Knoxville — Dear Water/Sewer Customer,

As you may be aware, on Jan. 1, 2009, an increase in Knoxville's wastewater (sewer) rates will go into effect. Unfortunately, the City was left with few options in our efforts to comply with unprecedented municipal sewer system requirements mandated by the federal Clean Water Act and the Iowa Department of Natural Resources (DNR). This letter explains the reason for the rate increase and provides the new sewer rate structure.

Why Is This Increase Happening?

The most immediate issue involves Knoxville’s sanitary sewer overflow, a condition caused by rainwater making its way into our sanitary sewer collection pipes, resulting in backups in basements or overflows from manholes. In these situations, the City has no choice but to utilize pumps to lower water levels and minimize backups. This water then flows into the storm water system and into the streams around Knoxville.

To address these issues, in 2001 Knoxville undertook an aggressive program for Inflow and Infiltration (I & I) mitigation This program, scheduled to be financed internally from user fees, was projected to be completed in about 30 years. However, in 2007, the Iowa DNR notified the City that our I & I program was not fast enough and now required a solution by 2010.

The only way Knoxville is able to comply with Iowa DNR requirements this quickly is to install a relief system of sanitary sewer pipes. We have started these projects which are now scheduled to be completed in 2009 and 2010 at a cost of approximately $8.5 million. To fund the new infrastructure, the City recently sold $5.3 million in revenue bonds to aid in the cost of the first phase, and expects further assistance from another $3 million in State Revolving Fund loans scheduled for next year. The sewer rate increase explained in this letter is calculated to cover the debt service costs for these and other related sewer improvement projects.

We agree the problem of sewer backups and overflows is a serious matter and requires attention, however we also believe the solution being forced upon us is both expensive and inadequate. Greater capacity means more water flows more quickly to our Wastewater Treatment plant, which will require substantial upgrades to both our detention (lagoon) and treatment capabilities. As a result, we are currently undergoing an engineering analysis of this capacity. We also anticipate that the Iowa DNR will implement additional water treatment standards in the future adding yet more expense for communities already struggling with tight budgets.

As a result, we plan to work with the Iowa League of Cities and Iowa lawmakers during the upcoming legislative session to seek assistance in funding these mandates, or at the very least to allow more realistic system enhancements and timeframes.

How Will This Increase Affect You?

Currently, the average household in Knoxville is paying about $47 per month (averaging 4,000 gallons per month) for combined water/sewer fees. Under the pending rate increase, this monthly cost will rise to about $56 per month or an average increase of $9.00. If your usage is higher or lower, your costs will adjust accordingly.

Here’s a breakdown of monthly base and user charges:

Current Pending

Water Base Fee $7.00* $7.00*

Water Use Fee $3.50 per 1,000 gal $3.50 per 1,000 gal

Sewer Base Fee $14.87 $18.89

Sewer Use Fee $4.52 per 1,000 gal $5.82 per 1,000 gal

(*includes first 2,000 gallons used)

The City's sanitary sewer operations are entirely supported by user fees as no property tax or other revenues are utilized. There are currently no State or Federal grant programs available for capital projects or operations in our sanitary sewer utility. Accordingly, sewer rates and charges must be established at a level to cover operations, maintenance, improvements and upgrades to the City’s collection system and Wastewater Treatment Plant.

What Can You Do?

We know this will be an uncomfortable and unpopular adjustment not only in our community, but it is also impacting many other cities throughout Iowa with aging sewer infrastructure. We will inform you of any developments that may occur as we seek more solutions to compliance with mandates established by the Iowa DNR. We encourage your participation as well in notifying your legislators of concerns you may have. While this is a difficult period for Knoxville's sewer infrastructure, it's still important to remember that together we are investing in a critical part of our community's future.

We appreciate your continued support and wish you Happy Holidays.

Dick Schrad

Knoxville City Manager