Town of Nashville utility customers can expect a rate increase to their water bills this spring to help better cover operating costs.
The increase also comes at a time when the town is preparing to pay over $70,000 to create a master plan for the water utility as leaks in the water system are resulting in thousands of dollars going down the drain.
At a meeting on Feb. 23, Utilities Service Board Vice President Bob Kirlin said that it was important for the public to know that the rate increase will not help with the water loss and that funding to fix that issue will need to come from other avenues.
The increase will be 10.8% and will be implemented on bills starting May 1. Nashville Town Council will have a first reading of the ordinance this week on March 4. The increase comes after a cost of service study was done and USB accountant Jared Hall suggested an increase on the water side to cover operating costs. Nashville Municipal Consultant Dax Norton said that without the increase, water utilities will be $125,000 in debt.
Roughly 53% of water distributed by the town was lost last year. Of that loss, 56% came from the Village Green area that also distributes water as far as Napa and Belmont.
The last rate increase was in 2012. The decision to increase the rate was made at a joint meeting between Nashville Town Council and USB on Feb. 23.
The increase comes after a cost of service study was done and USB accountant Jared Hall suggested an increase on the water side to cover operating costs.
“The longer we delay a rate increase, the more difficult a correction will be down the road,” USB member Pam Gould said. “It’s not an easy thing, but it’s not as hard as not doing it.”
Norton said the water department recently lost about $31,000, which could possibly be attributed to water loss in the town’s system.
At a joint meeting between town council and USB on Feb. 17, Norton said that if 600,000 gallons of water are being purchased by the town, they are losing — and not receiving compensation for — roughly 300,000 gallons of water.
The town’s Water/Sewer Operator Robin Willey said that tap fittings and saddles are rusting apart and that water is seeping from the pipes into the sand and gravel that surrounds the pipes that then allows the water to travel long distances.
Willey said on Feb. 25 that there is a wide variety of pipe materials in the ground with some being installed at different times. Deteriorating materials do not affect water quality and the town conducts monthly quality tests, he said.
Certain town water pipes were donated to the town from Camp Atterbury in 1947 and are galvanized pipe. Overtime, when that material is exposed to chlorine, pinhole leaks can develop and the pipe will corrode until it becomes perforated in hundreds of locations in one section of pipe.
Essentially, the town is paying double for water because they are losing more than half of it in the system, said Town Council President Nancy Crocker.
Jared Hall, town financial advisor with Krohn and Associates, was on Zoom for the meeting on Feb. 17. He said that the town is paying Brown County Water and not collecting off of water sales, losing up to $218,000 per year.
At the Feb. 23 meeting, Norton said that what they need to find out is whether or not water is being lost through distribution lines.
Fixes to the system to resolve the water loss issue is estimated to cost $4.5 million.
M.S. Consultants will now work closely with town utilities to develop a water utility master plan. This would include looking at mapping of pipe diameters, materials, distribution systems then creating an hydraulic model to find water pressure issues and volume supply issues.
If steps are not taken to resolve the issue, the state could come in and take over water distribution, Norton said.
He added that funding can be simultaneously approached, but that there are few grants available and this issue is usually covered by an interest loan.
The cost of the master plan by M.S. Consultants is $75,000 and is a six-month process. It will be paid for by a loan from the sanitary sewer cash reserves. Norton said they will also seek assistance from the State Revolving Fund (SRF) Loan Programs.
Both the USB and the town council voted to approve creating the master plan. On Feb. 23, Kirlin advised that the contract with M.S. Consultants should be reviewed by the town attorney, Wanda Jones.
What about wastewater?
The town received a $2 million State Water Infrastructure Fund grant from the Indiana Finance Authority in September to improve longstanding wastewater issues identified more than a year ago.
The proposed work to be funded partially with the grant money will fix problems at the town’s wastewater treatment plant, which prompted the Indiana Department of Environmental Management to step in the fall of 2019.
IDEM notified former town council President Jane Gore in October of 2020 that it had reason to believe that the town wastewater treatment plant had violated environmental rules.
One of the biggest concerns Willey has dealt with is what’s known as “I and I” or “I/I” — infiltration/inflow of water that is not wastewater into the wastewater system.
The estimated total cost for the projects was about $6 million. The town was to combine grant funds with a $3.9 million loan that has a zero percent interest rate from SRF as well as pledged American Rescue Plan money from the town council to cover the entire project, Norton said in a meeting in October.
Norton said in recent joint meetings with town council and the USB that due to recent inflation, the project could now cost as much as $9 million.
He said on Feb. 23 that the state asks daily for updates on the schedule and that eventually the $2 million will “go away” unless there is action.
The original project included the I/I project, replacement of the Brown County lift station, moving drawing beds and sledge up the hill from the current water treatment plant and moving any existing building out of the floodway.
IDEM expects the town to raise rates to support the work necessary to comply with the 2019 agree order, which would be a rate impact of 40.2%.
There is a timeline with the grant that states the project will be completed by December of this year.
COVID-19 caused a delay as well as determining how to finance the project. Norton said the deadline is negotiable and extensions could be requested.
Town council and USB agreed that the next step is to meet with Indiana Finance Authority and talk about the new project cost estimate, the impact of rates and discuss options going forward.
State park project?
The USB also recently established a water rate for the Brown County State Park project with town water utilities.
Town council and USB voted on Feb. 17 to present Indiana Department of Natural Resources with a wholesale water rate of $7 per 1,000 gallons. It was decided on Feb. 23 to instead accept DNR’s proposed rate of $4.63 per 1,000 gallons.
That rate was calculated by adding the wholesale cost to town plus roughly 40% of that cost.
The rate was accepted based on the fact that the park will construct and maintain its own water system infrastructure that it will provide to customers within the park.
“They are essentially another utility provider, buying water wholesale from us,” Norton said. “It’s no different than us buying (from) Brown County Water.”
Norton said the town will bring in $10,000 to $15,000 more annually from the park as a water customer.
“When the rates are raised, say three years down the road, and we have that very large customer, that large customer is going to cause a widening of the base and less impact on the rates,” he said.
He added that the park is essentially another utility provider, buying water wholesale from the town. It will use its own pump station, water tower and master meter, costing the town nothing, Norton said.
Their rate will be subject to increases every time the town implements general rate increases or a tracking increase.
The park is expected to connect to the town’s water system in 2023.
USB member Pam Gould was the only member to vote against the proposed rate.
“I don’t see full argument for treating this customer so much differently than all the rest,” she said. “All customers have to pay for their own infrastructure on their side of the meter, so it’s no different there.”
USB member Dan Claker said the economic impact is not likely to be seen for another five or ten years.
“No one’s ever entered this kind of contract with the state,” he said.
”I think it will eventually pay off.”