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Town Council forwards rate increase for water service

By Staff | Apr 16, 2010

Another hike in the municipal water rate has been granted initial approval by Shepherdstown’s Town Council. Hoy Shingleton, Shepherdstown’s utilities lawyer, said the rate increase is needed to qualify for a $9,000,000 low interest bond needed to replace the wastewater treatment plant on E. High Street. The measure still needs to pass a second reading by the Town Council before it becomes law.

The proceedings should have felt familiar to members of the Town Council, for less than a year ago, the Town Council voted to raise water rates expecting to qualify for the very same low interest bond program. Unfortunately, Shingleton said, the West Virginia Infastructure and Jobs Council, which administers the bond program, has since raised the minimum water rate requirements to levels which exceed the council’s prior rate increase.

The central issue in this series of rate increases is a simple ratio: average household water bills against median household income. When the Town Council passed last years rate increase, the Infrastructure and Jobs Council required that water rates meet 1.25 percent of median household income. The Infrastructure and Jobs Council now requires average water rates to be 1.5 percent of the median household income of the water service area.

Was this a bait and switch? Shingleton doesn’t think so. During the meeting he explained that the Infrastructure and Jobs Council doesn’t guarantee a municipality loan money the moment it meet a set of requirements. “When the initial loan letter came out, it was not a binding loan letter,” said Shingleton. “It basically says ‘we’ll probably give you the money’, but that’s about as good as it gets.”

Shingleton said Shepherdstown was left with two options. One was to not raise rates further and take the $9,000,000 bond at 3 percent interest. The other option was to raise rates 5 percent, bringing the water rate to 1.5 percent of median household incomes, and qualifying for a half percent bond interest rate.

Here’s where it gets tricky. If Shepherdstown didn’t raise rates to qualify for the low interest bond and instead took the bond at three percent interest, then future rate increases would still be necessary to pay off the increased interest expenses.

At those rates, said Shingleton, Shepherdstown would end up paying $4,577,000 in interest over the course of the 30 year life of the loan. If Shepherdstown raises rates to meet the Infrastructure and jobs development council’s revised rate-to-income requirements to qualify for the half percent loan, then the interest expenses over the next 30 years would total only $684,700.

“As painful as it may be to raise the rate a little bit, it’s the best option that they had,” said Shingleton.