Some Owensboro, Ky., city commissioners on Tuesday expressed concerns they had with the 32% proposed water rate increase and upward of $69 million in revenue bonds Owensboro Municipal Utilities wants to issue, all primarily for the expansion of a water treatment plant on the city's east side.
Commissioner Pam Smith-Wright and Mayor Pro Tem Bob Glenn said they believed the rate increase — expected to have an impact of about $5.09 monthly on the average OMU residential customer — could be harder on the low-income and elderly, while Commissioners Larry Conder and Jay Velotta, alongside Mayor Tom Watson, asked pointed questions about OMU's rainy day savings and the expected fallout of industrial customer losses.
The proposals, which are up to the city commission for approval now, will likely be voted on later this month. Until then, it's up to the public utility and its interim General Manager Kevin Frizzell to make a case for why the increase is needed.
"The last thing I want to do is be asking for a water rate increase," Frizzell told the commissioners Tuesday. "But I think it's very necessary. I look at this as an investment in our community's infrastructure."
With the commission's approval, OMU will institute a two-step rate increase for residential ratepayers that will begin on Oct. 1 to the tune of 20%, followed by another 12% on June 1, 2019. According to a Burns & McDonnell water rate analysis, future rate increases will likely be needed in 2024.
OMU officials say recent water main breaks, in addition to building settling at the 18-million-gallons-a-day-capacity Plant A, leave a complete shutter of the plant and the expansion of its younger cousin, the William Cavin Water Treatment Plant, the cheapest option. The plan would increase capacity there to 30 million gallons a day.
But the proposal comes after OMU passed a budget this summer with another set of energy cost adjustment increases on the electric delivery side, on top of other utility rate increases in the county in recent years.
"My bill has been rising $100 a month, and we live on a fixed income," said Anetta Owsley, a self-described senior citizen who lives in Owensboro. "I know I'm not the only one that's struggling right now. We need a break."
Smith-Wright and Glenn said they wanted more information from OMU on ways ratepayers like Owsley can save on their monthly bills, because the compounding nature of an increase, they said, is just too much.
Plus, Tuesday isn't the first time OMU has brought a proposal related to the expansion of the Cavin plant before the Owensboro City Commission. Elected officials rejected a rate increase and bond issue for engineering costs and associated expenses in March 2014, leaving the utility with no choice but to trim the proposed plan and start the approval process again.
The city commission approved the engineering costs in May 2014, and the engineering phase of the project concluded late last year.
But should OMU lose a large, industrial customer, the effect on the remaining ratepayers could be huge, Conder said after Tuesday's meeting. The utility doesn't contract its customers, meaning a sudden, unexpected exit could leave the 30-year bond payments much higher for the rest of the ratepayers.
That's true, Frizzell added later, but the rate increase proposed does soften the blow on the largest Owensboro customers, plus residential and industrial OMU revenue are about even, meaning the net effect could be smaller.
At issue for savings and contingencies is the nature of OMU's water budget.
"We operate the department on a razor-thin margin," he said. "There's not a lot of room for savings."
In the time it's taken OMU to regroup, engineer and come to agreements with its wholesale water customers, there wasn't an opportunity to build up any reserve funding in the department, because it is operated — and always has, he said — on a pay-for-use basis. Customers pay for the water they use, and OMU delivers that water at rates it costs to do so. There's almost no wiggle room at all.
Had rates gone up earlier, Frizzell said, in order to build up some funds before the construction phase neared, it would be difficult to make the case to the commission and ratepayers that more money was needed for a project from which they may never see the benefit.
