BERLIN – The increase in Berlin’s sewer rates, approved for Jan. 1, 2010 to last for as long as 18 months, could trend sharply upward in the future, elected officials said Monday night at the Berlin Mayor and Council meeting.
The Berlin council can look at the rates, which will increase 6.5 percent in January, in the future and make any necessary changes to handle the work on the wastewater plant, Berlin Administrator Tony Carson said, but the town is not locked into that 18-month period and could review fees earlier.
If everything goes as expected, said Berlin Mayor Gee Williams, the town will not need to make any adjustments in July 2010. If needed, rate adjustments probably would not be made until July 2011.
“It’s something we have to review as part of the budget, anyway,” said Williams.
If there is any adjustment, the rate will increase, Williams said, and will not decrease.
“We anticipate it to go up,” said Carson.
How much that rates goes up depends on the grants and loans attached to the project, according to Williams. The worst-case scenario would be an 18- to 20-percent increase, he said.
“That’s assuming very little help at all and I don’t think that will be that bad,” Williams said.
The town will do everything to meet obligations imposed by state and federal grants and loans to make it easy to receive more money from those sources, said Williams.
The amount of a bond issue to pay for the wastewater treatment plant improvements and expansion has been reduced, which will also lower the amount of interest to be paid on that loan.
The town will be reimbursed with federal and state stimulus funding for its upfront spending on the project much quicker than originally thought.
“Apparently, they’ve got plenty of it and are ready to go…the money for us, it’s been earmarked. It’s there,” said Williams.
Initially, the USDA, which is providing a $6 million loan and a $6 million grant for the wastewater treatment plant expansion and improvement project, said no money would be released until the project was substantially completed, according to Carson.
The town has now learned, however, that the USDA money will be disbursed sooner.
“We’ll be getting reimbursed in installments instead of one lump sum at the end,” Williams said.
The town will borrow $6 million in bond funds, as originally planned, but only $3 million in a grant anticipation note instead of the anticipated $8 million, according to the town council vote taken Monday night.
“We are borrowing half the amount we originally thought that we’d have to,” said Williams.
Subsequently, the amount of interest paid out by Berlin will be reduced.
“We’re only going to be paying interest on the money we need,” said Carson.
“I couldn’t see any downside to it,” said Williams.
The savings will be substantial, according to Carson.
“We are [saving substantially] because of the USDA telling us the funding will be in place prior to the completion of the project,” said Carson.
The interest rate is tied to a certain index, which currently sits at 2 percent.
Now, instead of relying on bridge financing to close to gap between construction bills and the release of the USDA funds, the town can submit bills as they come in to that agency for reimbursement, once Berlin meets its $2 million payment obligation.
Berlin’s upfront $2 million contribution includes money for engineering consultants, attorney fees, advertising and other planning and preparatory work.
“A lot of this we’ve already expended,” said Carson.
The two projects, the plant expansion and improvements, and the new lagoon liner, will begin in March. The wastewater treatment plant should be completed in December 2010, with the new lagoon completed before that date.
“We’re probably looking at a maximum of 12 months,” said Carson.