SADOW: Rate Hikes to Compel Monroe to More Efficiency

The day of reckoning has come for Monroe water, sewerage, and waste customers, and one can only hope the delay imposed by a penny-wise, pound-foolish City Council majority doesn’t end up costing ratepayers more over time than the money they managed to keep over the past year.

At its last meeting of the year, councilors sent out a warning that customers of city water, sewerage, and water services could expect to see a rate hike by May. Democrat Chairman Rodney McFarland likened the increase to halt a “kicking the can down the road” on rates and said he would vote for whatever the independent Mayor Friday Ellis Administration determined was necessary. While it’s good practice to ensure these services pay for themselves and maintain a healthy reserve for future needs, the fund cannot practically fall too low. Stipulations attached to bonds issued for capital items impose minimum reserve requirements, and the lower the reserve balance, the higher the interest rates the city will face on any future bond issuances. Indeed, existing debt was dropped two notches in quality by one of the big ratings firms because of this repeal.

It was a remarkable turnaround for McFarland, who, along with fellow Democrats Verbon Muhammad and Juanita Woods, blew up the mechanism that would increase rates in line with inflation. Previously, the city had an ordinance with that escalator clause to back the bonds. However, not long after McFarland and Muhammad joined the Council, they repealed that, saying they should look at this on a periodic basis and not be forced into anything. Early this year they did take a gander, and kicked the can down the road by denying an Ellis request to move rates higher by 2.7 percent.

That will come back to haunt customers if the eventual increase is substantially larger than the forgone hike. What was saved may end up being handed over–and then some–while the city also loses the opportunity to bolster its reserves, which could have grown available funds pulled down the level of future, inevitable increases needed to place the underfunded system on more solid footing.

Perhaps had the wasted time been put to good use, the delay might have been worth it. The interval could have been used to implement cost-saving measures. But an idea to contract garbage collection was batted away. The Democrats in the majority initially said they thought their constituents wouldn’t like it, and then proceeded to have community meetings about it, yet apparently still think that way since nothing has come of that suggestion.

However, good governance and leadership don’t just parrot perceived constituent preferences; you have to do what’s best for the governed even if a majority initially appears against it. Cities that privatize waste collection typically save money without service degradation, and a comparison with West Monroe, which does that, shows it has equivalent rates (before the coming Monroe increase) but a financially healthier system. Yet with city jobs at stake (a private operator likely can do the same or a better job with fewer employees), policy-makers often carry those employees’ water rather than decide with ratepayers foremost in mind.

Monroe should also consider privatizing water and sewerage provision. More and more local governments are doing that, and in Louisiana a handful of smaller municipalities have taken that plunge. Others, including larger ones like Bossier City, continue to own water and sewerage assets but contract out the management. In Bossier City, when it made the switch from city management about a decade ago, costs were controlled and reasonable rate hikes made occasionally, but certainly not annually.

But none of these options that could reduce the need for, if not obviate, rate increases have yet to be seriously considered in Monroe. It would be wise for the city to do so to blunt what could be a series of unwelcome rate hikes after clients take medicine on the upcoming one.

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