MuskogeePhoenix.com, Muskogee, OK

Local News

April 27, 2013

Cost gap may lead to rate hike

City Council, administrators will weigh issue in budget discussion

Sewer, trash and water rates in Muskogee lag behind the cost of providing those services, creating a gap officials believe could be costing the city hundreds of thousands of dollars.

The issue is one city councilors and administrators will examine during the coming weeks as they hammer out next year’s budget. If their initial assumptions are confirmed, utility rate hikes could be coming down the pike.

“I want to know the per unit cost of production and the unit price we are billing,” said Mayor Bob Coburn. “Are we recouping what we are spending to provide those services?”

The mayor said he would like to link city utility rates to the consumer price index to keep up with the pace of inflation. Lagging rates, Coburn said, rob city coffers of money that could be used to fix streets, provide police protection or other services upon which residents rely.

Coburn said the idea to tie utility rates to the rate of inflation came from conversations officials here had with their counterparts in Enid. City officials there linked rates with an index that provides for an automatic annual adjustment to account for inflation.

As an example, Coburn said if the rate of inflation increases 2 percent annually and utility rates remain unchanged 10 years, that would result with a 20 percent gap between the cost of service and the revenue collected. The city, as a result, ends up absorbing those costs at the expense of providing other core services.

City Attorney Roy Tucker offered another reason for the regular review and adjustments of the city’s utility rates. He said the state constitution may prohibit municipalities from providing utility services at rates below costs.

“Obviously, we have to take into account what it actually costs and make sure those numbers are accurate,” Tucker said. “My initial feeling is it is a good idea to closely mirror what the actual costs are. But what those costs are, we really don’t know right now.”

Tucker said he believes it would be “more palatable (for consumers) to see rate increases in smaller amounts on a regular basis than a large increase on an irregular basis because we haven’t kept up with the rate of inflation.”

Coburn said another gap that will have to be addressed involves the volume of water being processed for consumption in relation to the amount being billed.  

“Right now we have a gap between the water produced at the plant and what we are billing out to account users,” Coburn said. “That could be leaks in the delivery system, but my concern is that gap is getting larger instead of smaller.”

Reach D.E. Smoot at (918) 684-2901 or dsmoot@muskogeephoenix.com.

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