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September 17, 2013

Peru proposes 29 percent increase to water rates

Officials say utility revenue not enough to pay back loan.

PERU — Water rates in Peru could go up by as much as 29 percent to help pay for a $18.6 million upgrade to the city wastewater treatment plant that was completed in 2006.

Peru Utilities General Manager Roger Merriman said the proposed increase would generate around $705,000 a year in additional revenue for the utility. He said the current rate generates a total of $2.4 million.

For an average home using 4,000 gallons of water a month, the rate increase would come out to an additional $8.40 a month.

Merriman told the Peru City Council the rate increase is necessary because the utility isn’t generating enough revenue to pay for operation of the treatment plant and repayment on the $18.6 million bond the utility used to upgrade the plant.

He said an ordinance requires the utility generate enough money to pay for both.

“Our hand is being forced here,” Merriman said. “We really don’t have much choice in the matter. The current rates are simply not sufficient, and we’d like to address this now rather than later.”

Merriman said the utility is required annually to pay $1.24 million toward the debt, and it has 10 more years to pay off the remaining $12.4 million on the bond.

He said water rates increased 160 percent from 2000 to 2005 to help make the debt payment, but the utility never collected as much money as anticipated from the increase.

If the utility fails to pay back its bond debt, Merriman said, the state could take over the wastewater plant and force rate increases.

“I don’t think we want to go there,” he said. “We don’t enjoy asking our customers to pay more, especially in this economy. But if we default on the debt, the repercussions could be severe.”

Once the bond is repaid in 10 years, Merriman said the $1.24 million currently going towards the debt will help pay for another federally mandated project to eliminate overflow water from dumping into the Wabash River.

He said the Indiana Department of Environmental Management requires that upgrade be competed within 18 years.

Peru Utilities serves around 5,000 customers in the city. He said the increase would not affect Grissom Air Reserve Base, which the utility also serves.

Council will vote on the proposed rate increase during its October meeting. A public hearing will be held before the vote.

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