Infrastructure Task Force continues rate increase discussion

Wednesday, September 7, 2011

The discussion surrounding proposed water and sewer rate increases for the City of Cassville continued at the infrastructure task force meeting held at Cassville City Hall on Tuesday.

"It looks like you do have a certifiable problem," said Nolan McNeill, who was in attendance at the meeting. "I hate problems that are offered without solutions though. I was wondering if you have looked at the possibility of a one-cent sales tax that could raise enough revenue to fix the infrastructure problems you have.

"Other cities, like Springfield, charge eight cents in sales tax, and Cassville doesn't collect anything of that magnitude," said McNeill. "I think you should look at the possibility of selling whatever you need to the public in the next 18 months. You will still be able to collect the additional money in the time frame needed."

McNeill said he believes a sales tax will be a fair way to collect additional revenue from Cassville citizens. A sales tax would also provide revenue support from shoppers who visit the area from neighboring towns.

"I suggest you also look at what will be needed to repair the infrastructure problems that you have," said McNeill. "I hate to see you set into a mode where people can't pay and then they are shut off and receive a $100 charge to have utilities restored.

"I know that they say a sales tax is regressive, but in my opinion it is not," said McNeill. "With a sales tax, everybody participates. I think you should evaluate what you have to have and how much revenue is needed."

Eugene Dilbeck, city administrator, thanked McNeill for his suggestion.

"Cassville has used sales tax to pay for its bond indebtness," said Dilbeck. "The state legislature, over the years, has tried to make it where the public has a say in debt incurred by cities, but city utilities are exempted from that. It has been left to local officials to adjust utility rates as needed."

Utility rates are traditionally structured in direct relationship to operational costs, said Dilbeck.

"Sales tax is not in direct relationship to our needs," said Dilbeck. "It requires a vote of the people, and elections are expensive."

In the future, the city will likely ask voters to approve a bond issue or a sales tax increase to finance a major inflow and infiltration improvement project, said Dilbeck.

"Your idea has merit," said Dilbeck. "In essence, though, it takes control and responsibility away from local officials and gives it all to the people."

When infrastructure task force member John Starchman asked if there was a possibility of combining revenues from a sales tax increase with utility rates, Dilbeck reminded the members present that the city has seen a considerable decrease in sales tax revenue.

Task force member Bill Shiveley suggested the city determine how operational costs will decrease after the completion of the inflow and infiltration project and the installation of new water meters designed to reduce the city's water losses. He estimated that the city could save around $250,000 per year by correcting those issues.

"If the council approves a rate increase and we find that we have more revenue coming in, the council will have the option of electing to build the reserves for major maintenance and capital improvements, or roll back the rates," said Dilbeck. "Unlike a sales tax, they would still have that flexibility."

Starchman said that the city would have the flexibility to reduce the sales tax also.

Task force member Mike Schlichtman asked Dilbeck to provide the committee with information on how the Missouri Rural Water Association developed the proposed water and sewer rates.

"I feel like we don't have a clear picture of how those numbers were arrived at," said Schlichtman.

Dilbeck said that the proposed rates were determined using information from the city's 2010 audit report and recorded operational costs. Those amounts were applied to the city's current number of users to develop the proposed rate increases.

"I'm not here to try to scare you, but we have a lot of old lines in the ground," said Dilbeck. "Those lines continue to break. We continue to patch them, but a lot of this problem is simply the age of the system."

Starchman reminded those in attendance that if a water line breaks too close to the sewer system, the break could contaminate the entire drinking water system.

"My suggestion has nothing to do with subsidizing the citizens from paying their bills," said McNeill. "I was just thinking about adding revenue to fix the infrastructure.

"I really think you need to look at what you could raise in revenue if you decide to go that way," said McNeill. "I don't think you should throw away any options and look in only one direction. You need to look in every direction at all the options. If you don't, you might miss something."

Dilbeck stated that a one-cent sales tax would likely generate around $800,000 per year.

"We are restricted on how we can use sales tax revenues," said Darelyn Cooper, city finance officer. "We don't have an economic development sales tax or a law enforcement or transportation sales tax. These taxes have specific uses.

"We may have already used all of the sales tax options available to us," said Cooper. "I will need to check and see what we could draw from. We already have a one-half-cent capital improvement tax, which is the maximum. I don't know if there is anything else that would qualify for this."

Dilbeck reported that the Cassville City Council would begin discussing the proposed rates at an upcoming council meeting. The infrastructure task force will continue to meet to offer input on the rates and other issues.

Steve Walensky, public works director, also provided information on the city's sewer system during the meeting. He reported that the sewer system has lost more than $100,000 in revenue each year since 2004.

Last year's sewer system operation costs were $563,888, and revenues were $455,800. The system recorded a $108,088 deficit. The city's sewer account also has $274,279 in debt service, which is a total deficit of $382,367.

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