by Leslie Lytle, Messenger Staff Writer

At the Nov. 18 meeting of the Sewanee Utility District board of commissioner, the board approved a 2026 budget calling for an increase of 2 percent in the base rate and usage charges for water and sewer. The rate increase will cover operating expenses, but not critical capital improvement needs. “The proposed net income will be insufficient to fund all of the proposed Capital Improvement Plan for the coming year,” said SUD Manager Ben Beavers. “A decision will have to be made to borrow funds to close the gap, use current District cash reserves, or to modify and/or delay some of the proposed projects until a later date.” Beavers provided an overview of the cost increases driving the rate increase and the priority capital improvement demands confronting the utility.

The expense budget reflects an 8 percent increase in health care costs and a 2.8 percent cost of living increase for SUD employees, matching the 2026 Social Security cost of living increase. Also on the operating expense side, the cost of lab chemicals used for testing samples has increased, Beavers noted.

After operating expenses are met will leave SUD with $17,210 to pay for necessary capital improvements estimated to cost $739,637. The list of critical capital improvements includes SUD’s share of the cost for American Recovery Plan Act (ARPA) projects currently underway; painting the farm water tank; purchase of a new service truck; and rehabilitation of the Bob Stewman Road pump station. “Painting the farm tanks is the biggest chunk of the capital improvements needed,” Beavers said, cost $450,000. “Most everything else can be put off one year, but the farm tank painting shouldn’t be.” Beavers explained delaying painting the tank could result in rust with costly repairs adding to the expense. Beavers is researching grants to cover the cost of painting the tank.

Beavers said the capital improvements could be paid for out of cash reserves, but cautioned that depreciation rules would require SUD to show the replacement cost of ARPA projects as expenses beginning in 2027. Asked about the grinder pump fee SUD began charging grinder pump customers in January of 2025, Beavers said the revenue from the fee only covered 60 percent of grinder-pump repair and replacement costs this past year.

Except for the base rate and usage charge, no other SUD fees will increase in 2026. In June of 2025, SUD contracted for the firm RateStudies to analyze the utilities growth, revenue, and the amount of cash needed for operation, maintenance, debt service, funding of capital improvements, and maintaining a reasonable amount for cash reserves. Beavers will provide RateStudies with the 2026 budget data.

In other business, the board approved a request for water service from Merchant Management Group, Inc., for 22 lots in the Deep Woods development, with a projected peak demand of 6,615 gallons per day. Commissioner Clay Yeatman asked if SUD was required to provide water service. Beavers replied, “Yes, unless we can prove we don’t have the water available.” The infrastructure cost falls entirely to the developer. After one-year warranty period, SUD assumes ownership of the new infrastructure.

In the past few years, SUD received applications for and granted water service to a project for University apartments and for a development in the vicinity of St. Andrew’s-Sewanee School. “Those applications are no longer valid,” Beavers said. “One year is the policy on availability.” Board President Charlie Smith asked what the demands would be on SUD’s water supply if all the stalled projects again requested water service. “Running out of water is still roughly 1,000 units away,” Beavers said. “Last time we had a study done it showed 1,200 units and I don’t think we’ve added 200 since.”

The commissioner seats currently held by Johnny Hughes and Donnie McBee will come open for election in January. McBee will seek reelection. Hughes will not. SUD customers Ronnie Hoosier and Phil White have expressed an interest in being added to the slate of candidates. In December, the board will nominate an official slate. Voting will begin the first business day of 2026 at the SUD office during regular business hours.