The new rate, which is expected to be implemented by August, will be 75 percent of the bill for water usage.
Last May, the council approved an increase from 70 percent to 73 percent to help fund a $791,000 loan for sewer improvements.
The United States Department of Agriculture’s Rural Development division also provided the city more than $2 million for the project, which entails upgrading the wastewater treatment plant and replacing aging sewer lines.
Mayor Drew Gilbert told council members that bids for the work came in $800,000 over budget.
“We talked through a few options and went back to USDA and asked for the difference in the same grant-loan combination they gave us before,” Gilbert said.
Gilbert said USDA offered the city 72.51 percent of the difference, or $580,000, as a grant. The remaining $220,000 will be taken out as a loan.
Gilbert said that debt will be paid back exclusively with sewer receivables.
The average customer who uses 5,000 gallons of water a month will pay 83 cents more per month, according to Gilbert.
Gilbert also reminded council members that the city is under a consent decree with the Alabama Department of Environmental Management as a result of years of illegal discharges from the wastewater treatment plant, which was built in the 1970s.
“In my short tenure, what I’ve noticed with our sewer receivables is that now we’re using them to patch up the sewer system. We’re replacing pumps, having men working overtime overnight to man temporary pumps while we’re repairing other pumps and things like that,” Gilbert said.
The original debt for the project carried a 2 percent interest over 40 years.
Gilbert said his hope is that as the tax base gets stronger, the city can dedicate more of the sewer receivables to the loan and pay it off in a shorter amount of time.
“Where we are now is we just keep putting band-aids on that thing, and it’s more costly than this will be in the long run,” Gilbert said.
In June 2009, the previous administration approved the city’s first sewer rate increase in more than a decade from 58 percent to 70 percent.