Natural gas customers in the City of Union could see lower bills despite a proposed rate increase, finance director Walker Gallman says.

Union City Council voted Monday to approve increases in the residential, commercial and industrial base and facilities natural gas rates. The increases are projected to generate an additional $750,000 in revenue to help balance the proposed 2009-2010 budget. The increase, the city’s first since 2004, includes:

• Raising the residential base rate from 53 cents per hundred cubic feet to 63 cents and the facilities rate from $8 to $9.40.

• Raising the small commercial base rate from 49 cents per hundred cubic feet to 58 cents and the facilities rate from $10 to $11.80.

• Raising the large commercial rate from 47 cents per hundred cubic feet to 56 cents and the facilities rate from $14.25 to $16.70.

• Raising the industrial base rate from 80 cents a decatherm to $1.10. The city does not charge industries a facilities rate.

Gallman said the average residential customer uses 45 units of natural gas a month. With the base rate increase, the average residential user will pay an additional $5.90 a month.

Even with the rate increases, most customers could see a decrease in their natural gas bills because of the decline in the cost of natural gas. This was caused by the downturn in the economy, which reduced demand. Gallman said this should continue for the foreseeable future barring a natural or man-made disaster which causes the price of natural gas to spike.

The decline in the price of natural gas has also caused a decrease in the city’s proposed 2009-2010 budget which stands at $42,537,720 or nearly $8 million less than the current budget. This has had a negative impact on revenue causing a projected deficit which the city is working to close through a combination of budget cuts, rate increases and surplus funds.

Earlier this month, council approved a 10 percent increase in sewer rates which is projected to generate $150,000 in additional revenue. A residential customer in the city who generates 4,500 gallons of sewage a month will see their monthly bill increase by $2.97 a month. A residential customer outside the city will see their monthly bill increase by $4.45.

Council also directed Gallman to transfer surplus funds to cover the projected deficits in the general, utility and solid waste funds. Gallman said balancing the general fund will require $336,800 in surplus funds. He said the solid waste fund will be balanced with $130,000 in surplus funds and $149,990 in retained earnings.

Gallman said the increase in natural gas rates will reduce the projected utility fund deficit from $3.6 million to $2.75 million with further reductions achieved by delaying some capital expenditures.

Though water rates will remain the same, the tap fees will be increased from $350 to $450 for a 3/4-inch tap; $425 to $650 for a 1-inch tap; $625 to $850 for a 1 1/2-inch tap; and $2,500 to $3,000 for a 2-inch tap. The increase will allow the city to recoup the cost of installation which it has been unable to do under the existing fee schedule.

A new natural gas tap fee will be $275 for a 3/4-inch service line and $350 for a 1-inch gas service line. Currently, the city does not charge for the first 250 feet of a connection and only 50 cents a foot for each foot over 250 feet.

Unchanged is the monthly garbage collection fee ($12) and the city tax millage (74.3 mills).