How will the Duck River Dam affect water rates?

Feb. 28--CULLMAN -- As with most things, progress comes at a cost. For area water customers, it will likely take an increase of about $5 per month to fund the construction of a new secondary water source in the Duck River watershed.

With the reservoir project on the verge of breaking ground later this year, more detailed projections have surfaced as to exactly how much the effort will cost area rate payers.

City officials are projecting both wholesale and retail water rates to increase by a little more than $1 per 1,000 gallons over the next five years to fund the project. Once prices reach that higher rate level, they are expected to remain there for the next 25 years until the bond for the dam is repaid.

The project is estimated to cost approximately $68 million, which must be paid back via water sales revenue.

"The Duck River Dam project will be paid for by the sale of water, so naturally over a period of years the water rates will go up," Cullman Mayor Max Townson said. "This project is big, but it's necessary as a secondary water source for our agriculture, expansion of retail, expansion of industry and of course for human consumption."

City wholesale water rates are currently $1.50 per 1,000 gallons -- recently lowered from $2 per 1,000 gallons last year -- and officials expect the price to climb to $1.77 in fiscal year 2012, then jump to $2.36 in 2013. The price will remain around $2.36 throughout 2014, increase to $2.42 in 2015, then level off around $2.57 in 2016. The overall change represents an approximate 59 percent increase over the next five years. All estimates are based solely on projected costs from the dam project, not including any other potential capital expenditures (i.e. infrastructure upgrades, etc.) that could arise in the future.

"Basically, that one time increase of about $1 (per 1,000 gallons) should pay for the project over 30 years," city accountant Wes Moore said.

The rates should remain stable over the next few decades as the bond is repaid, Moore said, due largely to the manner in which the debt service payment schedule will be set.

"We are wrapping the new annual debt service around the existing utilities board debt service (approximately $4.5 million)," he said. "That is to keep the rate from fluctuating each year. By doing it this way, we can keep it steady throughout the life of the bond, so it isn't jumping extremely high one year, then dipping the next year."

On the retail side -- namely, the average area water customer -- exact water rate shifts across the county will vary depending on how those different systems (East Cullman, VAW, Cullman County, etc.) pass on the costs.

In the City of Cullman, officials expect rates for retail customers to increase by about 20 percent in the next five years. Rates are currently set at $4.85 per 1,000 gallon of treated water. That cost is projected to increase to $5.12 in 2012, $5.71 in 2013 and 2014, $5.77 in 2015 and $5.92 in 2016, before leveling out.

The average retail water customer uses approximately 5,000 gallons per month. Factoring in the likely rate increases, most city residents will be paying approximately $5 more per month for water.

Though rates will be rising, Townson said he believes the sacrifice is more than worth the benefits to the community in the long run.

"During the drought of 2007, we were within 60 days of being without water in Cullman County because the sole water source Lake Catoma was at it's lowest level ever," he said. "If we had been without water, if that had gone all the way down, you're talking about devastation to agriculture, chicken farmers, human consumption and industry. You can't recruit industry and retail if you don't have the water to support them, and we actually lost some good opportunities at that time because of the issue. We never want to see that happen again, and we definitely don't want to lose our presence as the number one agricultural county in the state, and to keep it that way, you have to have a secondary water source."

--See the Sunday, Feb. 27, 2011 edition of The Times for the full story.

-----

To see more of The Cullman Times or to subscribe to the newspaper, go to http://www.cullmantimes.com/.

Copyright (c) 2011, The Cullman Times, Ala.

Distributed by McClatchy-Tribune Information Services.

For more information about the content services offered by McClatchy-Tribune Information Services (MCT), visit www.mctinfoservices.com.

NASDAQ:CHCO,

A service of YellowBrix, Inc.