UAJA authorizes interim agreement with State College borough amid ongoing rate dispute

An interim agreement between the State College borough and the University Area Joint Authority may be reached in October as the two entities continue mediation in a lawsuit over UAJA’s rates.

During UAJA’s meeting Wednesday, the municipal authority that provides wastewater treatment to much of State College and the Centre Region voted to authorize its executive director to sign an interim agreement and submit it to the borough for their response and action.

Cory Miller, UAJA’s executive director, outlined the interim agreement Wednesday, which states they will continue to work with the borough through mediation to reach a final agreement on what the rate should be, among other items. With the interim agreement, the borough would pay nearly $2.6 million — the balance UAJA said the borough owes, not including penalties and fees.

“The penalties and fees would stay, but we would not be collecting those at this point, we will be reserving our position on the penalties and fees for the final resolution,” Miller said.

Additionally, the borough would continue to pay what they previously paid under the agreement that expired in 2020 at least until the end of the year.

“This agreement is set to expire on Jan. 1, 2025 so it sets forward a pretty aggressive schedule. There needs to be progress made in order for both parties to agree to continue working toward agreement. So, I think it’s a reasonable amount of time, if both parties are willing to put forth some effort and stay on schedule, I think it can be done,” Miller said.

In October 2022 UAJA voted to take legal action against the State College Borough, claiming it had been withholding partial payments and owed the authority more than $400,000.

Under an agreement between UAJA and the borough, which expired in September 2020, the borough paid their rates based on meter readings. After the authority conducted a rate study, it adopted new, higher rates in October 2021, and again in early 2022 with some changes. The borough had concerns with UAJA’s rate determination and has been paying UAJA according to the old agreement, UAJA leadership previously said. The borough only paid according to how UAJA billed them prior to January 2022.

The borough filed its own lawsuit against UAJA in December 2022 claiming the authority overcharged them by millions of dollars and improperly imposed new rates, StateCollege.com reported . Since then the two entities have been engaged in mediation, WJAC reported .

UAJA said they expect the borough to discuss and take potential action on the agreement next month. The State College borough council has two regular meetings scheduled (Oct. 7 and Oct. 21), as well as a work session on Oct. 14.

Rate increases could be implemented

As UAJA works on its 2025 budget, it needs to reflect “realistic revenues,” Miller said. Because the interim agreement states the borough will pay at the old rate, UAJA can’t count what it is billing them as realistic revenue.

During a Sept. 18 UAJA meeting, Miller explained they need to comply with its bond indenture and will have to take actions that will not reduce its bond rating or increase the cost of its bond insurance.

Because the borough isn’t paying at the current rate and they’re unsure if negotiations will be resolved before UAJA is done making the budget, they need to assume a rate increase will be needed to cover the amount that the borough isn’t paying.

“The preliminary indications are that in order to meet that requirement, we will need to increase the rates for all of the full UAJA customers, everybody except the borough, by $8 per quarter (per EDU) based on the 2024 budget. We don’t know what the 2025 budget is going to look like at this point. We’re going to do everything we can to hold the line, but there certainly is inflation. We will do what we can to overcome that,” Miller said.

They expect to notify customers of the rate increase in early October and will go into effect Jan. 1, 2025.

Because the timeline for the interim agreement is “very aggressive,” Miller said if things are resolved between now and January, rate increases may not be needed.