The Algood City Council approved a five-year water and sewer rate increase Tuesday.
City Manager Keith Morrison said the increases protect the city from operating utilities in the red.
“The other thing with the utility fund is that you have to account for depreciation. So the equipment depreciates. Depreciation for us is about a $280,000 a year hit,” Morrison said. ” And you have to put that much more money in your revenue over what your expenses were. So all those costs that continually keep going up will have to account for depreciation as well.”
Morrison said the five-year plan operates in response to Cookeville’s increase on wholesale rates for the city.
“You know, nine percent we have had to endure so we are only adding an additional three percent. So we didn’t go up another nine percent,” Morrison said. “And a lot has been handed off to us, so we are trying to keep this as low as we can. However, we may have to look at adjusting these between now and 2023 depending on the cost and how things build.”
If Algood reports two years in the red, Morrison said the state will come in and increase the rates without input from the city.
“So assuming that we were already two percent in the hole in expense versus revenue, we put a three percent increase on our rates,” Morrison said. “So in the fiscal year 2019, the rates will increase by 12 percent. Fiscal year 2020, 12 percent. Fiscal year 2021, 12 percent.”
In 2022, the city will increase the rate by eight percent and seven percent in 2023.
Morrison said the plan also adjusts the way sewer rates are reported.
“Sewer, we need to make a change. Currently, our rates are expressed as a percentage of water. The state doesn’t really like that anymore,” Morrison said. “They like those expressed as a dollar rate per gallon, just like with water. The bill will still be calculated the same it is just a different way of expressing the rate.”
Morrison said the city will continue efforts to keep extra utility costs low.
“We are also looking to do some camera work on sewer lines as well as hopefully some smoke testing. Both of those are to reduce infiltration of stormwater that enters the station,” Morrison said. “We pay per 1,000 gallons of what enters the system and goes to Cookeville through the meter. So the more stormwater we can reduce, the better off we are.”
The new sewer and water rates will take effect on July 1.