Proposal to raise Lexington sewer rates advances

A proposal that would raise Lexington sewer rates over the next two years moved forward Tuesday.

The Urban County Council voted 13-1 to put the proposal on council's agenda for Thursday. A final vote is expected in early March.

Mayor Jim Gray's administration proposed the sewer rate hike to help pay for up to $590 million over the next decade in sewer and stormwater upgrades that are part of the Environmental Protection Agency consent decree the city signed in 2008.

Tuesday was the first day for council members to debate the proposed sewer rate increase, and many said it is unavoidable.

"This is not a new problem, but it's come due on our watch," said Vice Mayor Steve Kay. "It's very clear: Either we fix the problem or we pay fees or fines for not fixing the problem."

Under the proposal, the sewer bill for a Lexington household using an average of 4,000 gallons a month would jump from the current rate of $21.75 to $24.36 on July 1. If the second year's increase is approved, the average bill would increase to $27.29 on July 1, 2016.

Council voted in 2008 to raise sewer fees by 48 percent. The rate then increased 35 percent the following year. Bills have risen only slightly since July 2011, when annual rate increases were tied to the consumer price index.

The city has spent $130 million since 2007 on projects to correct long-standing problems that led to overflows of the storm and sanitary sewer systems. But the city will spend even more during the next two years to comply with the agreement with the federal government. During that time, plans call for more than $265.5 million in capital projects.

"We're going to be spending nearly twice what we had spent in a short period of time," said Charlie Martin, director of the Division of Water Quality, who oversees the city's compliance with the EPA consent decree.

To pay for the projects, the city will need $48 million in bond money over the next two years. The proposed rate increase will pay debt payments on the $48 million.

"In order to go to market, investors want to know how you're going to pay for it," said Bill O'Mara, the city's finance commissioner. O'Mara said if the city does not raise rates before it tries to sell the bonds, they may not be able to sell the bonds or have to pay much higher interest rates.

O'Mara said that an additional 12 percent increase in 2018 is possible.

"We are not at the end of rate increases," O'Mara said. "We're at the beginning of the middle."

Council member Shevawn Akers was the only vote against moving the increase onto council's agenda for Thursday, but Akers said she will likely support the measure when it comes up for a final vote.

This story was originally published February 24, 2015 at 6:21 PM with the headline "Proposal to raise Lexington sewer rates advances."