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Costs to hit residents?

Utility rates may rise more than expected

February 15, 2011
By Ashley Hoholik

MANISTIQUE - Despite attempts to avoid it, the city of Manistique will likely pass on some of the cost of its $8 million utility project to residents. While the final numbers have yet to come before council, during Monday's meeting, members heard of potential greater-than-anticipated rate increases for both water and sewer services.

Funded by a combination of grants and low interest loans through USDA Rural Development (RD), the utility project will end up covering more than 40 blocks of utilities in Manistique.

The $4 million in water and $4 million in sewer infrastructure repair was disbursed as part of the American Recovery and Reinvestment Act (ARRA).

The utility upgrades are expected to cover both the east and west side of Manistique and will include new water lines, sewer, storm sewers and curbing, as well as new gutter and pavement.

At the beginning of this year, the city was allocated the final portion of the money for the project.

Since that time, officials have been working with Coleman Engineering Co., the firm hired for the project in 2010, to figure out ways to fund the city's match.

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At a glance

The city of Manistique may have to pass some of the cost of its $8 million utility project to residents.

Funded by a combination of grants and low interest loans through USDA Rural Development (RD), the utility project will end up covering more than 40 blocks of utilities in Manistique. The $4 million in water, $4 million in sewer infrastructure repair was disbursed as part of the American Recovery and Reinvestment Act (ARRA).

At the beginning of this year, the city was allocated the final portion of the money for the project. Since that time, officials have been working with Coleman Engineering Co., the firm hired for the project in 2010, to figure out ways to fund the city's match.

While the city was expecting the use of other methods, such as refinancing a current sewer debt, to avoid any noticeable rate increases for residents, city council members heard otherwise Monday.

According to Jeff Sjoquist, senior project manager for Coleman Engineering, RD is requiring the city have more unrestricted cash in both the water and sewer budgets at all times.

This would mean that in addition to the regular revenue and expenditure budget, the city would need approximately three month's worth of operational costs sitting in both accounts, explained City Manager Sheila Aldrich.

Maintaining this unrestricted cash balance means the city would have to come up with the money somewhere - and raising the rates is one way to do it, said Sjoquist.

"We are working with trying to keep the rates as low as possible and still be responsible for running your water and sewer systems," he explained.

"It's a budget - it's a 'beauty is in the eye of the beholder' type of thing as far as what is conservativeand this thing did get somewhat complicated."

Sjoquist pointed out Duane Reid, RD specialist with the USDA, has been working with Coleman to try to establish rate increases that appeal to the city, but their perspective on what is considered a safe, unrestricted cash balance differs.

"Our budget that we first submitted to them (RD), trying to keep the rates low, had very little unrestricted cash," he said. "Mr. Reid wants to see the unrestricted cash higher than what we had it."

Due to this request, Sjoquist explained that, if approved by the city, residents could face an increase of 30 cents per 1,000 gallon increase in water rates.

"Yes, of course, we were hoping for the down side (on water rate increases)," said Sjoquist. "On the other hand, we are gettingroughly three and a half miles of roadway, water, sewer, storm sewerthe public is getting a fair amount of work for that money."

While RD has yet to review the sewer proposal put forth by Coleman, Sjoquist said, due to their stipulations with the water budget, this proposal will most likely be shot down as well.

"I think the last one (proposed rate increase) that you saw was $1.37 on the fixed charge rate on the sewer," he said. "Again, that has very little unrestricted cashthis is not written in stone, but I would say you'll probably be in the couple dollar range."

Coleman will continue to work with RD on the rate increases and come back to the city with firm numbers in a few weeks said Sjoquist.

"Rural Development, as a lender...doesn't want a balanced budget in regard to revenues and expenses being exactly the same," he said. "They want some breathing room."

 
 

 

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