MENTONE – A Baker Tilly representative recommended to the Mentone Town Council Thursday that they increase sewer rates by 41.18%.
Ross Hagen, senior manager at Baker Tilly, said the account balances for the sewer funds totaled $351,871. There is a required minimum balance of $146,858, so there is a little bit of a cash surplus. The estimated annual cash operating disbursements, with a 3% inflation factor, is $203,003 for the near future.
The shortfall for the sewer system annually would be $88,000 and that’s if the town spends $20,000 on capital, which Hagen said the town hasn’t done historically over the last couple years.
If the sewer rates increase by 41.18%, the approximate average residential monthly bill would be $63.37. The current 4,000-gallon bill is $44.89. The change in the average monthly residential bill would be $18.48.
Hagen said when the town issues debt, the town makes certain promises to potential bond holders, which includes the town will maintain adequate rates and charges to be able to fund all their expenses.
He said the town’s bond payments for the sewer drops off at the end of 2030 and the town is allowed to use funds from the debt service reserve account for the last year’s payment. At that point, the $88,000 would go away. If there’s more projects, the town can look at more debt or they can use that money as cushion as inflation increases.
He said he hopes the rate will last so the town wouldn’t have to hit the taxpayers again for a number of years.
Hagen also presented a spectrum of sewer rates of towns in the same geographic area and that are similary sized to Mentone. Currently, he said Mentone is on the low end, but near the state average of towns under populations of 1,000. The information came from a study Baker Tilly published in 2021 with the information coming from work in 2020, so “it’s aged at this point.”
The proposed increase would move Mentone to the higher end of the spectrum, but wasn’t out of the ordinary.
Councilwoman Shelly Krueger asked why the information in the study was so old. Hagen said Baker Tilly prepares a state average study every three or four years and, due to the manpower the study requires, Baker Tilly can’t do it every year.
Krueger asked how often the town is required to do a rate study.
Hagen said the town isn’t required to do a study any number of years, unless the town passes something in their town code that says a study has to be done every so often. He did say be believes the last sewer study done was in 2010.
Krueger asked why the town was doing the study now.
Hagen said he thinks the driver was that the bond holder reached out to Clerk-Treasurer Amanda Yaprak and was concerned about the loss of cash from year to year. Technically, Hagen said he doesn’t think the town is in compliance with the bond convenance, so the bond holder can call the bonds and make the town pay the bonds back. He doesn’t think that will happen, but it can.
Hagen said the town had a couple of options, which included tabling the decision and delaying action or phase the rates in “over whatever period you want.” He said the town could do it in three phases, about a year apart.
Hagen said if the town implemented a rate increase starting Jan. 1, 2025, he suggested do a two-year rate implementation over 2025 and 2026.
Council President Jill Gross said she thought the council should have something settled by May or June in regards to a decision.
No action was taken Thursday.
In other business, the council:
• Approved a bid of $266,968.50 from Phend & Brown for paving Broadway Street from Main to Jefferson, Jefferson Street from Oak to Franklin, Monroe Street from Oak to Franklin, Etna Street from Main to Railroad and Franklin from Harrison to Maple.
• Heard the Easter Egg Hunt is at 10 a.m. March 30.
• Approved Gross as president for 2024.