With major water and sewer projects awaiting the city of Bismarck, utilities director Keith Demke is formulating a finance plan that might not dig into taxpayers' pocketbooks as deeply as first thought.

Demke explained to city commissioners Tuesday that normally the city allows its project reserves to build up before funding large capital projects, a sort of pay-as-you-go approach.

"That works most of the time, but when we get a bunch of big projects near the horizon, it's nearly impossible to maintain reasonable rate increases," Demke said. "It's like buying a house; as much as we would like to pay cash, we cannot."

But the city will soon be taking on some major projects, including a new water intake on the Missouri River, a new lime sludge plant and the updating of its aging sewage treatment plant. Demke said that unless a different approach to project financing is developed, Bismarck residents are facing as much as a 10-percent increase in their water and sewer utility rates.

After a financial analysis, Demke and city staff have come up with a proposal combining rate increases with bonding. The proposal uses the revenue bonding to fund the large capital improvements. The plans calls for a $20 million bond for the water utility and $10 million for sanitary sewer.

"What we're recommending is doing some revenue bonding for some large, dollar-value projects," Demke explained. "These projects are long-term assets, and rather than trying to generate enough funds in a five-year period for the facilities, we want to spread the cost out to the future."

Without the revenue bonding, according to Demke, residents can expect an annual 10-percent increase in rates, but with the revenue bonding, annual increases will be in the 2-percent to 4-percent range.

"I think that's pretty acceptable, given the rate of inflation,"Demke said. "It looks like a pretty viable solution."

For 2006, the utility department is proposing a 4-percent increase in water rates and 2-percent for sanitary sewer.

"Those who don't use a lot of water won't see as much as an increase as those who use a lot,"Demke said. "I think we've been able to correlate the increases with the fixed-income residents, which is a growing part of our consumer base."

Another finance project Demke is working on, similar to the sewer surcharge, is creating a reserve to defray some of the costs customers pay if something goes wrong with their water service line.

Property owners are solely responsible for the water line leading from the curbstop to their structure. If the curbstop or line fails, the property owner usually pays for the fix, quite often amounting to an out-of-pocket expense of between $2,000 and $5,000.

"Most people are not aware that they own the line," Demke said. "We're looking at a concept where we charge everybody a little bit to help defray those costs. I plan on bringing a proposal back to you (city commission) before the end of the year."

Commissioner Bryce Hill aired his concerns that continued raising of water rates will impact yard beautification as residents cut back on watering of lawns and other plants.

"They're going to find it harder and harder to spend money on watering their yard,"Hill said. "I hope we don't get to the point where they turn it off all together."

Commissioner Connie Sprynczynatyk said Hill's concern is legitimate and Bismarck has taken pride in being a "cleaner and greener" community.

"But I think the financing plan actually helps us in that regard," Sprynczynatyk said. "No one likes to see increaes, but these are user fees and those that use it pay for it. If we don't find an alternative funding mechanism, the jump in rates is going to be big."

Mayor John Warford said that projects such as the intake and lime sludge treatment plant will ensure the city's supply and water quality for years to come.

The recent drought has taken its toll on Missouri River flows and communities have found their intakes high and dry. The proposed intake for Bismarck will actually take its water from under the river.

"This plan is really for your information and will be part of the funding ordinance we will consider in September,"Commissioner Sandi Tabor said. "The issue is finding a balance and it's reasonable to assess what we can afford to bond."

(Reach Gordon Weixel at 701-250-8255 or gordon.weixel@;bismarcktribune.com)