Umbaugh presents information about water company purchase

MOORESVILLE – Scott Miller and John Seever, certified public accountants with H.J. Umbaugh and Associates in Indianapolis, told the Mooresville Town Council Tuesday that funding for the water purchase from Indiana American Water Company is doable. This is without rate increases over what customers are paying now with IAWC and no tax increases.

Miller said all of the plans are in fundable range, and the town will have enough money to make the utility acquisition and have funds left over for capital improvements after paying off the debt and other expenses.

Umbaugh presented three different interest rate scenarios for the council to study bond issuance ranging from 3-1/2 percent to 5-1/2 percent. Miller said most bond banks in the market would want to see a municipality have the bare minimum of 125 percent of revenue to cover the principle and interest payments and have 25 percent left over for capital projects and other costs.

In Umbaugh’s three choices, the lowest interest rate would allow for 210 percent, the middle interest rate (4-1/2 percent) would allow for 192 percent and the highest would be 176 percent.

Miller said the bonds issued could be paid back with future revenue generated by the water operation.

In a letter to the media and the public, approved by council members Tuesday, council president George Watkins said an IAWC witness had earlier provided testimony to the Indiana Utility Regulatory Commission stating “The goal in a future rate case would be to combine these two rate groups into one and thereby implement full STP (single-tariff pricing).”

Mooresville is currently in its own rate group (Area 2) with the communities of Wabash and Winchester, but would be combined with another larger rate category (Area 1).

Miller said without the town purchasing its water system from IAWC, customers would have to pay 11 percent more on their bill to join with the other rate group, not counting future rate increases.

Watkins said the double-digit rate increase of 2012 is likely the first of several rate hikes over the next several years that could have the average household paying as much as 32 percent more for water service. The rate hike jump for large businesses in Mooresville could lead to water bills as high as 70 percent more than what they are currently paying.

“The average homeowner saw a 17 percent increase in 2012, while some businesses and local industrial customers were left to deal with increases up to 40 percent,” the letter stated.

According to the letter, the town council made its decision to purchase the water system from IAWC because of excess profits being taken out of the Mooresville community by IAWC and additional tax savings available to municipal operators (the town).

Council members have stated their concerns about Mooresville residents subsidizing the funding needs of other Indiana communities. They claim that IAWC officials have yet to deny their intention to consolidate the rate groups and have not indicated that they are moving away from the plan, which would result in much higher water rates for Mooresville.

Council member Tony Langley, who presented the plan last year to acquire the water system from IAWC, said in the letter, “We don’t have any problems with the local staff and how they manage the local operation. “However, the corporate offices of IAWC that file these rate increases for Mooresville customers are seeking to continue the implementation of a rate strategy that simply is not in the best interests of Mooresville water customers.

“The Mooresville Town Council has the legal right to protect its citizens from these unnecessary rate increases and have begun taking steps to do so.”

Mooresville clerk-treasurer Sandra Perry said legal fees for the services of the town’s water attorney J. Christopher Janak and its regular attorney Tim Currens will most likely be paid out of Food and Beverage money.

“That’s the only area where we have a lot of money coming in,” Perry said.

Janak of Bose, McKinney and Evans has not billed the town yet for his work, Perry said.

The estimated unbilled portion for any work done for the water case is $1,500 to date, Currens said. He added that he’s keeping any work he does on the issue in a separate billing category.

In other business

In other business, council attorney Tim Currens presented the council members with the capital improvement plan for the 2013 tax distribution.

“It’s pretty much the same as last year,” Currens said. “There’s $14,000 for cemetery maintenance, $341,000 for general fund health insurance and $50,000 for its contract with the Morgan County Economic Development Corporation.”

The council approved the plan and also approved claims of $153,103.64.

By Amy Hillenburg | Reporter | Published February, 23rd 2013 in The Reporter Times