Morrison Creek rate hike coming but details unclear

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— Tap fees and rates for water and sewer services will rise when the Morrison Metropolitan Water and Sanitation District pays off its debts, but not as much as a preliminary rate study suggested they should rise.

Board members viewed the first draft of a long-awaited rate study in somewhat dismay June 15 and decided to postpone the final draft, which was due next month, so everyone has more time to come up with appropriate figures.

The decision came after project manager Greg Tilley presented the board with the preliminary study. It suggested how much tap fees and quarterly rates should be when the district finishes paying its 22-year-old bankruptcy debt in August.

The suggested increase for quarterly water and sewer fees was 6.6 percent, from $82.50 to $87.98.

But what stunned the board were the suggested levels for tap fees. The study indicated the fees should be increased by more than 1,100 percent. The suggested rate for water fees was $8,643 and for sewer tap fees was $8,947. Right now, it costs residents who want to be hooked up to water and sewer $750 for each service.

District Manager Steve Colby said that $750 is possibly the lowest tap fee for a water or sewer hookup in Colorado. However, the district doesn't want to raise the fees until it is through paying off the bankruptcy, he said. That's because 249 contribution certificates, each good for a water and sewer tap, are held by property owners in the district.

The certificates were sold for $1,000 each after the district went bankrupt in 1978 to raise funds to pay back bondholders. If the tap fees were raised, the certificates' value would suddenly increase. For example, if tap fees went to $5,000 for water and $5,000 for sewer, each contribution certificate would be worth $10,000.

"If you raised the tap fees, what you would probably do is raise the demand for contribution certificates," Colby said.

When the certificates do expire on Aug. 22, the holders can receive $1,000 cash or they can surrender the certificate as credit for a future water and sewer hookup on one parcel of land.

In the meantime, the district has been collecting interest on money it raised from the certificates for nearly 20 years and no one has yet cashed a certificate in, Colby said.

Not all the tax information was present when the figures were calculated, which made the numbers come out high, Tilley admitted. He and the board agreed that the amount of tax revenue collected over the years by property owners living in the district but are not hooked to the system should be taken into account when setting the tap fees.

Though the final numbers are not expected to be as high as what the preliminary study suggests, Tilley said tap fees and rates will have to be higher than they are now if the district wants to ensure it has enough money to operate.

"Those two are going to go up a lot to make up for the cost of infrastructure," he said.

Furthermore, when the district finishes paying its bankruptcy off in August, it will have a reserve of $300,000. Tilley urged the board to think about finding a way to add to the reserves through time instead of dipping into them.

"There is going to be money there for the next 10 years or so but it will be exhausted," he said.

However, board Chairman John Wittemeyer and Treasurer Greg Hermann both warned that the only way the district will bring in more revenues is by getting more people to tap into the infrastructure. A high tap fee wouldn't help in doing that.

"I don't think we want to create a document that doesn't encourage people to come into the system," Wittemeyer said.

Right now the district is running at 15 percent capacity with 250 customers. That's the core of the problem with setting reasonable tap fee amounts for the district, Tilley said. People who tap into the infrastructure are buying into a large system that's underutilized and expensive to run.

"As the district goes, for now, more customers will bring the costs down," Tilley said.

The best thing for the district is to get more people on line, Hermann.

"We need to do whatever we can to hook these people up," he said.

A final draft of the rate study is due on Sept. 1.

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