Elkins hopes for swift rate passage
By ANTHONY GAYNOR Staff WriterThe Elkins Water Committee is fast-tracking two rate increases in hopes of saving the city and its residents between $4 million and $6 million in interest with Build America Bonds (BABs) on the $28 million USDA loan for the new water treatment plant and distribution system upgrades. The savings hinge on the ability to get the increases through the West Virginia Public Service Commission before the end of the year.
"There is an opportunity with Build America to save millions of dollars," Greg Belcher with Chapman Technical Group said. "The only way to do that is to close the loan by the end of the year."
Chapman Technical Group has provided the engineering on the new water plant and distrobution system upgrades project for the city. According to Belcher, the original plan called for water plant work first and distribution second, but the advent of the possibility of Build America Bonds has switched the process.
John Stump with the lawfirm Steptoe & Johnson, who is providing bond council for the city, said the BABs would allow the city to save 45 percent on the interest rate from the USDA loan which pays for the water project. He said the current interest rate is 3.75 percent, and with the BAB, it would be lowered to just more than 2 percent.
"It would provide a lowered cost of borrowing," Stump said. "It expires at the end of the year."
Belcher and Stump both said the loan would have to be closed by the end of the year to qualify for the money. That means the project along with two rate increases would have to be approved by the Public Service Commission.
"We do not lose anything if we don't make it, but we could save a lot of money," Belcher said.
Stump said the city should try to get as much of the project included in the rate increases and the certificate of need with the WVPSC to maximize savings.
The city will be looking at three increases in the next two years. The first would be an immediate going-rate increase to help the operation of the water fund. The second is for the first phase of the water project, which includes distribution system upgrades, and a third would come when the plant is constructed.
Currently, Elkins water customers pay $13.96 for 2,000 gallons of water; $17.44 for 3,000 gallons; $20.92 for 4,000 gallons; $24.40 for 5,000 gallons; and $27.40 for 6,000 gallons.
Under the general rate increase being considered, customers who use 2,000 gallons would see an increase of $3.06 to $17.02; for 3,000 gallons, an increase of $3.82 to $21.60; for 4,000 gallons, an increase of $4.58 to $25.50; for 5,000 gallons, an increase of $5.34 to $29.74; and for 6,000 gallons, an increase of $6 to $33.40.
According to Water Committee Chairman and Councilman Tom Hensil, 2nd Ward, the general rate increase would go into effect 45 days after the passage of the second reading of the ordinance. Attorney Bob Rodecker, a WVPSC specialist who is helping the city with the increases, said only two readings of rate ordinances are required.
The rate increase will be built to cover the expenses of using $18 million of the $28 million USDA loan for work on the water distribution system and the 3.75 percent interest rate. Figures for the increase will be presented at a Elkins Water Committee meeting on Monday.
One of the keys to get the BABs is the approval of the WVPSC, and to ensure that there can be no protests to the increase filed.
"The increases do not include increases to the PSDs (Public Service Districts) because they typically protest," Rodecker said. "You still have the potential of a customer in the city protesting."
According to Rodecker there are three ways to protest:
- A petition from 25 percent of the customers.
- Customers outside the city limits, to which the increases do not apply.
- A customer on the basis that they are being discriminated against.
"In the end, it will be less in rate increases if the Build America Bonds go through," Councilwoman Marilynn Counzo, 4th Ward, said.
Another challenge is the time frame the WVPSC reviews measures such as rate increases. Rodecker said the WVPSC typically has 270 days to consider a rate increase even if it is not protested.
"We are asking them to get this done in 100 days," he said. "That is a pretty tall order."
Stump said meetings could be scheduled with the WVPSC to explain the savings.
"What we are asking the PSC is monumental," Stump said. " It could save $4 million to $6 million."
According to Stump, the WVPSC has made decisions quickly when there is the potential to lose funding or to save money.
The Water Committee will consider both increases beginning at 4 p.m. on Monday. It will then make a recommendation to Elkins City Council for approval during its meeting Aug. 5 at 7 p.m.
