The Greeneville Board of Mayor and Aldermen on Tuesday unanimously approved on first reading an ordinance increasing water and sewer service rates.

The proposal, which raises rates and charges over a five-year period, can be adopted on second reading at the board's next meeting on Aug. 21.

If the amendment to the town's Municipal Code is approved Aug. 21, the rate increase would take effect on Sept. 1.

The water and sewer rate hikes are necessary in order for the Greeneville Water Commission to break even, Superintendent Laura White said.

Getting back in the black after three years of deficit operations is mandated by the state, White said.

If the board does not approve the rate increase, the state will step in and automatically impose higher rates, engineering consultant Gary McGill told the board.

The Greeneville Water Commission operated at a $123,238 deficit in 2009, a $443,623 shortfall in 2010 and was $551,315 in the red in 2011, water commission Comptroller Kim Bowers said today.

The five-year plan allows for capital improvements to aging pipelines, pumps and other infrastructure equipment, White said.

"Nobody likes rate increases, but this proposal sounds like the easiest one to customers of the water system," Alderman Sarah Webster said.

"I think it is a reasonable way to go at this time."

Tennessee law requires the establishment by ordinance of separate rates and charges "that are respectively sufficient for the water system and the sanitary sewer system to pay all of its reasonable expenses of operation, repair, and maintenance, provide for a sinking fund for payment of principal and interest of bonds when due, and maintain an adequate depreciation account to the end that each system shall be self-supporting."

The town water commission determined that the rates and charges for water service and for sanitary sewer service must be increased in order for each system to be self-supporting, according to the proposed amendment.

Details of the proposed sewer rate charges include:

* Through June 30, 2013, the inside-Greeneville sewer rate will be $3.10 per hundred cubic feet of water consumed. The outside-Greeneville sewer rate will be $6.20 per hundred cubic feet of water consumed.

In each instance, an additional monthly charge is added. An additional monthly charge of $7 for inside-town sewer service and $14 for outside-town sewer service is added "for administrative and general expense."

* Beginning July 1, 2013, the inside-town sewer rate will be $3.20 per hundred cubic feet of water consumed. The outside-town sewer rate will be $6.40 per hundred cubic feet of water consumed.

In each instance, the additional monthly charge for administrative and general expense will rise to $9 for inside-town sewer rate service and $18 for outside-town sewer service.

* Beginning July 1, 2014, the inside town sewer rate will be $3.25 per hundred cubic feet of water consumed. The outside town sewer rate will be $6.50 per hundred cubic feet of water consumed.

The 2014 rate increase also includes the charge for administrative and general expense, which will rise to $9.50 monthly for inside-town sewer rate service and $19 for outside-town sewer service.

The base sewer rate at 2,000 gallons is currently $9.42. If the changes are approved on second reading and go into effect, the montly rate through June 30, 2013 would be $13.20, with incremental increases afterward.

The base sewer rate at 5,000 gallons is currently $19.62. The new rate through June 30, 2013, would increase to $28.70.

The base sewer rate at 11,000 gallons is currently $37.47. The new rate through June 30, 2013, would increase to $50.40.

The base sewer rate at 28,000 gallons is currently $73.17. The new rate through June 30, 2013, would increase to $93.80.

Sewer bills are calculated based on water usage, Bowers said.

Through June 30, 2013, rates for metered water are fixed inside town limits at $1.25 per 100 cubic feet for the first 1,000 cubic feet per month, $1.15 per 100 cubic feet for the next 1,000 cubic feet per month, and $1.10 per 100 cubic feet for all amounts over 2,000 cubic feet per month.

There is an $8.25 monthly service fee.

A 10 percent service charge will be added for nonpayment of the bill if not paid within 15 days after the date shown on the statement.

All consumers outside the corporate limits of the Town of Greeneville will be charged 100 percent additional on the schedule of rates and demand charges.

Beginning July 1, 2014, metered water rates on the first 1,000 cubic feet per month will cost $1.25 per 100 cubic feet. The next 1,000 cubic feet per month will be $1.20 per 100 cubic feet, and the rate will be $1.15 per 100 cubic feet for all amounts over 2,000 cubic feet per month.

The service fee per month will be $8.40.

There will be a 10 percent service charge added for nonpayment of the bill if not paid within 15 days after the date shown on the statement.

A 2,000-gallon user of water currently pays $5.46 per month.

The proposed new rate through June 30, 2013, is $10.65 per 2,000 gallons per month, with incremental increases for the next five years. About 29 percent of Greeneville Water Commission customers fall into the 2,000-gallon use range, Bowers said.

A 5,000-gallon user of water currently pays $11.54 per month. The new rate through June 30, 2013, is $16.65 per 5,000 gallons. About 31.3 percent of Water Commission customers fall into the 5,000-gallon use range.

An industrial customer that uses 808,000 gallons of water per month currently pays $1,102. The new rate through June 30, 2013 is $1,198. About 1.8 percent of water commission customers fall into the 808,000-gallon use range.

All consumers outside the corporate limits of the Town of Greeneville that receive their water from Greeneville will be charged 100 percent additional on the schedule of rates and demand charges.

Beginning July 1, 2015, metered water rates inside town limits will be $1.30 per 100 cubic feet for the first 1,000 cubic feet per month, $1.25 per 100 cubic feet for the next 1,000 cubic feet per month, and $1.20 per 100 cubic feet for all amounts over 2,000 cubic feet per month.

There will be a service fee of $8.50 per month.

There will be a 10 percent service charge added for nonpayment of the bill if it is not paid within 15 days after the date shown on the statement.

All consumers outside the corporate limits of the Town of Greeneville will be charged 100 percent additional on the schedule of rates and demand charges.

McGill, founder of McGill Associates, the Knoxville consulting firm that has been advising the Greeneville Water Commission, said that in 2008, the state Comptroller's Office decided that a water or sewer utility that had three consecutive years of deficit operations must prepare a plan to get back to self-supporting operational status.

In 2010, the state changed the law to two years of deficit operation, rather than three.

The Greenville Water Commission raised rates two years ago, but the amount "was not sufficient to close the deficit," McGill said.

"We took a little harder look at what would be fair to the most consumers so water supports water and sewer supports sewer," he said.

Capital improvements necessary to maintain the water and sewer system were identified and figured into the five-year plan, McGill said.

The rate increase will keep the system "reliable and adequate" and allow for equipment replacement within the aging system, he said.

The restructured rate system will be based on actual usage, and actually lowers rates from current fixed rates based on a four-tier system, McGill said.

Elimination of one of the tiers "made the rate structure simpler."

"It's really a fair way to handle the usage cost," he said.

McGill said the proposed Greenville water and sewer rates compare favorably with those in surrounding cities such as Bristol, Kingsport and Elizabethton.

"In almost every case, even with the changes in the rate system, those rates are still below the surrounding communities," McGill said.

The overall goal of the five-year plan "is to keep rates as low as they are and still meet the comptroller's requirements," he said. "We used the same fairness approach to the base rates as well."

The state requirements needed to be met, but (the plan) goes no further than that," McGill said. "This is not any more than what you need. There is no cushion here."

If approved on second reading by the board, the plan will be forwarded to the state for approval, McGill said.

"I've kept them up to date, and they know we've got a good plan," he said. "We need to do this to comply with the law, and in our opinion, this is a good way to do it."

If the board doesn't approve the five-year rate plan, "They [state officials] will come in and set rates," he said.

The five-year plan gives the board a "planning tool" to work with, McGill said.

"Critical assets" in the water and sewer system must be kept in good repair to avoid any health concerns, Mayor W.T. Daniels said.

"We don't want to put the people in jeopardy," he emphasized.

White said the existing intake into the Nolichucky River was built in 1954 and modified in 1966, 1976 and 1996.

"Some of our pumps are original and have been rebuilt," she said.

Some of the pipelines in the town's water and sewer system are 70 years old, she added.