Allen: Previous administration miscalculated costs for water plant operation, debt payments

By DAVID J. COEHRS

Expositor Features Editor

DELTA - Fortunately, for the 3,000 residents of this village, their new water plant is performing well at full capacity.

Unfortunately, Village Administrator Derek Allen said its cost was miscalculated four years ago, and now the overrun is scheduled to hit the residents' water bills with a vengeance. And the only thing residents can do, he said, is deal with it.

Beginning in October, they can expect their average monthly payment to increase from $39.50 to $53.67. The village council expects the ordinance to pass its third reading in July, followed by a mandatory 30-day waiting period. It will become effective Aug. 23.

And the amount could increase in 2012.

"This is already done," Allen said. "It's already been spent, and now the new mayor and new village administrator are stuck having to pay for something (the council) spent four years ago."

After being hired as administrator in February, Allen discovered pricing miscalculations for the water plant made by former administrator Gary Baker in 2004. As a result, what a former village council approved as a $4 million project eventually cost $6.4 million.

Since then, the village has endured deficit spending of between $200,000 and $250,000 annually directly related to paying the extra debt.

In order to meet the obligation, that former village council passed an ordinance in 2005 raising water rates 8.7 percent a year. Although the village was generating $740,000 in revenue off of water rates annually, the debt to pay off the water plant and a water tower on County Road 10 equaled $460,000 a year. Allen said a total of 63 percent of water revenue was used to pay the debt, meaning the village needed $1 million a year from the water rate just to stay level.

"(The revenue) was woefully insufficient. It didn't even come close to meeting the needs to pay the debt," he said. "If you compared it to buying a house, you could never afford to buy a house if 40 percent of your income was going toward a house payment."

The village's $6.4 million loan on the water plant, which it began paying last year, is active through 2036. The village also owes another $1 million for the water tower, payable through 2024.

"It tells me that for 3,000 people to pay for $7.4 million worth of debt, it's too much," Allen said. "That's what caused the massive rate increase we're looking at."

Village water rates are currently tiered, with the first 100 cubic feet of water priced at $12.70, and every 100 cubic feet beyond that priced at $2.86 up to 6,600 cubic feet. The new ordinance will institute a flat fee for all residents of $3.70 per 100 cubic feet of water. Customers living outside the village will pay 50 percent more.

"I think most council people know this is what we're looking at. For the most part, they didn't make this decision on the water plant. And those who did make it, I question the level of information they were given," Allen said. 'Unfortunately, there's really nothing to do. We already spent the money, now the bill's due.

"All this rate increase is just to pay the loan back. We've analyzed every option, but it's the same operating cost."

He said when he looked at the original paper Baker used to calculate the water plant's affordability, he realized the figures didn't add up.

"You can't borrow that much money, and not expect some sort of drastic impact on your finances," he said.

Baker did not return a call for comment.

Despite the cost overrun and glitches that surfaced after the water plant went on line - particularly the need to replace dozens of faulty filters - talk of shutting it down to resolve the problem makes no sense, Allen added.

Senior council member Marcy LeFevre was a member of the council that approved the new water plant.

"I think we made the decision to build the plant based on the information we were given," she said. "It's always easy to look back in hindsight. Obviously, when things are planned, they're not always the cost that you anticipate. I voted the way I did at the time with the information I was given."

The increase in water rates is the result of a lack of oversight on controlling the plant's cost, Mayor Dan Miller said.

"I really believe if the council had been given the full numbers (they) probably wouldn't have built this plant. This is nothing this (current) council has done; this is something that was done previously. That's spilled milk. Now we have to pay for it."

Miller said residents have expressed concern the village will not be able to afford both the water plant and the ongoing sewer separation project, which is mandated by the Ohio Environmental Protection Agency.

"It's going to be a big hit. It looks like we're going to be around the top five in the state for water rates," he said.

That status may impede the village's market for new water customers.

"We have to be competitively priced, and unfortunately, we're right in the zone here for a lot of water being used. The county water line sits right in our backyard," Miller lamented. "Council's awful concerned that they're going to take the hit. This was money spent before the current council was put into place. Unfortunately, we have to pick up the pieces."