Will my utility rates go up, down, or stay the same forever and ever?

Recently, the Town of Dayton engaged the services of a municipal financial consulting firm to review the monthly sewage fees. The reports and supporting documents are quite a disappointment if you want a layman's indication of fee changes and the reasons behind them. Assessment is nearly unreadable for those who are not financial consultants. No charts or diagrams are provided. Most of the historical information cited in the report is directly from the state Gateway. Gateway collects and provides access to information about how taxes and other public dollars are budgeted and spent by Indiana's local units of government. 

The municipal financial consultant calls for return engagements every 3 to 5 years to review what financial systems and support personnel should be providing to a town regularly. Specifically, the consultant recommends:

  1. True up rates to current Town policies and procedures and number of customers
  2. Adjust for actual rates of inflation 
  3. Buildinto rates the current equipment needs and replacement schedule.
 

Yes, but what about the rate? 

The provided rate study calculated the money needed for expenses to provide the town's sewage utility. Then, rates were calculated that will collect that budget. Rates will certainly rise without a new neighborhood over which to spread costs. With the addition of 110 houses in a new neighborhood, the wastewater treatment rate can be reduced by 5%, and as much as 15%, depending on careful spending  of utility funds on items other than Lafayette's treatment fees.

Should the wastewater portion of your utility bill be increased?

We all want to quickly say No. NO!! A loud no, in some cases. The town recently engaged the services of a firm from Carmel, Indiana to conduct a financial study to determine what, if any, changes should be made to the monthly bill paid by the town residents and businesses. The firm has been engaged as many as five or more times over ten or more years. The firm is engaged directly. The town of Dayton does not prepare a Request for Quotation (RFQ) with specific needs and formats and analysis requested from a group of qualified firms, even those closer to Dayton, for categories in which money is spent for wastewater. No comparison shopping is done. It is clearly evident that Therber, Brock & Associates, LLC is a focused firm with qualified analysts and a strong reputation among town councils throughout the state. 

The Indiana Code, which is the law of the land here in the state and county and township and town, designates which categories should be included in Dayton's sewage utility rate study. Should the wastewater portion of your utility bill be increased? Let's examine the findings from the study.

Where is the money spent?

Here are the categories in which money is spent that ends up in the wastewater portion of the utility bills in Dayton:

  • Operation expenses
    •     Personnel, insurance, vehicle, computer, communications
  • Maintenance expenses
    •   Equipment
  • Repair parts and labor
    •   Infrastructure
  • New equipment
    •     Pumps, readers, meters
  • Taxes
    •     Defined by state and county and town
  • Working capital
    •   Money for all of those expenses listed above
  • Debt service expenses
    •     Interest on the loan that paid for the sewer installation
  • Debt service reserve
    •     There are only a few more payments to make, so a reserve is not needed. It should be used to pay off the loan.
  • Payment in lieu of tax
    •   A payment from the town's fees collected from residents instead of calling the fee a tax. State capitol politicians are proud of their slight of hand.
  • Return on utility plant
    •  A fancy way to say "inflation" which is when seemingly everything costs more next year than it did last year.

Who paid for the sewers?

Property owners in the town of Dayton pay for the sewers through monthly payments as part of their utility bill, which also includes a fee for water usage and for collection of trash and recyclable goods. The trash collector provides standard bins allowing the trash and recycled goods to be handled from an automated arm on a truck. 

In the 1970s, it was determined by the town council that the town could literally handle no more shit. The sewage systems on property after property were full. Sage council members, with advice from peers and professionals, determined that a wastewater system using the services of Lafayette Water Works would raise the standard of living and quality of life and provide for years of growth and prosperity in Dayton, and secured funding through the sale of the Sewage Works Revenue Bonds for $1,633,400 on May 1, 1978. Think of it as a 40 year loan having a 5% interest rate.

The financial institutions and government departments that collaborated to fund the loan get their money over 40 years of repayments. The final $39,000 will be paid by January 1, 2018. The USDA - Rural Development department owns the bonds, and it has been recommended that they be contacted to determine the current payoff amount, and pay it from current funds. It will save hundreds of dollars and can be handled directly and without assistance of outside consultants and lawyers and their ever-necessary fees.

How much does Dayton pay Lafayette for wastewater treatment?

As noted in the report, the Town of Dayton sends its wastewater to the City of Lafayette to be treated under an interlocal agreement between the Town of Dayton and Lafayette. This agreement allows Lafayette to increase its sewage rates to Dayton periodically. Here are recent and future rate increases that Lafayette has implemented:

  • 2013: 15%
  • 2014: 10%
  • 2015:  5%
  • 2016: No change   
  • 2017: 16%
  • 2018:  6%
  • 2019:  5%
 Lafayette's wastewater treatment plant ensures that Dayton's sewage is treated efficiently.

Lafayette's wastewater treatment plant ensures that Dayton's sewage is treated efficiently.

Lafayette has a combined sanitary sewer and storm sewer system. The Indiana Department of Environmental Management (IDEM) recently required them to separate those systems. These and other needed capital improvements are estimated to cost Lafayette Water Works over $179,000,000 dollars in the next 20 years. Lafayette's customer base of 26,520 customers will have to pay for these costs through increased rates and charges over the next 20 years.

Wastewater Payments Received vs Cost to Process

This chart shows the Wastewater Payments Received vs Cost to Process. 547 accounts are served by the wastewater system. The top 10 users account for 18% to 20% of the the wastewater usage. Dayton is projected to pay Lafayette approximately $185,000 for sanitary sewer treatment in 2017 and will be paying over $200,000 a year by 2019. Sanitary sewage treatment payments to Lafayette are the Town of Dayton's largest annual operating cost and comprise approximately 60% of Dayton's total annual sewage disbursements.

 Payments from users track closely to the cost of the treatment, as expected.

Payments from users track closely to the cost of the treatment, as expected.

 
Dave Leininger2 Comments