A rate increase implemented in January for the 11,000 water and 14,000 sewer customers for the city of O'Fallon may have been 25 to 40 percent more than was justified, according to Assistant City Administrator Greg Smothers.
A $75,000 analysis of the system done by Donahue and Associates, a consulting firm, found that the proposed $24 million wastewater treatment plant on Firma Rd. may not be necessary. "(The) $24 million is a big hit on rates any way you slice it," Smothers said. "Your rates are going to go up. If you don't do this plant, which I don't think we need to do, and if we can do (something else) at a fraction of the cost, obviously the rates are going to come down accordingly."
The consultant also found that the existing $12 million water plant built two years ago is operating at half capacity because of problems with the engineering.
"We're confident we can make some changes in this plant at a fraction of the cost to make some 2.8 million gallons of capacity here," Smothers said.
In addition, a $2 million elevated water tower, designed to hold one million gallons of water and intended to solve ongoing water pressure problems in the southwestern area of O'Fallon, had an undetected open valve for six years. Once the open valve was closed, in mere minutes, water pressure was improved for the neighborhood. Smothers said the need for the tower may not have been necessary because there are about 700,000 gallons of water more than required.
When determining the rates for water and sewer residents several items need to be taken into consideration including recovery of operating costs, debt services, future capital improvements and a rainy day fund which would apply for an unforeseen disaster, Smothers said.
Revenues generated from the huge rate increase of the water and sewer tap-on fees, from $2,000 to $5,000, approved last year, were not taken into account when assessing the rates which contributed to a 34 percent "rainy day" fund.
"Typically a rainy day fund is between 12 and 15 percent," Smothers said.
O'Fallon-based Development Dynamics is currently conducting a rate study to determine more accurate rates. Smothers said he was hoping to conclude the rate study in the short term and present findings to the City Council. The City Council would then ultimately decide the water and sewer rates.
"What we propose is going to be justified by reasonable expenditures and trying to get the best return for the taxpayer money," Smothers said.
By Amy Armour Wednesday August 23, 2006
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