Consultant tells Town of Sellersburg phased water and sewer rate increases likely needed to cover projects and higher costs

At a Town of Sellersburg workshop, Andre Riley, consultant with Baker Tilly, told town leaders the utilities will likely need phased rate increases to match revenue needs for planned capital projects, higher operating costs and existing debt.

Riley said the firm’s water cost-of-service work followed the American Water Works Association manual and that the water rate design they propose would simplify the current six declining consumption blocks into three, while allocating roughly 76% of water system costs to the residential class. "When we're doing a cost service study, you're trying to allocate cost based on how different types of users use the system," Riley said.

The recommendation for the water utility reflects a 5-year financing assumption that includes a $17,600,000 capital program sized on a 35-year issuance, Riley said. Under the model Baker Tilly ran, the town’s consolidated water revenues would need to increase from about $3.1 million currently to roughly $5.0 million over the multi-year period; on average across the five-year model the firm showed a 44% increase for residential accounts, 66% for commercial and larger percentage shifts for other classes. Riley cautioned those are averages and that individual customers would see differing changes depending on usage patterns.

Riley summarized why the sewer utility requires separate treatment: operating costs have risen sharply since 2019, he said, with total operational increases of about 73%, personnel costs rising more than 100% and chemical costs roughly four times prior levels. The sewer utility also carries debt tied to a prior State Revolving Fund (SRF) bond; Baker Tilly recorded an annual debt service obligation of about $1.6 million tied to a roughly $21 million SRF financing.

Because of those pressures, Baker Tilly presented four alternatives for sewer-rate phasing: two three-year options (one that front-loads rates and another that uses cash to shave near-term increases), a four-year option and a five-year option that aligns timing with the water schedule. Each alternative trades lower short-term increases against faster depletion of cash reserves or higher long-term rates. Riley said the town maintains minimum balances now and that available cash gives the council flexibility to select a phasing approach.

Riley walked the council through the trade-offs: a front-loaded three-phase plan produces larger near-term bill increases but restores cost recovery sooner, while a stretched five-phase plan smooths first-year increases but adds years of inflation and can raise long-term cost. He noted the town also has a recurring replacement allowance modeled at $500,000 per year to fund ongoing capital needs; that allowance can be adjusted to smooth rate impacts but would affect cash balances.

On the water side, Baker Tilly recommended simplifying the block structure to three user classes to reflect grouped usage peaks and to better align charges with system impacts. Riley said the firm’s modeling showed some cost shifts to fire-protection and contract customers because of system oversizing for fire flows.

Riley described SRF as a commonly used financing source that offers subsidized interest (the firm called it the program’s "floor"), but he cautioned SRF awards are competitive and often capped; he said recent SRF budgeting and market conditions imply blended borrowing costs will vary depending on the subsidy portion the town obtains.

Council members asked about the size of immediate impacts to typical bills. Riley gave model examples: the firm’s five-phase water scenario showed modest per-phase increases for a typical residential user (about $3 per year on average over the modeled years), while sewer alternatives produce larger first-year percentage impacts under some plans. Town staff suggested Baker Tilly prepare a combined, stacked comparison of water, sewer and typical trash charges to illustrate total household bill impacts for outreach materials.

No rate ordinance or motion to adopt rates was made at the workshop. Riley noted the next formal steps would be a council rate action, which requires introduction, public hearing and adoption under the town’s legal process; he also said the town will need to decide whether to pursue SRF or open-market financing and the timing of any bond issuance. After the presentation the council moved to adjourn; the motion to adjourn carried on a voice vote.

The council requested Baker Tilly materials be posted to the town website and discussed the possibility of using the town newsletter and a bill-comparison graphic to inform residents before any formal rate hearings.