NEWS INFORMATION FROM

THE OFFICE OF MAYOR STEPHEN R. REED
City of Harrisburg
King City Government Center
Harrisburg, PA 17101-1678
Telephone: 255.3040

FOR IMMEDIATE USE
31 December 2002

HIGHER COSTS, LOWER INVESTMENT EARNINGS FORCE CITY WATER RATE INCREASE FOR 2003; AVERAGE BILL TO GO UP $2.79 A MONTH

Harrisburg, PA — Rising liability and employee costs, coupled with lower interest rate earnings over the past year, will cause a 12% increase in rates charged to customers of the Harrisburg Water System, Harrisburg Authority Board Chairman Trent Hargrove today reported. The rate increase goes into effect on January 1st and affects both residential and commercial customers served by the city water system.

Hargrove said the average household of four persons will see a $2.79 increase in their monthly bill, or about $33.51 in increased costs over a year’s time. Even with the increase however, Harrisburg water system customers will still enjoy one of the lowest water rates in the midstate. Rates were last raised in 1996, but were then decreased in 1999 to reflect higher interest earnings on investments achieved by the Authority.

Even with the increase, the Harrisburg system will be the 19th lowest out of 30 municipalities in Dauphin County that are served by water systems.

Hargrove noted that the new rates reflect an array of factors that have caused costs to escalate in recent years, including additional security costs in the wake of 9/11; substantially increased insurance and health benefit costs; normal inflation for salaries and other employee costs; lowered interest earnings on Authority investments; and substantially reduced revenues stemming from decreases in consumption caused by extended periods of drought.

Hargrove said that revenues from the sale of water have decreased significantly over the past year, resulting in the loss of nearly $1 million in anticipated revenues, along with a nearly $300,000 decrease in interest earnings caused by lowered market interest rates. Higher costs for materials, equipment, labor and insurance are also impacting water system operations, as well as normal inflationary and regulatory cost increases.

“Rates for the Harrisburg Water System have traditionally been among the lowest charged in the midstate” said Hargrove, “and even with this new increase, Harrisburg customers will still pay significantly less than many surrounding municipalities. The average annual cost for city water services, currently at $279 per year, will now rise to approximately $313, well below the rates charged to customers in more than 40 other midstate communities.”

A comparison of water rates conducted by The Patriot News last year, revealed that water customers in many West Shore communities pay an average of more than $463 per year for service, while Harrisburg has only charged its residents and those customers based in the Borough of Penbrook and parts of Susquehanna and Lower Paxton Townships an average of $279 per year.

“We have been able to avoid any cost increases for nearly five years, and in fact even decreased rates in 1999 to reflect the higher revenues received as a result of well-performing investments,” said Hargrove. “Unfortunately, the pendulum of national economic fortune has now swung in the opposite direction.”

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