Hillsborough leaders are weighing possible rate changes for water and sewer customers as the town faces higher operating costs, partially due to flooding from Tropical Storm Chantal, according to a presentation given to the Board of Commissioners last month. 

Chantal dropped an estimated 10.5 inches of rain in Hillsborough last summer, knocking out the town's river pump station and damaging other water infrastructure. 

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Local government consulting company Raftelis is recommending the Town of Hillsborough increase water and sewer rates by 7.5% over the next three fiscal years to maintain the town's ability to cover debt obligations.

The firm noted the town's maintenance costs are about 20% higher than last fiscal year.

"It's certainly an industry-wide trend in the water and sewer industry. The rate of inflation has been relatively high for water and sewer utilities. We're facing some pretty high capital costs," Raftelis representative Vanessa Bryant said during a budget work session on Feb. 23.

The firm also recommended options for a new rate structure that would charge volume of use and include a flat fee for customer service and billing costs, according to town officials. 

Hillsborough officials caution that the potential rate increases are merely recommendations and that it is too early in the budget process to tell what the rates will be next fiscal year, noting that costs for some Chantal-related damages are still coming in. 

"We are still very much going through that process. Estimates are coming in daily and it's very much a dynamic situation at this point," Hillsborough Budget Director Emily Bradford said. "As part of our process, we're always looking to see which expenses can be deferred, delayed or reduced to make potential rate increases more manageable."

It comes as officials in the Town of Hillsborough and other North Carolina municipalities say they are waiting for millions in reimbursements from the federal government to pay for disaster mitigation projects, many of which Hillsborough leaders say would move crucial water infrastructure out of flood hazard areas.

About a month before Chantal hit, Hillsborough leaders approved water and sewer rate increases by 7.5% as part of a budget plan to cover costs. At the time, Hillsborough officials said a budget deficit remained despite the increases.

During the Feb. 23 meeting, town officials asked Raftelis representatives to come back with additional options and more information on the system's fixed costs beyond service and billing.

Town officials say the budget and associated rate changes will come into better focus in May.