COST OF WATER COULD GO UP; COUNCIL TO CONSIDER 3 PERCENT RATE HIKE EFFECTIVE JAN. 1

Cape Girardeau residents can expect to pay 3 percent more for city water, effective Jan. 1.

The City Council will consider approving the rate hike when it meets Monday night.

The rate hike had been expected: It was included in the fiscal 1996 budget approved by the council earlier this year.

City officials said the rate hike is needed to offset increased operating costs for the water system. The money won't be used to expand the water system.

The water system needs to be expanded, officials said. But that will require voter approval of a bond issue and a related hike of water fees by more than 13 percent.

City officials have proposed submitting a bond issue to voters next year, but so far nothing has been finalized.

The 3 percent increase comes even as the city is refunding about $32,000 in overcharges for 468 of its water customers. The affected customers are those who are large users of water, in excess of 44,880 gallons a month.

An incorrect rate was used to calculate the water charges for those customers following a water rate hike last January.

"This affects only 3 percent of our customer base and that's primarily our larger commercial customers," said Sherri Finley, the city's public awareness coordinator.

The city Friday mailed out refund checks to 99 commercial and six residential customers. Refund checks were only issued to commercial customers owed more than $50 and residential customers owed more than $15. The other 94 residential and 214 commercial customers will receive credits on their next bill, Finley said.

The refunds include 5.75 percent interest.

"The 5.75 percent interest is basically what we felt we earned on the money over the timeframe," said John Richbourg, city finance director.

Richbourg said customers who use more than 44,880 gallons a month are charged at a reduced rate.

"Our budget was figured on the correct rate so this won't cause a budget shortfall," he said.

The 3 percent rate hike will apply to both the meter charge and the usage charge, and raise about $110,000 in additional revenue.

City officials said the average monthly residential bill will increase by 43 cents a month or $5.19 a year, and the average commercial bill by $1.80 a month or $21.65 a year.

Residential customers using a little more than 5,000 gallons a month would see their monthly bill increase from $14.44 to $14.87; commercial customers using more than 29,000 gallons a month would see their monthly bill climb from $60.95 to $62.75.

This would mark the first rate hike for operational purposes since the city bought the water system from Union Electric in June 1992.

The city hiked consumption charges by 5 percent last January. The rate hike yielded about a 3 percent increase in gross revenue.

But that money was earmarked solely for capital improvements, said Tom Taggart, water system manager.

Taggart works for Alliance Water Resources, a private firm that manages the city-owned system.

When the city purchased the water system, it was envisioned that water rates would be hiked 2 to 3 percent annually to offset increased operating expenses.

Part of the increased cost comes from the fact that the city's bond payments climb each year, Taggart said. The city is paying off $11 million in bonds.

"We had some unbudgeted expenses in relation to floods too," Taggart added.

The city also has seen some inflationary increases and could see its water testing costs climb by $50,000 if new federal regulations are imposed, Taggart said.

In the first year of city operation, 1992-93, the water system accumulated a $231,000 surplus.

In 1993-94, the water system finished $9,962 in the black. But last fiscal year, the system ended $41,601 in the red.

Taggart said the water system is supposed to pay its own way. "You can't operate in the red," he said.