Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, June 29, 1993 TAG: 9306290086
SECTION: CURRENT PAGE: NRV-6 EDITION: NEW RIVER VALLEY
SOURCE: PAUL DELLINGER STAFF WRITER
DATELINE: PULASKI LENGTH: Medium
The members, meeting Monday morning as the Finance Committee, heard from Hiawatha Nicely, vice president of operations at Magnox Inc., on the water issue.
They also learned that Magnox is planning an expansion to be completed by March 1994 at its Pulaski operation, turning out magnetic particles for the recording industry. Nicely said work on the new facility would start at the end of July.
He said a $7 million expansion that got under way last July is complete. "We have material going into that factory for the first time this morning."
The new expansion probably will cost about $2 million, he said, although Magnox is still negotiating on prices for three major pieces of equipment going into it. "So it's another significant investment," he said.
The expansions will mean that Magnox will use more water in its manufacturing process, he said, although Magnox has been trying to use as little as possible. It is one of the four major raw materials that Magnox buys.
Magnox is the town's biggest water user. It considered building its own filtration plant and getting water directly from Peak Creek, but stayed on the town system after council made a significant investment in the municipal water plant about six years ago and renewed that decision two years ago when council revised its rate structure to give high-volume users a better break.
Councilmen Andrew Graham and Don Crispin have been critical of that structure, saying that it subsidizes Magnox.
Crispin said that more than 45 percent of municipalities have gone to a flat rate for water rates, and he thinks Pulaski should, too. Mayor Gary Hancock said economies of scale should be considered in charging high-volume business users.
"I don't think there's any question as to where we are now, that we have to increase the water rates," Hancock said, but "I don't think there's any need for council to go to a flat rate."
Councilman Nick Glenn said a flat rate would cause the town to lose its biggest customer, Magnox, leaving it to the remaining customers to pay bonded indebtedness and other fixed costs. The result would be a big hit on all users, he said, much bigger than if Magnox stayed as a paying customer.
Even though it pays for its water on a graduated scale, Magnox provides a significant amount of Water Fund revenue - enough so that it would be in even more trouble than it is if Magnox came off the system and built its own plant.
Council is leaning toward hiring a consultant to study its water situation, including rates. It has not yet decided whether to set a rate increase now or wait a few months until it could get a recommendation from the consultant, but everyone agrees that some kind of increase is needed to keep the Water Fund solvent.
"We don't think the town subsidizes us. We think we subsidize the town," Nicely said, in helping to repay the $4 million bond issue for the town's plant.
Graham said the proposed town budget is misleading because it does not show the Water Fund will be operating at a deficit.
Assistant Town Manager Rob Lyons said he programmed into the proposed budget what would be needed for the Water Fund. "That assumes we're going to have some adjustment to the rates. We don't know how we're going to get there," he said.
Glenn suggested a 15 percent across-the-board rate increase for all users, residential and business, on the same graduated scale that now exists. Graham said he could never support that.
All those are likely to be discussed anew at council's special meeting tonight for budget adoption, starting at 7 p.m.
by CNB