Tuesday, Apr. 10, 2012

Proposed water and sewer increases may be higher in Wake Forest

Raleigh merger must be paid off

The Wake Forest Board of Commissioners got early warning Tuesday of a coming 15 percent water and sewer rate hike proposed for next year’s budget – 3 percent higher than projections in January.

However, the proposed increase the year after that is significantly lower than expected: 7 percent instead of 12 percent. Overall, the increase will be smaller than originally planned.

The price increases are necessary to pay off the 2005 water and sewer merger with the city of Raleigh.

After discussion, the board asked staff to provide more information on Raleigh rates and the possible impact of lifting the 2008 ban on irrigation systems connected to the town drinking water system.

The target is for the merger to be paid off in 2014 so Wake Forest’s rates can drop down to match Raleigh’s, Town Manager Mark Williams told the commissioners. The 2012-13 budget is scheduled to be presented to the board at its May meeting. Williams chose to present the water and sewer rates early because he anticipated discussion.

Commissioner Frank Drake said he saw few other viable options for the town.

“We don’t have a choice,” Drake said. “In my opinion, this may be the least painful – it’s not palatable, but it’s the least painful.”

Commissioner Zach Donahue disagreed, saying he thought the town should investigate the possibility of reinstating irrigation hookups and charging a high one-time connection fee to help reduce the amount of price increase necessary to the general population.

“But you have no idea how many people are going to sign up,” Mayor Vivian Jones countered.

The average customer in Wake Forest currently pays about $68 per month for water and sewer. The proposed increases would raise the monthly bill to about $78. The new rates would take effect July 1, assuming the board passes its budget at its June meeting as scheduled.

The original plan was to pay the cost of the merger – currently at about $17 million – with the extra cash from Wake Forest’s much higher rates, Williams said. The merger originally was expected to lower Wake Forest rates in the long run.

But that plan was set before the recession, back when Raleigh’s water and sewer rates weren’t expected to climb. Instead, Raleigh saw double-digit rate hikes, and Wake Forest’s former 14 percent growth rate slowed to 4.5 percent, which means less revenue for the town than projected. There is no longer enough difference between the rates to cover the cost of absorbing Wake Forest’s water and sewer needs into the Raleigh system by 2014 without a significant rise in rates.

If the town does not find a way to pay the difference, Raleigh has the right to institute a flat surcharge of $25 to $55 per customer, per month until repayment is complete.

Other municipalities are in the same situation. Wendell Commissioners voted unanimously to raise water and sewer rates 8.5 percent a month in 2013 and 2014. An additional 5 percent increase will be added every year after that until 2025. The increase will add $5.76 a month to the average bill in 2012-13, then $3.35 per month every year until the merger is paid off.