Columbia’s 140,000 water and sewage customers in and outside the city could see as much as an average 12 percent rate hike as early as this summer.
For the typical residential customer living inside the city, that translates to about a $6 monthly bill increase. For residential customers outside the city, who account for about two-thirds of the city’s water customers and half of its sewage customers, the monthly increase would be about $10.
Some council members appear reluctant to approve any increase. But a hike for the fiscal year that begins in July is a strong possibility in the wake of an unprecedented six-plus-hour meeting Tuesday at City Hall during which staffers and consultants briefed council on the needs of the city’s sprawling water and sewage system.
The Environmental Protection Agency has threatened the city with fines and a possible takeover of the system because unlawful polluted overflow from the city’s wastewater plant and sewage lines periodically turns local rivers into smelly and unsightly waterways full of bacteria that can make people sick. The city is under court order to pay for upgrades.
“If they don’t find the revenue to make the changes, we are going to have some big issues,” said Congaree Riverkeeper Bill Stangler, who monitors local rivers. “Potentially the EPA could take the system over and raise rates however they see fit – that’s a worst-case scenario. But sewer spills are a public hazard.”
Any rate hike will go to pay for some $700 million worth of EPA-mandated major capital improvements to both the water and sewage systems.
The systems suffer from years of chronic neglect by former city officials who used the system as a cash cow to kick off funds for non-utility projects. One of South Carolina’s largest utilities, the city of Columbia sends out some 60 million of gallons of water daily to Midlands area customers.
Council will meet again March 17 to mull possible rate increases. A first vote won’t come until April.
The 12 percent proposed rate hike was the highest of two possible rate hikes aired by council Tuesday. The other was just under 6 percent.
Any rate hikes this year would be just the first of five years of consecutive rate hikes, according to city plans released Tuesday. Council would have to vote on the next fiscal year’s hike each spring. Because of future unknown variables, it is not possible to predict how large a rate increase would be needed next year and thereafter, city officials said.
Even with this year’s proposed rate increase, Columbia customers still would pay less for water and sewage than customers in many regional systems, including those in Lexington, Cayce, Greenville, Rock Hill, Charlotte and Charleston, city officials said. And their bills, amounting annually to just under 2 percent of the city’s median household income, would still fall well within accepted national affordability guidelines for water and sewage services, city staffers said.
Mayor Steve Benjamin said there are $150 million worth of unannounced development projects that will require a modern water and sewage system. Currently, the city has 2,400 miles of water lines and 1,100 miles of sewage lines, many old and leaky. The city has one major sewage treatment plant and two water plants.
“Hopefully, my colleagues will see this as an opportunity to invest in our future – to not be pennywise and pound foolish,” Benjamin said after the meeting, speaking in favor of some kind of increase.
The possibility of more customers paying monthly bills prompted some council members to speculate the additional revenue would sharply lessen the need for future rate hikes. But city staffers indicated any additional revenue from future customers would be offset by increasing expenses. That’s how dire the situation is, staffers said.
“The cost of doing business continues to increase,” Assistant City Manager for Operations Missy Gentry told Councilman Moe Baddourah, who had asked about the increased revenue from more customers. As the city grows, parts of the utility will become more expensive, and city utility employees will have increased pension, health insurance and cost of living expenses.
The city finances most improvements by selling bonds, then paying the bondholders off gradually with money, in this case with money from water and sewage ratepayers.
Already, there are indications that parts of the city’s sewage system are so dilapidated that development projects run the risk of being stalled, according to Joey Jaco, director of the city’s department of utilities and engineering.
Jaco told council it is difficult to permit four proposed subdivisions for the north Columbia area because of pollution overflow problems in the Cane Creek section of the city. That area needs a $26 million sewage system upgrade.
Kit Smith, a citizen-activist and sometime critic of city utility policies, attended only half the meeting but pronounced herself pleased with the information council presented, calling it both comprehensive and transparent.
“They did a really good job of giving us all kinds of information. Some of it was hard for a lay person to follow, but I was very pleased,” said Smith, a former member of Richland County Council.
Smith predicted an item to keep an eye on is what council does with a proposed $4 million transfer next fiscal year from the water and sewage funds to the city’s general fund.
In recent years, council has transferred $4 million annually from the water and sewage fund to the city’s general fund, where it is spent on various projects. However, during Tuesday’s discussion, some council members indicated they might want to keep all or part of the $4 million in the water and sewer fund to offset any rate hikes.
“I was glad to see the city hold the session,” Stangler said. “This is a lot of stuff that’s been rushed through in the past.”
Earlier this year, council explored the idea of leasing or selling the city water and sewage system to a private company and solicited proposals from companies.
The proposal sparked such controversy in the community that after it became public, council members voted not to entertain any proposals that might deal with selling or leasing the city’s water system.
On Tuesday, city officials revealed nine private companies have submitted proposals for Columbia’s utility system. Staffers are now evaluating the proposals and will not consider any proposals that seek a private takeover of the system but could look at some sort of contractual management, officials said.
Across the nation, private companies are taking over utilities because of their sizable and steady yearly revenue streams. Columbia’s system generates about $124 million a year. Even with the EPA-mandated obligations, Columbia’s system would still be an attractive takeover target, citizens have said.
It has been some years since City Council members, wary of offending and creating hardship for fixed-budget constituents, approved a substantial rate hike. The city did approve a hike in 2013, but it was basically revenue-neutral, officials said.