Chattanooga can handle a $250 million sewer repair price tag

In this file photo, a manhole cover for the City of Chattanooga's sewer system is next to a storm drain built in 1939 that crosses underneath Sterling Ave. next to Riverview Park.

Photo by John Rawlston /Chattanooga Times Free Press.

A $250 million price tag for sewer repairs is a big pill to swallow.

But city officials said Wednesday that meeting the mandate of a consent decree Chattanooga reached this week with the U.S. Environmental Protection Agency and the U.S. Justice Department is doable.

The city retires debt each year just as quickly as it takes on new debt for the sewer system, said Daisy Madison, the city's chief financial officer.

"[The cost] is not rising at a rate as large as it may seem," she said.

The city was handed a bill Tuesday by federal regulators stating it would have to conduct an estimated $250 million in sewer repair work over the next decade and a half.

But Chattanoogans will have 16 years to pay for that work. That translates to about $15.6 million, on average, each year the city will have to dedicate toward its pledge to improve sewers. The city retires about $10 million a year in sewer debt, Madison said.

"Obviously, you don't have to do it all at once," she said.

Finding money

City officials have said ratepayers will finance the now federally mandated improvements to the region's waste water treatment, but they acknowledge that they don't yet have a concrete roadmap.

"My crystal ball is just about as good as yours," said Jerry Stewart, director of the city's Waste Resources Division.

His crystal ball, however, is a bit more clear than he lets on.

The plan is to raise rates incrementally by less than 10 percent a year for the next 16 years, he said.

The catch is that rate increases must always be approved by the City Council. And who knows now who those members will be during that time?

But, for this year at least, Stewart and other city officials say they have a head start. The city has allocated $38 million in its capital budget for sewer fixes.

"We knew this was coming," Stewart said. "We were trying to be prepared."

Steve Leach, the city's administrator of Public Works, said the city also showed foresight by starting gradual fee increases of about 3.5 percent a year 10 years ago. It helped show federal regulators the city is serious about fixing sewer problems, he said.

Over that decade, the average residential bill has risen $13.50. In 2002, the city's residential sewer rate was $3.09 cents per 1,000 gallons. Today it is $5.79 -- an 87 percent increase in a decade.

The gradual hikes mean Chattanooga sewer users won't see an enormous bill sprung on them all at once, he said.

"We think our approach of doing it one step at a time was better than some communities who saw a 50 percent increase all at once," Leach said.

For the average household in the city, that means a $15.45 monthly sewer bill in 2002 now is $26.37. By the end of the year, the bill will be $28.95.

Commercial rates are about 60 cents higher per 1,000 gallons.

Repercussions

Tim Spires, president and CEO of the Chattanooga Manufacturers Association, said he has kept a watchful eye on what is going on. Manufacturers are some of the largest users with industrial waste to process.

"It's not a surprise," he said. "It's not catching us off guard, but it's a tough business market right now."

He said manufacturers want a good environment, but also don't want to see business adversely affected.

Spires said he is unsure how a long-term fee increase would affect industries in Chattanooga.

"I can't really say there's a point where we say, 'Can't,'" he said.