Metro may raise rates on water, sewer use

Hikes could be double-digit; stormwater fees possible, tooBy MICHAEL CASS • Staff Writer (Tennessean) • March 28, 2008 Many Metro water and sewer users could confront double-digit rate increases and new stormwater fees in the next year as the city tries to catch up on years of building and drainage projects. But Mayor Karl Dean's administration isn't ready to sign off on anything yet. The administration considers the issue "a high priority" but doesn't believe new rates or fees must be in place when the next fiscal year starts July 1, Metro Finance Director Rich Riebeling said Thursday. The city is being pressed on several fronts to generate new revenue for its water and sewer program, which is required to pay for itself. Capital projects worth hundreds of millions of dollars need to get done. The U.S. Environmental Protection Agency is concerned about water quality. And a national firm recently reduced Metro's bond rating for outstanding debt on water and sewer projects and said several years of "double-digit annual rate hikes" might be necessary. "If we don't do a rate increase, there's no money for capital," Councilwoman Emily Evans said. The city hasn't changed the water rate for a typical residential meter since 1999, when the rate went down 25 percent. Sewer rates haven't changed since 1995. To make up some ground, Evans said, water and sewer rate hikes of 18 percent to 20 percent would be in order in 2008-09. She cautioned, however, that such an increase wouldn't necessarily apply to all of Metro's 170,000 residential, commercial and industrial water and sewer customers. Evans, who represents Belle Meade and West Meade, said Metro Water Services needs to complete $500 million in capital projects, including water main upgrades and new water tanks across the county, in the next five years. That total doesn't account for stormwater control, which a consultant recently calculated to cost $200 million over eight years. The consultant recommended that the city charge property owners a monthly user fee to generate that money; for most single-family homes, it would be $4.98 a month. Councilman Mike Jameson, who represents parts of downtown and East Nashville, said he is eager to get a stormwater program on the books so developers will have an incentive to use building materials that absorb rain, reducing runoff. No conclusions yet Riebeling and Evans said the city would need to deal with the water and sewer rates and the stormwater fee at the same time, creating a comprehensive approach to Metro Water's revenue needs. "You can't piecemeal it," Riebeling said. But Riebeling said the Dean administration still needs to "do our homework" to fully understand Metro Water's financial condition and building needs. He said there was nothing "magic" about implementing the new revenue streams by July 1. "I don't think we've reached any conclusions yet," he said. Metro Water Services Director Scott Potter "wants to immediately move forward with a plan to the council. I don't think we're quite ready to do that. "We're going to ultimately propose a program we think is necessary for the city and Metro Water to go forward." Potter's spokeswoman, Sonia Harvat, did not return a phone call seeking comment but wrote in an e-mail, "A discussion will need to take place at some point in the near future to ensure that Metro Water is adequately funded to meet regulations and provide vital services to our community. In the mean time, we share Mayor Dean's commitment to living within our means and will be identifying areas of cost savings and increased efficiency, as every department has been asked to do." Evans said some council members feel "a mild sense of urgency that motivates us to get things done sooner rather than later" because they've been hearing from some of their constituents about targeted fees. Customers who pay their water bills late now must pay a penalty of $10 or 5 percent, whichever is higher. The late fee used to be 5 percent, which generated little revenue from a $10 water bill. Meanwhile, new restaurant owners have complained about "capacity fees" of tens of thousands of dollars to connect their businesses to the city's water supply. "We've done all these revenue enhancements," said Councilman Parker Toler, who represents south Davidson County and is a former Metro Water official. "It's gotten out of proportion. That's not the way the utility was intended to operate." Toler said stormwater is becoming a critical concern for Nashville, and many parts of the water and sewer system need upgrades or replacement parts. "We are a big, growing city," Toler said. "And at some point these things must be done."