Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, September 15, 1993 TAG: 9309150036
SECTION: CURRENT PAGE: NRV-9 EDITION: NEW RIVER VALLEY
SOURCE: PAUL DELLINGER STAFF WRITER
DATELINE: PULASKI LENGTH: Medium
"That's absurd," said Dave Spangler, president of Jefferson Mills. "How do you justify that?"
The recommendation came from Ernst & Young, consultants hired by the town to study water rates and revenue projections.
Spangler objected to an across-the-board increase when rates are so diverse. Pulaski Town Council adopted a rate structure at the end of 1991 that gave high-volume industrial users lower rates.
"I'm totally against this. This is a significant increase to our company," Spangler said.
Ellen Erhardt, with Ernst & Young, replied that the recommended increase is designed to get the town's water system on a self-supporting basis. She estimated that the water fund would have a $170,000 deficit by the end of the 1993-94 fiscal year without it.
The consultants will study the rate structure next and make recommendations on that, she said.
"We hope to finish that phase in the next 60 to 90 days. That's our goal," Town Manager Tom Combiths told officials from Jefferson Mills, Magnox, Renfro Corp., Pulaski Furniture Corp. and Pulaski Community Hospital at an informational session Tuesday.
He and Assistant Town Manager Rob Lyons offered to discuss special problems the increase might pose with the industry representatives individually.
Town officials got the rate-increase recommendation at a Finance Committee meeting early Tuesday. They agreed to a special council meeting at 7 p.m. Sept. 28 for a public hearing on it.
If the rate increase is delayed beyond Oct. 1, Erhardt said, it would take a bigger increase for the balance of the fiscal year to keep the water fund from going broke.
Magnox Operations Manager Hi Nicely said the lower rates for high-volume users had not been a gift from the town, but a business decision. Magnox would have built its own filtration system, he said, and the town would have lost more money from unsold water than through the reduced rates.
"There is an economy of scale," Nicely said. He predicted that higher rates would discourage potential new industries that use water as a raw material "and the ones who are here are going to look for a way to do it differently or get out."
Magnox, which uses water in producing oxides for the recording industry, is the town's biggest water consumer. Magnox and Renfro, a hosiery manufacturer, use about half the water produced by the town.
Nicely said there is another problem with town water, because some of the purification chemicals in it affect Magnox's product. "We definitely will have to reduce our usage considerably," he said.
Pete Crawford said the same thing would be true at Pulaski Furniture, and Spangler said Jefferson Mills would cut its water use.
Renfro and Pulaski Furniture recently have announced expansions, and Magnox is completing one. Ernst & Young were projecting an increase in industrial water use by 1995, but the industrial officials predicted just the opposite Tuesday if rates rise.
Ernst & Young also recommended rate increases in mid-1994 and mid-1995 sufficient to bring in 5 percent more revenue each of those fiscal years, based on whatever new rate structure is finally approved.
Crawford asked why existing rates did not already bring in enough revenue for the system. Lyons said the reasons included inflationary cost increases for such things as electricity and chemicals, debt-service increases, and a revenue-cutting drop in the amount of water being sold to industry.
He and Town Engineer John Hawley said efforts had been made to tighten operational expenses. A leak-detection program has been carried out, and the town is making pump stations more efficient.
Lyons said that, even with a 24 percent increase, Pulaski's rates still would be below or competitive with those of surrounding localities and the state average.
"We want the rates to be fair," he said. "We also need to work with our industries."
The last rate increase was a 10 percent boost in mid-1990.
by CNB