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Ordinance increases charge for water usage by 5 percent

By Bill Short

Flag City LogoThe Millington Board of Mayor and Aldermen has passed an ordinance on final reading that increases the city’s charge for water usage by 5 percent.
Board members took the action during their June 16 meeting on a motion offered by Alderman Thomas McGhee and seconded by Alderman Hank Hawkins.
The motion was passed by six affirmative votes, with Alderman Frankie Dakin absent.
The ordinance was passed on first reading at the board’s May 9 meeting.
The City Charter authorizes the board to operate water and sewer systems to “promote and protect the public health,” and to impose charges to cover the costs of those services.
Tennessee law requires that the charges cover the costs separately for the two systems.
The ordinance states that the operating costs of Millington’s Water System continue to increase as the system ages, while the number of customers remains “static from year to year.”
While noting that this necessitates a rate hike, the ordinance states that 5 percent is the “smallest increase” that will cover the estimated costs for the 2017 fiscal year.
Water supplied by the city’s water system will be charged to each customer based on the following monthly rates:
(1) First 2,000 gallons – $10.50.
(2) Additional usage – The amount that bears the same relationship to $3.52 that the number of gallons used in excess of the first 2,000 bears to 1,000 gallons.
The rate will be adjusted each year for bills issued at the end of July. It will be based on the percentage increase in the Consumer Price Index over the December 2015 index.
The rate increase will be posted on the city’s Web site as soon as it is known.
During discussion shortly before the vote, Alderman Mike Caruthers said he had asked City Finance Director John Trusty to provide a spreadsheet detailing “exactly” why the rate needed to be increased.
Although Millington had 2,998 water customers during the 2012 fiscal year, Trusty said it currently has “only 12” more than that. But he noted that “average consumption” has decreased, which has a “negative impact” on the city’s revenues.
“We were selling about 2.6 million gallons a month in 2012,” he recalled. “And now, we’re selling about 2.4 million gallons a month.”
Trusty also said the last time water revenues were increased was shortly before the city started having to account for the Other Post-Employment Benefits.
“That was not factored into the costs that needed to be covered by the last rate increase,” he acknowledged. “That number is now running about $60,000 a year.”
Trusty said the city will get an “updated” number on that when an actuarial study is completed for the current fiscal year. But he noted that the costs have been “gradually” increasing.
Because Millington’s water system is “very old,” Trusty said it has “a number of capital needs.”
Those include improvement, renovation and/or potential replacement of the original Water Treatment Plant as well as pipes in upcoming years.
“You never know when that’s going to hit us hard,” he acknowledged. “If that happens, we’re going to have more expenses than we’ve been having in an average year.”
Trusty reiterated that, under state law, there must be a balanced budget in the city’s Water Fund, with the fees alone financing that.
“Without an increase, we’re looking at about a $45,000 deficit for the new year,” he acknowledged. “With the increase, we’ve got about $11,000 that would go in contingency.”
McGhee asked what would happen if Millington did not have a rate that is “sufficient” to support its water system.
“If we have a deficit of two years in a row,” Trusty replied, “the state will force the city to increase that rate, without us having a choice in what that number is.”

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June 2016
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