Town Council Approves $11.75 Million Bond, Sewer Rates Will Climb to $17.00

On Thursday March 25th the Berryville Town council held a late afternoon special session to consider the bond resolution to borrow $11.75 million to secure the final funds necessary to begin construction of the new municipal sewage treatment plant. This step in the project represents the line of demarcation between planning and actual construction. Once these funds are secured construction proposals will be converted into contracts. Since the entire funding scenario for the project hinges on the loan that   The Virginia Resources Authority (VRA) is providing, there was little left to decide in the matter, however the council did need to review some of the conditions of the loan  before they could put the measure to a vote.

berryvill-council-meeting2First and foremost VRA required the town to adopt a “Business Plan” that will demonstrate that the town’s Sewer Fund will have sufficient funding to meet the loan obligations. This plan was presented to the council by town manager Keith Dalton, and it revealed the first solid usage rate numbers, which require significant increases.

The rate study was prepared by Chester Engineering on behalf of the town and shows that once the new waste water treatment plant is operating and the town is making loan payments, the sewer rate will need to be at $16.73/1000 gallons of usage to cover the sewer fund expenses ( a 52% increase from the current rate of $11.00/1000 gallons of usage). To reach this level the town plans to adopt a phased approach to rate increases. Each year for the next four years, the town will raise sewer rate $1.50 per 1000 gallons usage until they reach the $17.00 mark. The schedule would be as follows:

  • July 2010 $1.50 to $12.50 an increase of 13.6%
  • July 2011 $1.50 to $14.00 an increase of 12%
  • July 2012 $1.50 to $15.50 an increase of 10.7%
  • July 2013 $1.50 to $17.00 an increase of 9.6%

Town Manager Keith Dalton was quick to point out that the financial model for the Sewer Fund does not include any availability fees typically charged for new construction. This strategy will repay the loan completely with usage fees.

“What we need to remember when we’re talking about the rate being $16.73 is that all of this is based on the only income for the Sewer Fund coming from user fees.” Dalton explained, “When this project was planned and when the availability fees were set, we all knew that a portion of this plant and a portion of the out fall line were going to be built with availability fees. That income has disappeared.”

Dalton did point out that if availability fees generate revenue in the future, fee increases could be reduced or eliminated.

The final vote required a role call and one by one each council member that was present voted to approve the resolution.

Since the building industry is unlikely to rebound in the next 3 years, future rate hikes are now a near certainty.