>> CITY WATER CRISIS
City of Milledgeville water customers may face a substantial increase in their bills in the not-too-distant future if the recommendations of engineers are followed.
Kenny Green of Turnipseed Engineering gave a 40-minute presentation to the mayor and city council in a work session this past Tuesday, detailing the results of a study the firm did regarding significant upgrades needed at the Lamar Ham Water Treatment Plant and the accompanying need for increased revenue.
Council members unanimously approved a contract at the subsequent meeting that night between the city and Turnipseed, whereby the company will furnish the engineering services for the project. Green began by showing how the water system’s revenue and expenses have fared in the past seven years.
“You’ve been making about the same amount of money on water and sewer since 2016,” Green said. “When you look at it over that time, it’s been flat, in the $7 million range.”
On the other side, Green said at first glance it appeared expenses have remained flat, but he pointed out that some non-operating expenses disappeared in the past three years. That was due to the city paying off some old debt and in 2022 taking some fund balance money to pay off some additional expenses.
“That’s all about reducing debt. If you take that out of the equation, you’re left with the real expenses,” he said. “In the last three years expenses have gone up considerably.
“That’s not shocking. Everybody knows what’s happened the last three years. I have a bunch of kids at home, so I know what’s happening with a gallon of milk. That is exactly what you are seeing there in 2021-23.”
Green said ongoing maintenance is the main cause of the increases.
“Water treatment maintenance, wastewater maintenance, distribution and collection system maintenance, all those costs have increased since 2020 when they took a jump.”
Green said when the city pays off debt, additional funds should be the result.
“That didn’t happen here, he explained. “Your extra income from paying off debt went straight into higher expenses.”
Green then compared the system revenue with expenses and showed council members that the city is now making less money than is being spent, and why, in his opinion.
“The reason that can happen in a municipality is, you’ve had some good management. In the past you’ve built up fund balances, and you’ve been spending some of those fund balances to avoid raising rates. If you continue that forever, eventually you get to a point where you run out of money and can’t pay your bills,” Green said.
City Manager Hank Griffeth confirmed last week that the city has not increased its water rates since 2009.
Treatment Plant in need of renovation
Green turned his attention to the water treatment plant.
“This is the city’s main investment,” he said of the facility. “It was built in 1953. It is showing signs of age, but it is a strong and vibrant structure. We’ve spent a good bit of time investigating things, and the bones of this structure are good, but the mechanical pieces inside are at the end of their service life or past and need to be replaced.”
The engineer used a slide presentation to familiarize council members with the facility and the need for the renovation. New filters, a laboratory area, concrete replacement, new piping, and electrical wiring were among the numerous items he referenced in the mostly-technical discussion.
On a positive note, Green said a concern in the past has been whether investing in that facility is practical; is the investment there worth it. His answer was yes.
“The plant is conservatively designed, so there is a good bit of additional capacity. The city is currently using about 50 percent of the plant capacity,” he said.
“Most cities would love to have the excess capacity you have in your plant. Because when those industries come knocking, they come and say, ‘We need a million gallons,’ not many cities in Georgia can say they have that capacity, but you do.”
According to Green, with additional improvements and upgrades, Milledgeville could have an additional 20-million gallons of water for treatment.
Cost increases expected, rate hikes likely
The proposed renovation project will not be cheap, however. Green showed that estimated costs in 2020 totaled $27.7 million, with plans to try to reduce that to $25 million.
“This is not 2020, and what we are finding is that costs have doubled or more,” Green said before going through various factors that have led to that increase. However, Green stated some drops in prices have occurred in recent months, leading to his advice for figuring the project cost.
“What we feel is prudent for the city is to plan only for double what we were talking about in 2020, only double,” Green said. “There have been some places that have gone over that, and I think it is going to take some value engineering to only double. That brings the total needed to $50 million.”
Green discussed two possible sources of outside funding: Georgia Environmental Facilities Authority (GEFA) loans or bonds, and the pros and cons of each. Since 2020, the GEFA interest rate on a 30-year loan has gone from 1.6 percent to just over four percent, he stated, while bonds are now more attractive than before due to interest rates, quicker availability, flexible repayment opportunities, and the ability to invest money received from the bonds.
Whatever outside source of funding is chosen, it is apparent higher water and sewer rates are inevitable to pay the additional money for the loans. Green went through the various costs, including projected operating expenses of $9.3 million, water plant debt repayment, wastewater plant, $1 million per year in planned capital investment for infrastructure improvements, and a small amount for some debt coverage.
“If you add up those expenses, looking at the bond option, you would need about $15 million in revenue. You’d be looking at $17 million with the GEFA option. So,” he stated, “your budgeted revenue (now) is $7.1 million, meaning you need about double the revenue you have right now.”
Green said the company calculated how to raise that much money.
“In the end, the rate increase needed to raise that much additional revenue is about a 50 percent rate increase,” he concluded, then went through needed increases in base charges for both water and sewer as well as prices per thousand gallons.
The base rate for both water and sewer would go from $12.89 to at least $19, depending on whether GEFA or bond funds were used, and the cost per thousand gallons would jump from $2.85 to at least $4.21. Sewer rates were also adjusted.
“It costs you more to treat sewer than water, and so sewer ought to cost more.”
Green showed council members water and sewer rates of some area cities and counties with similar customer counts.
“All of those comparison communities, all of them are paying a good bit more than the city of Milledgeville.”
Some of examples were over two times as much as Milledgeville. Though, Green emphasized even with the increase in rates, Milledgeville would not be out of line.
“These rate increases don’t blow it up to the point where they say ‘man, I don’t want to live in Milledgeville’. You’re still right there in the pack.”
Green was asked what the construction time for the project would be.
“We would plan on a year and a half. And, before that year and a half starts, there needs to be close to a year to design the improvements and bid it before we can start construction. So, if we start today, you’re looking at 2 1/2 years before you can get finished.”