Dwindling payments from Occidental Chemical Corp. for a toxic waste settlement have the Niagara Falls Water Board grappling with how to make up the lost revenue during the next five years.
Water Board members have started to examine budget projections in an attempt to assess what impact the diminishing payment schedule will have on water and sewer budgets.
Annual payments from Occidental Chemical that spanned a 20-year agreement are scheduled to drop from $1.9 million this year to zero in 2014.
"We have to close the gap of the loss of this revenue," said Nicholas Marchelos, vice chairman of the Niagara Falls Water Board.
Members of the board said they are examining all solutions -- including the potential for rate increases -- as they develop a five-year plan.
Board members said they also are looking at other ways to increase revenue and trim costs.
"We're just trying to be proactive on this," said Michael McNally, Water Board chairman. "Everything is on the table right now, and honestly we don't have a number yet. We want to make sure we have all the correct information, because it's very difficult to ask anyone to pay an increase."
Occidental Chemical struck a deal with the City of Niagara Falls in the early '90s to help pay for a $69 million water treatment plant on Buffalo Avenue. The city's previous plant was contaminated by an Occidental toxic waste dump, known as the "S-Area."
Under the agreement, Occidental agreed to pay the city $64.9 million during a 20-year period on a sliding payment schedule. The city, which at the time controlled water and sewer operations, was responsible for paying the remaining construction costs of the new plant, as well as interest on the debt.
Annual payments from Occidental started in 1994 at $7 million and decreased over time.
Although the money is to help pay for the construction of a new water treatment plant, the annual payments are inserted directly into the Water Board's operating budget. Debt payments are also paid from that budget.
The Occidental payment makes up 7.3 percent of the revenue in the Water Board's $26 million 2011 budget.
Already faced with declining industrial water consumption, increasing expenses and long-term maintenance costs, Water Board members said the end of the Occidental payments will impact their budget.
McNally said Water Board members hope to draw up a plan that would give ratepayers "an inclination of where the rates will be between now and 2014."
The board has trimmed its work force by more than 30 positions in recent years to about 91 jobs.
Patricia Haick, who retired as Water Board director of financial services last month, said the Occidental payments never corresponded exactly to the debt schedule for the new water plant.
The city spun off control of its water and sewer systems to the independent Water Board and Water Authority in 2003, to allow debt to be refinanced.
When that happened, all debt on the water and wastewater treatment plants was merged, Haick said.
The Water Board had $103.7 million in debt at the end of 2010, Haick said. A portion of that amount was refinanced in 2005, Haick said.