BEACON PHOTO/AL EVERSON
Drinking less or paying more? — The City of Deltona is raising water and sewer rates for the first time in 13 years. The City Commission rejected a proposed rate hike last month, but reversed its decision Nov. 3, claiming more money is needed to keep pace with rising operating costs and to ensure the city keeps its commitment to pay off its bonds. Deltona floated almost $82 million in bonds in 2003 to buy and improve the utility system.
By Al Everson
posted Nov 7, 2008 - 2:39:28pm
Deltona city commissioners didn't really want to, but in the end they approved a 17.25- percent hike in the rates for city water and sewer.
They were warned Deltona's utility system might become insolvent if they didn't approve the price hike, the first in 13 years.
"There ain't nobody up here on this dais that wants to vote yes on this," Mayor Dennis Mulder said.
Eventually, though, a majority of the City Commission rallied behind the plan to raise the rates, even though an average of 130 Deltona households each week are having their water shut off for nonpayment, even at the old lower rates.
Two weeks earlier, the City Commission voted down the rate hikes and asked City Manager Faith Miller to develop other options. Miller said there was nothing else the city could do.
"There's not too much we can do alternatively," she said.
Without a rate structure that adequately funds the utilities, the city's bond rating may be in danger of being lowered, the manager noted.
One resident warned the economic effect of the new rates may be harsh.
"Our people are drowning in hardship," said Jason Heckler, noting the city's streets are lined with homes and vehicles for sale. "If we raise water rates, we need to offset that with a decrease in the ad valorem rates. ... We can no longer continue to ask people to pay more and more and more."
Although the new rate structure is expected to increase the average water bill by only $3 or $4 a month, Heckler was not swayed.
"It is very real that someone may be just $4 away from foreclosure," he said.
Ironically, the tough economic factors also are hurting Deltona's utilities.
"There has been a significant drop in the growth ... the general economic downturn," said Michael Burton of Burton and Associates, the St. Augustine consulting firm that recommended the rate increases. "A new home being built adds revenue to the system."
In addition, Burton told the commission, there is less water being used, as people move out of homes in foreclosure-battered Deltona, and businesses reduce their demand.
Burton said the decline in water and sewer sales must be offset by higher charges.
Deltona has not changed its water and sewer rates since 1995, in spite of rising costs to operate the systems.
Mayor Mulder said he had discussed selling the municipal utilities "at auction" to the highest bidder, instead of raising the rates, but that idea was dropped.
Deltona bought the water and sewer systems from Florida Water and Allete in 2003.
The city sold about $81.7 million in bonds to buy the utilities and make several improvements, including building a planned sewage-treatment facility and new water-storage tanks.
The bonds are to be repaid over 30 years, and the current payoff is just under $79 million.
The financial facts made Commissioner Michele McFall-Conte change her mind. At the earlier meeting, she had opposed the rate hike.
"If we don't pass it, it could jeopardize the city as a whole," McFall-Conte said. "I'm not willing to put this city at risk. ... I will reluctantly support it tonight."
Commissioner Zenaida Denizac remained steadfast against raising the rates.
"People are moving left and right out of their homes," she said. "Our sewer rates are among the highest. ... There has to be some other solutions. I'm not the expert; I'm just an advocate for the residents."
City Manager Miller cited higher costs for operating the utilities — including chemicals, fuel, electricity and sludge removal, as well as personnel and insurance — on top of the $4.5 million in annual payments on the bond issue.
To reject higher rates, the mayor told his colleagues, "is a vote to bankrupt the water company."
The rate increase developed by Burton and Associates is the first of five recommended increases, each of which is 17.25 percent, to be implemented over five years, ending in 2013.
The consultants analyzed the utilities and their financial condition earlier this year. The Consumer Price Index has risen by about 44 percent since 1995, Burton and Associates said, but the costs of operating and maintaining water and sewer systems have gone up even more. Thus, the firm advised, the five-step rate plan is needed to combat shortfalls.
"Your ability to operate the system could be compromised," Burton warned the City Commission.
Five commissioners, including Mulder, McFall-Conte, Vice Mayor Michael Carmolingo, Janet Deyette and Paul Treusch, voted to raise the utility rates, while Commissioners Denizac and Herb Zischkau dissented.
The higher rates will be reflected in the December bills.
The impact fees for new water and sewer connections will also be raised.
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