MUD Board votes to skip scheduled water and sewer rate increase

During a meeting that lasted over four hours, the Metro Utility Department Board voted on Monday to skip a previously approved five percent rate increase – opting instead to wait on the finding of a third party rate study before moving forward. | A Lynchburg Times Graphic

By Tabitha Evans Moore, EDITOR & PUBLISHER

LYNCHBURG  — In Tuesday’s Metro Utility Department (MUD) Board meeting the five current members – Chair Shane Taylor, Barry Posluszny, Charles “Boo” Johnston, Greg Guinn, and Glenn Thomas voted not to execute an automatic five percent water rate increase approved by the 2022 iteration of the Board. Only Taylor and Posluszny remain from the 2022 Board consisting of Chair Keith Moses, Shane Taylor, Barry Posluszny, Jon Robertson, and Will Shavers.

Moses stepped down from the Board in January 2023 and Taylor replaced him as Chair. Johnston then replaced Moses on the Board. Robertson and Shavers stepped down soon after and were replaced by Guinn and Thomas.

According to the minutes of the May 2022 MUD Board Meeting, the previous board declined to discuss a two percent water rate increase just prior to budget season that year. MUD officials had suggested the small increase “to maintain healthy operating revenues and address increasing inflation rates” but the Board felt that the increase could be avoided due to the utility’s “positive net financial position.”

However, after COVID hit, the cost of raw materials increased across the board, and so the Board acquiesced and approved a three percent increase based on the 2020 water rate study. According to the June 2022 meeting minutes, Robertson made the rate increase motion and Shavers seconded it. The motion passed with four yes votes and one vote to abstain by Taylor.

Prior to the 2022 increase, rates were last increased in 2018. That rate increase led to a $1 million fund balance that the MUD eventually decided to invest as another form of revenue generation. Interest from those accounts goes to pay for current projects.

And with a new administration on its way, that Board decided to kick the can down the road with an automatic five percent rate increase pending in 2024 – an increase Chair Taylor asked the current board members to “kill with a motion” in Monday night’s meeting.

State suggests a rate study every four years

To keep the Metro Utility Department solvent, the Tennessee Comptroller’s office recommends utilities perform rate studies every four years to make sure revenues pace expenses. In theory, frequent rate studies can help utilities avoid major rate increases. The last MUD rate study was completed in 2020.

“I personally feel as if I’d like to have a professional opinion on where the utility stands as far as the water and sewer rates go before moving forward with any increase,” Chair Taylor told the Board. “I understand that the utility is doing pretty good right now as far as our net return, but I’d like to understand where we are headed for the next five years.”

According to the 2022-23 State Financial Audit, the Metro Utility Department is in a positive position by $1.3 million dollars. Tennessee law requires that all public utilities operate as a financially self-sufficient enterprise and that rates and fees reflect the actual cost of providing its water and sewer services. MUD is 100 percent funded by ratepayers.

Also in the mix is a proposal by new Board member Glen Thomas to charge all businesses in Moore County commercial water and sewer rates. Currently, some low usage business accounts are listed in the books as residential.

In Moore County, residential water rates are $9.94 per 1000 gallons and commercial water rates are $12.65 per 1000 gallons. Industrial accounts pay $14.36 per 1000 gallons. The main industrial account in Lynchburg is The Jack Daniel Distillery, which makes up 55 percent of MUD revenue, according to the state audit.

On the sewer side, residential rates are $22.89 per 1000 gallons and commercial rates are $28.18 per 1000 gallons. There is no industrial sewer rate.

Greg Guinn made the motion to kill the five percent rate increase and Barry Posluszny seconded it. Later in the meeting, Thomas made a motion that “all commerce businesses” should be changed to commercial water and sewer rates effective July 1. His motion passed by a 4-1 vote with Thomas, Guinn, Johnston, and Posluszny voting in favor and Chair Taylor voting against.

Poluszny prefers smaller but more frequent increases

During open discussion, Poluszny told board members that he opposed big increases and would instead like to see a smaller one percent increased year-over-year to make it easier on ratepayers.

“I said this during the last rate study conversation, and I felt like I was looked at as if I were speaking Chinese,” Polunszny stated. “If you raise a customer’s bill by 10 percent, they are going to be upset.”

Chair Taylor then recommended tabling Thomas’s rate reclassification proposal until after the rate study, an idea Thomas bristled at – suggesting instead that MUD perform its own rate study.

“Listen, the state, they want a lot, but you don’t have to do everything they say. I’ll guarantee you that they don’t want to pay for a rate study,” Thomas told the Board. “You just have to draw a line on them sometimes.”

“We’ve jumped outside the scope of the motion,” Chair Taylor reminded the Board, as he called for a roll call vote. Guinn, Johnston, Poluszny, Thomas, and Taylor all voted to kill the five percent rate increase. It passed unanimously. They also voted 4-1 to move forward with the new rate study at a cost of $12,000. Thomas was the lone no vote.

According to Chair Taylor, the study will allow an independent third party to come in and compare the goals of the utility against their current project and depreciation to then estimate rates that should be good for the next 4-5 years.•

{In total, this article represents nearly 10 hours of work by our editor. Last night’s MUD Board meeting lasted from 6 to 10 p.m. Every word was recorded by our staff and then transcribed. The article itself required over three hours of research. None of that includes the decades of experience and knowledge it takes to report on something as complicated as a local utility board. Consider subscribing to support our work at this link.}