
The rate increase, Brigham said, would be enough “to put us back in the black,” and eventually create a reserve fund so the city could once again attack deferred maintenance projects.
Council members weren’t happy about their predicament.
Beverly Franklin asked why previous city commissioners failed to adjust rates in the past to prevent such a hefty increase this year. A drastic hike for industrial customers could cause some to consider leaving town, she warned.
Likewise, Ken Rowe suggested that a 24-percent increase for residents was unfair, in part because it would have the most impact on poorer families or those on fixed incomes.
The third strike, Brigham acknowledged, is that Iola’s rates aren’t low enough to attract other rural water districts to buy the city’s treated water — one of the avenues city planners envisioned to help pay for the new water plant.
What’s more, a significant rate increase could price Iola out of the few water district agreements it has in place now, Brigham warned.
Council members asked Brigham for more detailed rate scenarios, including one that would balance the budget only for now, “and let us look later on at making adjustments to build a reserve,” Councilman Kendall Callahan said.
The water rates were last adjusted in 2005, Brigham said.
She also noted that the city is in violation of state law and its loan agreement with the state because its utility fund is in arrears and reliant upon transfers from the sewer fund.
No decision yet on water rate hikes
