Rate hike rollback raises concerns

A newly elected East Point City Council bowed to voters this week and took the first step toward rolling back a water rate increase that boosted bills by at least 145 percent. But now the city has to fill a $7.5 million hole in the general budget, which could mean dramatic cuts in staff or services.

The council budget committee ordered the staff to come up with a plan for balancing the city budget — including new water rates — within two weeks in order to allow the rollback in utility charges.

“We’re not making any promises, but we’ll do our best,” said acting City Manager Nina Hickson at the committee meeting Thursday.

The city had been able to boast this week that it had climbed out of the financial hole it was in 2007 when it had a $6 million deficit — something it had faced for a few years.

East Point has been rocked by a water war since last July, when it boosted the standard base water-and-sewer rate from $19.50 to $47.80 for 3,000 gallons of water after the council voted to stop subsidizing utilities from the general fund and make them pay the full cost of their operations. The cost was projected to increase to $66.85 when the next fiscal year begins in July.

That sparked a firestorm of citizen protest and resulted in the defeat in three council members in the last election and the firing of both the city manager and the city finance director.

Mayor Earnestine Pittman said she could support a base water rate of $32 and cutting the allowable gallons by one-third, but anything higher would be a betrayal of the voters. Three new council members were sworn into office at the council meeting Tuesday after campaigning on promises to roll back the rate increases. The result gave Pittman the majority she needed to gain control of the city government.

After the new members were sworn in Tuesday, the council voted 4-4 to accelerate a vote later this month on eliminating a 2.5 million utility franchise fee and to move another $5 million in utility costs to the general fund.

Pittman’s tie-breaking vote ensured that rollback will come before the council on Jan. 16. Pittman was confident it will pass.

“That was the platform they ran on,” she said in a interview with The Atlanta Journal-Constitution. “The general fund will just have to make it up and the only way you make up things is when you start cutting.”

Councilwoman Sharonda Hubbard questioned how the city would be able to make up $7.5 million from cuts in the $32.4 million general fund or the $96.7 million budgeted for operations and maintenance. The entire budget is $114 million, a 17 percent increase from the previous fiscal year.

“I am certain there is not $7.5 million of fluff built into the budget that can be rolled back,” Hubbard said. “We’ll be cutting into the bone.”

Michael Bell, former chief financial officer for the city of Atlanta and DeKalb County, was skeptical that the south Fulton County city would be able to balance the utility rollback through cuts in staff and services. The city only had $4 million in reserves — about half of what Bell said was the bare minimum of one month operating costs — and city officials expect Atlanta to increase its sewage treatment fees by $4 million, eating up any reserve.

He also noted it would be twice as painful to make up the $7.5 million halfway through the fiscal year. “The employees that you have to cut mid-year double to obtain the same economic benefit,” said Bell, now a public policy professor at Georgia State University. “If they have been cutting in recent years like a lot of governments, it’s going to be hard to cut some more, and your labor costs are the big part of the budget.”

Councilman Myron Cook, who heads the budget committee, said the council wants the staff to find a way to best replenish the projected deficit and then adjust the water rate to a number to make up the difference. He said the council owed residents — many of whom are on fixed incomes — its best effort to tamp down the water rates. He acknowledged the effort might fail, but said at least the public would know the council made the effort.

“The majority of the last council rushed this rate increase through and some of them paid a political price for it,” Cook said. “Nothing is sacred. ... but this is going to be tough. It might be a miracle. ... If we have to keep the rates like they are, at least we’ll have a better explanation.”

Councilman Lance Rhodes, who like Hubbard supported the rate increase, contends all the options were explored last year and that a rate increase was the only way to ensure the city was financially sound.

“If they can suddenly come up with the $7 million today, why didn’t they come up with it six months before?” Rhodes told the AJC. “We are looking to make the utilities self-sustaining, and if we don’t make that a principle, we are just going to dig ourselves deeper into the hole.”