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NARRAGANSETT—The Town Council approved first readings of two ordinances Monday evening which would increase sewer and water rates for residents. In January, the town hired Pioneer Consulting Group, Inc., to review the town’s Wastewater and Water Funds, and because of internal and external factors, there was a need to revise rates.
“Last year, when we were looking at strategic issues, one was returning the Water Fund to a more healthy state,” said Town Engineer Jeffry Ceasrine.” For a number of years, we have been using reserves and the Water Fund balance has been declining.”
“The Sewer Fund is fine where it is, but is starting to show its age, so to speak,” he added. “This is the first independent look we’ve done for 20 years, at least for as long as I have been here.”
The town has suggested a 42 percent increase for the minimum water charge to town residents. Currently, residential property owners pay a baseline fee of $197 per annum, or $16.42 monthly, which would rise to $280 per year, or $23.33 per month. The minimum block usage will remain at 6,000 cubic feet.
For sewers, the charge is $345 yearly, and under the current proposal, that figure will increase to $400, or 16 percent. The minimum block usage will also decrease from 10,000 to 8,000 cubic feet.
In January, Douglas W. Gardner, President of Pioneer Consulting Group, Inc., presented a detailed report about the long-term sustainability of the Water and Sewer Funds, as well as provide recommendations to strengthen the finances of the town, the product of which are the currently drafted ordinances.
Gardner found through his study that the town’s Water expenditures exceed revenues, and although Sewer expenditures are at a breakeven level, the minimum charge for users of both Water and Sewer is heavily subsidized. In fiscal year 2010-11, for example, the Water Fund generated approximately $1.3 million in revenues, while paying out approximately $1.7 million in expenditures.
“[Heavy subsidization] means that the town is not charging enough for services,” said Gardner in January. “It costs [the town] more to provide the current minimum, and the larger consumers are thus subsidizing the smaller, eating up the Fund Balance.”
Rising operating costs for water and sewer facilities and United Water’s 2012 rate increase of 18.4 percent, approved by the state Public Utilities Commission (PUC), have largely contributed to rate increases. The town’s Water Fund has furthermore been operating at a deficit for several years, and the town has not raised rates since 1995, further compounding both funds’ ability to generate revenues and remain healthy. Gardner also analysed the town’s Base Charge for water and sewer services, which does not adequately recover total costs for those funds.
The majority of customers do not consume the minimum water allowed in the base charge estimates of water and sewer usage. 2,843 of 5,196 water customers fall within the 6,000 cubic feet or less category, the lowest allowance bracket in the water base charge. Of 7,711 customers who use sewers in Narragansett, 6,299, or 82 percent, are under the 10,000 cubic feet or less allowance bracket for sewer. Gardner thus provided suggestions for making the water and sewer funds healthy and equitable for all users in order to secure their long-term financial stability.
“If the town council does not approve new rates, the town will be in a deficit pretty quickly,” said Gardner. “There was a 40 percent increase this year and a five percent increase the year before. This would have been a lot worse without those increases.”
Both Ceasrine and Gardner reiterated the importance of rate increases in keeping both funds financially healthy, even if the increases may hurt some residents in terms of payment.
“Narragansett has been artificially keeping its rates low, which is a common occurrence, but at some point, that comes back to bite you,” said Gardner. “Water is the critical one, and if you don’t raise those rates this year, the town breaks even next year. In fiscal year 2014, it will be in the red and you will have to go to the general fund to fix it. I am sure the town’s finances can’t handle that.”
“[The town] needs to get this in the right direction, and right now its moving in the wrong direction,” he added.
The two motions were passed unanimously, and second readings along with potential adoption are scheduled for the June 18 regular meeting.