City could consider water rate increases

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Cumberland Times-News, May 16, 2012

Matthew Bieniek

 

Cumberland’s returns on investments very low compared to private utilities

 

CUMBERLAND — While the city is on the road to financial recovery, making sure that recovery continues may take an increase in water and sewer rates, City Administrator Jeff Rhodes told Mayor Brian Grim and city council members at a budget work session Tuesday.

At the same time, the city should continue a hiring freeze, affecting six currently open positions, Rhodes recommended.

“It’s not wise. It’s not wise,” said Rhodes of the city’s $6 million sewer operation that generates an operating margin of only $10,000.

The city’s returns on investments are very low compared to private utilities.

The city has a return on water and sewer utilities of 3.49 percent compared to a 13 percent plus return for private utilities regulated by rate commissioners, Rhodes said.

“We’re a regional provider of water,” Rhodes said, so the burden of any increase would not be borne solely by Cumberland citizens.

Rhodes did not recommend a specific increase, but said he could provide various scenarios to the council.

It’s important to note, Rhodes said, that to increase that margin to the desired 8-10 percent wouldn’t necessarily mean increasing rates at that level. It could be that a much smaller rate increase could do the job. The city’s financial advisers are also recommending the change.

“We are on the road to recovery, but to stay on that road, we may need ... increases just to maintain those services,” Grim said. Taxpayers pay the increased cost of not dealing with these issues in advance and then allowing them to “blow up,” Rhodes said.

The city is not trying to make a profit, but recent water main breaks, like one on Bedford Road, and other known problems eat into the city’s budget.

For example, the valves at the Fort Hill reservoir are in poor shape and don’t close completely. They must be replaced, Rhodes said. It will be an expensive project, since the valves are deep in the ground.

“This should have been done years ago,” Rhodes said, of the $200,000 Fort Hill job, currently in the city’s proposed capital budget.

The hiring freeze will continue the trend of the city reducing its work force.

In 2008, the city had 274 full time employees; in 2012, that number is 252, Rhodes said.

City workers will also get no cost of living adjustment in the proposed 2013 budget, Rhodes said. The six frozen positions will be evaluated for possible elimination, Rhodes said.

“We do have some things that are constraining us by not filling these positions ... but it’s the right thing to do,” Rhodes said.

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