Cape Coral could default on its bonds if a utility rate increase is not approved by city council members, Financial Services Director Mark Mason said Wednesday.
During a press conference to discuss the release of a new utility rate study, Mason said that without the proposed increase in the study, the city’s bond rating could be reduced to “junk” status, which could lead to the city defaulting on its bonds.
“Our advice to the city council is if we don’t do this (raise the rates), the potential is that our bonds are downgraded to junk status and we default on our bonds,” he said.
Under the study, conducted by Burton & Associates, combined water, sewer and irrigation bills will rise from the current average of $81.97 to $103.70 per month in fiscal year 2010. The bills would rise to $157.79 by 2014, a 92.5 percent increase from the current average.
The projected increases in utility rates are the result of the global credit crunch and the city council’s decision in February to stop the utility expansion for potable water in the area north of Pine Island Road.
The council reversed its decision to approve the UEP’s expansion in the north Cape, which would have brought 57,000 more units into the utility system.
Combined with council’s decision to halt the UEP in the Southwest 6/7 section, preventing 6,200 homeowners from hooking into the system, the lack of additional utility customers added to the amount of the rate increase.
A rate plan adopted in 2006 counted on 5,250 units being added each year to the system.