PATTERSON -- In order to pay for water plant improvements, the City of Patterson is discussing raising water rates for both commercial and residential customers.
While the current water plant does produce quality water, the infrastructure is nearing 70 years old. Residents passed a 12.41-mill property tax April 30 to pay for $5 million in bank loans for the plant replacement. However, engineers currently estimate the project will cost between $8 million and $9.8 million.
David Riggins of Government Consultants of Louisiana in Baton Rouge explained the financing:
—$5 million loaned by two local banks. That amount would be paid back with the money raised by the 12.41 mills residents will pay annually in property taxes. Riggins said that amount is expected to generate $280,000 annually. However, if it does not, the tax can be increased after the first year.
—$5 million in the form of a U.S. Department of Agriculture loan with a three percent fixed rate payable over 30 to 40 years. This is the current estimate based on the city’s most recent audit. Another audit is due at the end of the calendar year, along with the USDA’s new budget. Riggins said he did not expect much to change with respect to the rates. This amount would be paid with user fees.
In order to accommodate the payment of the USDA loan and operating expenses, the city needs to generate approximately $1.2 million annually through user fees — essentially, from residential and commercial water bills. The only way to do that is to restructure and increase rates, according to Louisiana Rural Water Association representative Rusty Reeves.
Currently both residential and commercial customers pay $10 for the first 3,000 gallons of water used and $5 for every 1,000 gallons used after.
The proposal, as laid out by Reeves Tuesday, changes commercial rates in the city limits to $30 for the first 4,000 gallons and $7.50 for each 1,000 gallons consumed after. That changes an average commercial user’s bill of nearly 8,000 gallons a month from $23.83 per month to $49.97.
The largest user, however, consumes an average 762,333 gallons per month. That user’s average monthly bill would increase from $2,067 to $5,717 under the new rates.
Mayor Rodney Grogan asked whether such users, if they are a social service agency such as a health care system, could receive an incentive rate.
Such rates do exist and vary city by city. They are governed by city council ordinances, but, Reeves warned, if the city lowers its rates in one area, it must make up the revenue elsewhere in order to pay the debt it is incurring for the water plant.
“I know those numbers look tough on some of your businesses, but for the long-range growth of Patterson, you need to do this,” Reeves told the council.
For commercial customers outside the city limits who are served by the municipal water system, proposed rates would be $35 for the first 4,000 gallons and $8 for each 1,000 thereafter. The increased amount is due to different tax structures that residents inside the city limits pay but those outside the city are not bound by, Reeves said.
With the new rate structure, annual revenue would go from $2,738 to $6,831 outside the city limits and from $109,149 to $257,627 inside the city limits.
Residential rates in town currently are $10 per month for the first 3,000 gallons, $5 for the next 5,000 gallons and $3.80 afterward. Outside the city limits, residents pay $12.25, $5.25 and $2.80 at those same usage amounts.
The proposed amounts would be $15 for the first 2,000 gallons and $5 for every 2,000 gallons afterward in town and $17.50 and $5.25 outside the city limits.
This would increase the average citizen’s bill about $10 per month, from $23.55 to $33.55. In the highest water consumption month, July, the average homeowner in Patterson would go from paying $25.29 to $37.90 under the new rate structure.
Outside of town, the average residential bill will go from $31 to $41.55 under the proposed rate structure.
“This would reduce the minimum to where the rates kick in earlier so it would be to their advantage to conserve water,” Councilman Larry Mendoza pointed out.
Reeves noted that for water systems making improvements, these rates are in line across the state.
At the same time the city implements the new rate structure, it could implement an “evergreen rate” which would essentially keep the utility rate in line with the Consumer Price Index for the year. That way the city would never have to go back to its residents with a rate increase. It would increase or decrease naturally with inflation.
He also noted that the town will not be making a profit on its water plant.
“People will be mad,” Reeves told the council concerning a rate increase “but they will be more mad if they don’t have water.”