Sewer Rate Increase FAQ’s
The sewer rate increase that was passed by the City Council in May went into effect July 1, 2009.
To help our residents understand the need for the increase and to explain how it will be administered, we have compiled a list of frequently asked questions and the corresponding answers that are listed below.
How will the sewer rate increase benefit O’Fallon residents?
 The rate increase will allow the City to qualify for stimulus funding that will save $5 million over 20 years at today’s dollar. There is a unique opportunity through the federal economic stimulus plan to fund sewer projects with 0% interest loans. Qualification for stimulus funding under IEPA-guidance requires public utilities to show that they have a sufficient rate structure to support payback of the loan.
Therefore, O’Fallon needs to increase its rates to ensure payback of the loans.
The rate increase will fund essential repairs to the sanitary sewer system and will allow for the establishment of a reserve fund for future capital needs. It will allow the fund to end the year in the black versus red, as it did this past year.
How will the new rates affect rate payers?
The average household uses around 5,000 gallons of water per month, so the average increase is 34%. To view complete tiered rate table, please click this link.
How much additional funding will be generated?
$1.1 million
How will it be spent?
Does the tiered User Rate Fee attempt to have those who contribute more sewage to the system pay more for service?
Yes. Those who use the service more contribute to more stress on the system than the smaller users. As a result, these users cause additional maintenance, repair, planning, engineering, and construction costs.
Will there be at a later date a water rate increase, and if so, will it also include a Water Lateral replacement program?
No water rate increase is contemplated at this time.
Regarding the rate increase in general, what happens if we’re unable to get the 0% interest rate stimulus money?
If O’Fallon doesn’t get the 0% interest money, then we go after the 2.5% IEPA money that we received for the water towers and pump station. As you might expect, it will cost more: $609,000 per year versus $358,000 for the stimulus package as 25% of that is really a grant. Most likely, we would try to stretch out our capital program at the waste water treatment plant (WWTP) from 10 to 15 years to 15 to 20 years. Maybe we will only do the headworks in the first couple of years. Of course, we could borrow from the other portions of the pie, or stagger in additional non-CPI rate increases. There a lot of considerations down the road that will be affected by the regulators and environmental legislation that is as of yet unwritten.
What is our track record on sewer rate increases over the past years?
 In 1996, rates were increased 11% to qualify for the IEPA loan for the Treatment Plant improvements. In 2003, rates were increased 21% to maintain solvency. In 2006, rates were increased 15% to maintain solvency (consultant recommended a 50% increase at that time). In 2006, the CPI adjustment was 4.7%, in 2007 the CPI adjustment was 5.2%, and in 2008, the CPI adjustment was
5.1%. Sewer averaging was put in place in 2006, which reduced wastewater revenues.
If you have further questions that have not been addressed in this article, please contact us at 624-4500.
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