With plans moving forward on a new water treatment plant, the city of Rifle's water fund will be in a "state of flux" in 2013, City Manger John Hier told city council on Monday, Nov. 19.
The council held its second public hearing on the proposed 2013 city budget.
"You're going to see this fund all over the board for the next two years," Hier told council. "It's like what we saw in the wastewater treatment plant. When we built that plant, we didn't know for sure what we'd need for operations and maintenance. Now we're getting a handle on that cost."
Voter approval of a three-quarters of a cent sales and use tax hike in this month's general election will mean the water fund will lose it's enterprise, or self-funding, status in the new year, said Finance Director Charles Kelty.
"We'll still be able to modify fees and rates, but I'd really recommend we do not incur any further debt, since we're now $25 million in debt," he said of the expected cost of a new treatment plant. "Especially without a vote of the people."
The city obtained the money for the plant through a $25.5 million, low-interest loan from the Colorado Water Resources and Power Authority.
City officials have said the existing Graham Mesa plant is aging, undersized to serve projected population growth and unable to meet possible tougher federal water quality standards in the future.
The water capital fund includes the new plant, Hier said.
"We don't really know how much we'll spend this next year, since it's a two-year project," he added. "But right now, we're estimating about half" the $25 million.
Hier said the wastewater treatment plant took longer to build than the engineers estimate.
"So if it looks like we're going to spend more than [half the $25 million available], we'll come back and ask you for your OK," he added.
Kelty noted the city's debt service payments will rise by $1.3 million due to the $25 million loan. However, he also proposed the city pay off two loans next November.
One helped build a water tank in the northeast part of the city and would save $214,000 in interest, Kelty said. The other was a 2006 program that replaced residential water meters through a lease/purchase arrangement. Kelty proposed the city pay off that debt and save $28,000.
Water rates to drop
Under a water rate structure approved earlier this year by council to help repay the loan and cover operating costs of the new plant, the base rate charged to city water users rose in September, and more than doubled some customers' water bills, payable in October. The rate structure is tiered, so those who use the most water pay the highest rates.
City Attorney Jim Neu told council on Monday that he will write an emergency ordinance for its Dec. 12 meeting that will roll back the recent water rate increase, since voters approved the sales tax measure. If approved, the rates would drop to their previous levels in January, he said.
Earlier this year, Hier recommended the city take two steps, if the tax hike was approved: Eliminate a second water rate increase planned for April 2013, and lower the recent increase, "so the combined revenue from the sales tax and new rates will generate only that revenue needed to pay the debt service and increased operation and maintenance cost on the new plant," Hier wrote in a memo to the city council.
Due to the "excellent" loan rate, Hier continued, "it may be possible to lower ... monthly base rates to $23 per month and significantly reduce the ... tier rates."
When the debt on the water plant is paid off, the 3/4 cent sales and use tax will end.
Bids for the new plant are scheduled to be sought in December, with construction beginning in March and lasting two years.
The final cost of the new plant may vary, depending upon the final design and number of bids received. Nine contractors have been pre-qualified to bid on the work.
Parks and recreation
The city's parks and recreation fund is projected to receive more than $3.5 million in revenue, and have expenditures of $3.9 million. The difference will be covered by money not spent this year.
Included in the fund is a long awaited second phase of the Deerfield Park project, if a $350,000 Great Outdoors Colorado grant is obtained, said Hier.
Kelty added Garfield School District Re-2 has designated $300,000 towards the project as well.
Revenues from the Rifle Fitness Center are forecast to drop sharply, Kelty added, by about $95,000.
The city and the Rifle Regional Economic Development Corp. are operating the fitness center for a three-year trial period, Kelty noted. The group pays the rent on the facility on Airport Road, he said.
The 2013 city budget is due to be adopted by the council on Dec. 5.