Study: Canton Should Raise Water Rates 20 Percent

Canton water and sewer customers may need to brace themselves for a 20 percent hike in their bills this year and an additional 7 percent increase next year.

During a Tuesday night work session, a Charlotte, NC, company that has studied Canton's water and sewer fund for the last five months offered its preliminary findings.

If the city does not immediately adjust rates, Raftelis Financial Consultants Inc. concluded that reserves in the city's water and sewer fund will nearly evaporate.

"If one of those big pump stations goes down," company vice president Lex Warmath told council members and other top city officials, "you don't have any money for it.

"We're trying to at least retain half of the $1.3 million you have today in reserves by the end of the year. That 20 percent gets us there."

City leaders don't want to raise rates, but they may not have a choice.

"Am I hearing that if we don't do something, that the level of service that we're providing our customers at this time, we're not going to be able to continue with that," council member Pat Tanner asked Warmath.

"You would be at a very high risk that you will not be able to continue with that," Warmath said. "Higher than acceptable."

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The news comes at a time when the city's infrastructure is aging and in desperate need of repair.

"We've got some projects in the future that are nipping at us," Warmath said. "There is an expansion to the water plant and then there are some improvements to the wastewater system, which are probably even more critical."

The other issue is debt. Lots of it.

"You're sitting at $3.5 million total debt for the entire system," he said.

Some bills are due this fiscal year and Canton is not generating enough revenue today to pay them.

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During and after Warmath's presentation, officials threw every possible scenario on the table.

Various council members suggested temporary fixes to the city's water treatment plant instead of the costly–though much needed–upgrades.

"It's sort of like throwing good money after bad," Warmath said. "You can Band-aid it, but eventually you're going to have to do it and then you'll lose the value of everything you invested in that.

Council member Bill Bryan asked if the city could sell its stake in the Hickory Log Creek Reservoir, which took years to build and ran millions over budget.

Mayor Gene Hobgood said he didn't think it would "behoove us" to sell it.

"We've been through too much hell to think about getting rid of the whole thing," he said.

Even if the city followed through with such a scenario, the sale wouldn't be finalized in time to settle bills that are due by September.

Hobgood wondered if the city could use 2009 reservoir bonds to pay off debts.

"We've already maxed out on what we can use the proceeds of that bond for debt," Canton chief financial officer Scott Price said. "It would affect the tax exempt status of the bond."

After each alternative was considered, the conversation returned to Warmath's original proposal.

"It's not a good situation," he said, "but it's where you are today and it needs to be addressed."

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The earliest that council members could consider a rate increase is April 7, the date of its regularly scheduled meeting.

"The longer you wait," Warmath said, "the worse it will get, particularly as those reserves start being used up. And next year, if you didn't do anything, you would be in a position where you wanted to go to the state of Georgia and say we want to borrow money for our wastewater treatment plant, they would look at your financials and say you can't until you raise rates."

If council members approve a rate increase, residents who use 3,000 gallons a month would pay $37.62 this year and $40.25 next year. Currently, they pay $31.35.

Commercial customers who use 8,000 gallons a month would see their bills rise from the current $83.60 to $100.32, then $107.34 next year.

"We're against the wall," council member John Beresford said.