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NILES -- Local residents could see their monthly sewer bill rise nearly $10 a month at the start of 2027 based on the results of a five-year rate study.
City officials at a recent utilities committee meeting heard from Steve Courtney and Amanda Guci of Raftelis, a North Carolina-based public-sector management and financial consulting firm that specializes in advising local governments and utilities.
The firm was tasked with handling the city's rate study, which covers 2027 to 2031, and provides an overview of the study's goal, current rates and operating expenses, and a financial plan, rate design and adjustments.
The city's sewer rates have not been increased since 2014, at a 10-year nominal rate until 2024, according to Councilman at-Large Edward Stredney.
Two rate studies occurred during that period, but no changes were made.
Guci said the financial plan portion of the study collects data from the utility, including capital project funding, detailed budgets and historical expenses, and billing determinants such as customer accounts and usage.
She said the firm also considered the city's Capital Improvement Plan, which features $6.2 million over the five years in investments to the sewer department and wastewater plant, primarily funded by the Ohio Public Works Commission 2027 Loan and General Obligation bonds.
Guci said utilities staff provided the firm with as lean of a CIP budget as they could, and the firm added $600,000 in investments through Fiscal Years 2030 and 2031 to the plan to ensure there was a projection until then, with the number being based on the average project cost.
OPTIONS
Guci introduced two rate adjustment options for council moving forward, depending on what they wanted to do with the CIP.
Option one is designed to fully fund CIP requirements in a pay-as-you-go manner, in addition to the $1.7 million OPWC 2027 loan and the $1.9 million general obligation bond.
"We are increasing rates in 2027 through 2029 at about 13% each year across the board, and then 2030 and 31, 9% and 5%, respectively," Guci said. "This will ensure that you are meeting your revenue requirements."
At a meter size of 5/8" and 5,000 gallon consumption rate, residential customers would be paying $82.21 a month in 2027 and $120.14 in 2031.
A graph that followed shows the sewer's cash flow would be at approximately $10 million in 2031 -- exceeding the department's operation and management, cash-funded capital and existing and proposed debt service needs.
Guci clarified that the sewer's revenues are sitting at about $6.6 million, later noting that they are operating at a deficit in 2026, drawing down cash reserves, and leaving the department at a Debt Service Coverage ratio of 0.50x -- far below utility industry practice, according to the presentation.
The first option would put the DSC ratio above the target 1.25x ratio by 2031 and take the sewer system out of a deficit by 2029.
If no changes are made, Councilman Aaron Johnstone, D-2nd Ward, noted the city would be "lucky" to be able to pay operating and maintenance costs.
The second option, which provides no cash funding to the CIP but includes the OPWC 2027 loan and general obligation bond, would raise rates 9% each year from 2027 to 2030 and 5% in 2031.
Residential customers at meter size of 5/8" and 5,000 gallon consumption rate would pay $79.30 in 2027 and $107.83 in 2031.
Guci noted the city would be dipping into its cash on hand until 2030 because of its deficit position throughout those years.
The department's DSC ratio would remain below industry practice into 2031, sitting at 1.06x by then.
"I gave you option two, because I wanted to do something less than (a) double-digit increase, but it's definitely not recommended, because you're already taking the already lean CIP and making it extremely lean," Guci said.
Johnstone noted that any unforeseen but needed improvements would blow the whole model apart for their sewer department, adding that they've already put off a stage of their Eastwood Mall storm sewer project, which is set to enter its next phase in 2027.
"If we had the funding in place, we could have it done already, right? We're only kind of putting it off into the third stage, because it's already screwed up the budget -- we don't want to screw it up even further," Johnstone said.
In terms of what is normal for cities, Guci noted she never agreed with municipal utilities keeping their rates unchanged for five to 10-year periods, questioning it what it does.
"You're foregoing CIP, your foregoing any other costs you need to incur as a utility, and then you're facing a double-digit increase eventually," Guci said. "I always recommend following inflation -- 3%; I didn't do a 10-year (forecast), but if I did a 10-year, you will see I probably put 3%, 3%, 3% afterwards -- even if you didn't need it."