Clark Township

A 57% increase in quarterly sewer rates plus a 3% yearly increase to address inflation is under consideration by the Clark Township Board of Trustees. Any increases could be seen by residents as early as their December bill. Immediate action, however, is required on the Special Assessment District, which has been amortized incorrectly since 1991 in violation of state law and a township resolution. Correcting the error will result in about a $53 cost increase to the average residential property located within the Special Assessment District.

The sewer rate increases likely will be considered by the Clark Township board at its Thursday, September 18, meeting.

When the 1991 Sewer Expansion Project was initiated, the final nine years of debt obligations were without any planned revenue source. There will be a shortfall in meeting the debt obligations by more than $610,000 by 2029 if steps are not taken now, according to analyst Tom Traciak of ACI Finance of Mason, who addressed a joint meeting of the Clark Township Board of Trustees and the Sewer Advisory Board Thursday, August 28. About 40 residents attended the meeting.

A millage approved by voters in 1981 for an extension to the sewer system is expected to retire $1.1 million in bonds by 2029.

The township board hired Mr. Traciak for $8,500 last fall, seeking an analysis on how to meet current needs on system operation and maintenance, plan for the repair and replacement of the system as it ages, meet debt retirement obligations, and provide for the sustainability of the sewer system.

To correct the amortization error, special assessment fees will increase from $197.31 to $251.21 for 100 feet of property frontage. This increase will appear on December bills. Each following year, the cost will decrease until 2030, when the special assessment is paid off.

The amortization formula the township was using contradicts state law and the township's bond resolution. The special assessment required 40 equal payments of the principal amount each year. The interest was to be added on. The township, however, has been charging 40 equal payments of both principal and interest.

The payment amortization mistake was realized during the rate review, Mr. Traciak said to resident Ken Drenth of Cedarville, who questioned how the error could have gone on for so many years undiscovered.

Each consultant, including auditors and bond attorneys, said Mr. Traciak, looks at items from a different perspective, and looks at specific areas.

To meet operating and maintenance needs, capital improvements, and to build up the cash in the sewer fund, Mr. Traciak advised the township to bump up the current rate of $46 per REU (residential equivalency unit) per quarter, to $72 per REU for all customers.

The proposed increase, along with annual inflation hikes, will help build up funds over a five-year period.

"We're not trying to do this overnight," he said of the suggested hike. "We don't want to overburden the customer."

Marti Harness of Cedarville said she lives on a fixed income and will have to find something to cut in her personal budget to pay for this increase. She asked board members if they were doing anything to cut costs.

In response, Township Supervisor Linda Hudson said, the two Department of Public Works (DPW) two full-time employees have been trained to perform some maintenance of the system to save costs.

Sewer Advisory Board member Steve Autore said the township had also offered to hire out the skills of the DPW to other communities.

Looking at the sewer operation fund, which Mr. Traciak called "woefully inadequate," he recommended the township keep a cash balance of a minimum of $125,000 in the fund. Currently, the cash balance is about $15,000.

Over the next five years, the cash balance in the sewer operation fund would be about $175,668.

He recommends that communities the size of Clark Township have a cash balance equivalent to cover 12 months of operations. A cash buffer is needed to cover unexpected breakdowns, he said.

Historically, he said, the sewer fund has been operating in the red without even including depreciation.

"If you don't fund depreciation," he said, "then you're not building up the cash to do replacement of the system."

Each year, he said, the township is spending about $18,000 to maintain the system.

Even though many communities are afraid to raise rates annually through an automatic rate increase, he said, they should do so to keep pace with inflation. By having annual increases, communities prevent periodic spikes in rate fees as they play catch-up with increasing costs.

"Operating expenses, utilities, maintenance, supplies, these things tend to inflate faster than the general consumer price index," he said. "You do have to build in inflation."

User rates, he said, need to cover all aspects of operation and maintenance of the sewer system, and also should include proper funding of capital improvement spending.

Mr. Traciak advised the board evaluate the sewer fund every three years, as many components affect the fund, including increasing operations and maintenance costs and changes in capital improvements.