Signal Mountain mayor floats potential water rate increase

Signal Mountain Mayor Chris Howley listens to Councilman Dan Landrum at Signal Mountain Town Hall on June 6, 2018.
Signal Mountain Mayor Chris Howley listens to Councilman Dan Landrum at Signal Mountain Town Hall on June 6, 2018.

The Signal Mountain Town Council is considering raising water rates for town residents prior to making a decision on whether the town will sell its water system to Tennessee American Water or Walden's Ridge Utility District, or retain ownership and continue to manage the system itself.

An eventual rate increase is inevitable - both companies have said they would raise the base rate if they acquired the system: $18.52 if sold to WRUD and $1.62 for TAW, though TAW's figure does not include any capital improvements. State law allows Tennessee American to pass along the costs of any approved capital improvements to ratepayers as a "capital recovery rider" on their monthly water bills.

The town postponed its decision on the water system sale until an independent study is complete, which Town Manager Boyd Veal said should be ready by the end of September. The purpose of the study is to look at the feasibility of the town keeping its water system as well as whether the town should keep it, and what the town needs to do if officials decide to keep the system.

Mayor Chris Howley said at the council's Aug. 24 agenda work session that he is prepared to make a decision concerning the water system sale. If others are putting off the decision, he said, the council should move forward with a rate increase on the assumption that the town will decide to keep the system.

"We're going to lose three or six more months of collecting - if we decide to keep it - the capital we're going to need to staff up and do everything we've got to do, which will put us in a bigger hole," he said.

Howley suggested they raise the rates to the amount Veal had projected would be necessary if they decided to keep the system. That projected base rate is $31.74 per 4,000 gallons, an increase of $11.55 for town residents from the current base rate.

Councilman Bob Spalding said he felt that would be a good idea, but Councilman Dan Landrum recommended the town request an independent rate study, a service that the University of Tennessee Municipal Technical Advisory Service could provide, before changing its rates. MTAS is currently conducting the feasibility study on whether the town should retain ownership of and continue to manage its own water system.

Veal said his projections should not be considered a professional rate study. They were based on the gap between the funds generated by the current rates and the expenses he anticipates the town will incur if it keeps the system, including hiring professional management for the system and increasing the salaries of system employees.

"I looked at where we would have to set the rates to take a fairly aggressive and long-term approach to taking care of the system without having to go into at least long-term [debt] and perhaps even avoiding short-term debt," said Veal.

Landrum noted that the town's water fund for capital projects, which is separate from the general fund budget, is currently at $2.6 million. Raising the rates now isn't necessary, he said, since the improvement and maintenance projects ID'ed are intended to be completed over a long-term period rather than all at once.

In response to Howley's question of how much the town spent on projects related to the water system last year, Veal said the amount was just under $900,000.

Spalding suggested the council request a rate study now, rather than waiting until the feasibility study is complete, to give the council additional information.

If the town waits for the results of a rate study - which would cost about $3,000 if done by MTAS, according to Landrum - Howley said they'd be several months behind in raising the funds necessary to maintain and operate the system without going into further debt.

Since the town sources its water from an independent supplier, both the town's projected rates and the results of a rate study would be based on estimates of what the supplier will charge, said Howley, who took issue with paying for a rate study. He said he trusts that the rates projected by the town's staff are reasonable considering their experience running and managing the system.

Howley added that the town's rates haven't been raised in three years, and continuing to keep them the same will hurt the town financially. Considering the rates have been frozen for several years, a few more months won't make a big difference, Veal responded.

"I think the process needs to involve more than just my recommendations," Veal said.

Howley said it's easy for them to pass the issue down to future councils, though he added that he doesn't believe the current councilors are doing their duty if they choose to do so. He again suggested that the council take action soon, though no decision was made at the work session to put the issue on the agenda of the council's Sept. 10 meeting.

Email Emily Crisman at ecrisman@timesfreepress.com.

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