Why your sewer bill may be going up amid UAJA’s rate dispute with State College borough
The University Area Joint Authority, which provides wastewater treatment to much of State College and the Centre Region, alerted customers of future rate increases amid its ongoing dispute with the State College borough.
Rates will increase for customers in College, Ferguson, Harris and Patton townships beginning in January to make up for the “continued shortfall in payments by State College Borough,” Cory Miller, UAJA’s executive director, wrote in a letter to customers. Customers will see their rates increase by $8, bringing rates to $121 per EDU per quarter; customers will receive their first quarter bills in early April, Miller wrote.
Miller wrote they’re also increasing rates for the borough but it won’t have an immediate financial impact on UAJA because the borough is paying based on a previous rate.
“UAJA can expect the Borough to pay only 64 percent of the billed amount,” Miller wrote.
UAJA discussed the rate increase during its board meeting in September, noting an increase is needed to show UAJA has sufficient revenue to cover its debt service payments, expenses, etc. But because the borough is underpaying, the budget can only show the amount it’s expected to receive based on what it receives from the borough.
“Because UAJA relies on revenue bonds to fund major capital projects, the annual budgeting process must pass tests included in the bond indenture, which are rules designed to ensure the financial stability of UAJA and protect the interests of the bond holders. One of those tests is the debt service coverage ratio. The UAJA budget must show that sufficient revenues will be generated to cover the debt service payments, operating expenses, and a small reserve,” Miller’s letter stated. “Since the Borough will continue to underpay, the UAJA budget can only show the amount that is expected from the Borough based on underpayment. To make up for that underpayment, revenues from other sources must be increased to reflect the difference.”
The letter states that if the borough begins paying the billed amount with the first quarter bill in 2025, or based on an adjusted rate UAJA agreed with, the rates for other customers can be adjusted.
UAJA and the borough did recently agree to an interim agreement which states the two will continue to work together through mediation to reach a final agreement on what the rate should be, among other items. With the interim agreement, the borough will pay nearly $2.6 million — the balance UAJA said the borough owes, not including penalties and fees.
If the negotiations are unsuccessful, the borough’s litigation challenging the rate will continue. If the rates are found to be unreasonable, then UAJA will have to reimburse the borough, Tom Fountaine, borough manager, told the borough council on Monday. There was no discussion among the council members about the agreement.
The interim agreement will expire Jan. 1, 2025.
In October 2022 UAJA voted to take legal action against the State College Borough, claiming it had been withholding partial payments and owed the authority more than $400,000. Under an agreement between UAJA and the borough, which expired in September 2020, the borough paid their rates based on meter readings. After the authority conducted a rate study, it adopted new, higher rates in October 2021, and again in early 2022 with some changes. The borough had concerns with UAJA’s rate determination and has been paying UAJA according to the old agreement, UAJA leadership previously said.
The borough only paid according to how UAJA billed them prior to January 2022.
The borough filed its own lawsuit against UAJA claiming the authority overcharged them by millions of dollars and improperly imposed new rates; since then the two entities have been engaged in mediation.
