After the City Council advanced a sewer rate-hike proposal Aug. 7, members made clear that 19 percent was too much and that money would need to come from other areas of the city’s finances.

Later this week, contracted accountants will present several alternative increases that would factor in money from construction-bond refunds and economic development tax dollars, among other sources. The amount of those alternative plans was not known Monday.

A meeting originally planned for Wednesday evening is now tentatively set for 6:30 on Thursday, an hour before the regular council meeting, Council President Jeff Gahan said.

On Aug. 8, the financial board for the State Revolving Fund — a loan program for water and wastewater system improvements — agreed to trim the utility’s $4 million payment due Sept. 1 to about $3 million and backload some of its debt for renovations. That vote was contingent on the city improving its annual revenue to a level 25 percent beyond its bond obligations.

An 11 percent increase would meet that goal, while the 19 percent hike proposed by the Sewer Board would also provide a debt-reserve fund and cover a new set of renovations and repairs, according to figures from H.J. Umbaugh and Associates.

State Revolving Fund director Jim McGoff said Monday that the loan — of which he estimated $37 million remains to be paid — was initially approved in 2002 because utility revenue was adequate for bond obligations at that time.

But sewer-system usage unexpectedly declined over several years, dragging revenue down with it.

If the utility doesn’t raise rates or find money elsewhere it will need to show documented proof that it has enough revenue to warrant the bond agreements, McGoff said. And if not, the State Revolving Fund could punish the violation by demanding all $37 million immediately, instead of allowing it to be paid over the next two decades.

“We certainly would rather not [do that], but if they’re in default on their loan, we’d have to take the appropriate actions to make sure the loan is repaid,” McGoff said.

If New Albany fails to concoct a plan to make more money for its bond coverage, “then we’d be asking the city, what are they going to do about it?”

McGoff stressed that his organization and the city were getting along fine.

“We’ve just had conversations with the mayor’s office and their financial adviser and they’ve been very helpful,” McGoff said. “And in our opinion, they’re trying to do the right thing.”

Sewer Board attorney Greg Fifer echoed the feelings of agreement.

“I think they’re relatively pleased that we’ve been up-front with them,” Fifer said.

But Fifer added that without the rate increase, there’s no effective way to manipulate the finances to show proof of bond coverage.

“I don’t know what I would say at this point in time,” Fifer said.

Gahan declined comment on the rate proposal until after alternatives are presented Thursday.

Trending Video

Recommended for you