Elizabethton’s City Council approved on first reading the 2015-2016 fiscal year budget during its meeting Thursday night.

The budget contains a 2 cent property tax decrease and a 9.65 percent utility rate increase for city customers. The final budget approval will be up for a vote in the June Council meeting.

Mayor Curt Alexander proposed reducing the property tax after the city discovered it would be receiving an additional $600,000 from an in lieu of tax payment from the Elizabethton Electric Department. If approved on second reading, the property tax would decrease from $1.82 per $100 of assessed value to $1.80 per $100.

“We have the opportunity before us to allocate this extra revenue,”Alexander said. “Should we give a break to the tax payers? We have been hammering them with rate increases and we always said we could lower the taxes if we get more money.”

The motion to reduce the property tax rate was unanimously approved.

Council also included water and sewer rate increases to help fund the cost of infrastructure improvements in the city while boosting the dropping revenues for the utility.

The base water rates would increase by $2.50 during the 2015-2016 fiscal year and $1.50 in the 2016-2017 year. The base sewer rate would increase by $2 in 2015-2016 and $1 in 2016-2017.

The water usage rate would still increase by 4 percent annually from 2015 to 2021. The sewer usage rate would increase 4 percent from 2016 to 2019 and 2 percent from 2019-2021.

“This is our best effort at finding out how we are going to do this,” Coetzee said. “We listened to what you said last time and we are trying to find a way to make this work. We pushed everything one year into the future. It lessens the impact but we still get to where we were before.”

For the current fiscal year, the city water and sewer is projected to have an $823,559 shortfall in revenue because the water and sewer rates have been “under-collected,” Coetzee said.

There were multiple reasons for the under collection, Coetzee said. One was reduced use from customers after the previous rate increases along with natural decreased use because of the seasons. The biggest impact came from more water efficient fixtures and appliances in homes.

Council hesitated to increase the utility rates, which would represent a total combined increase of around 9.65 percent on an average water/sewer bill.

“I would like to leave the rates as they are,” Sam Shipley said. “There are so many people who can’t afford another increase.”

Alexander stated he did not have faith in the reports that developed the new rates because they had been so inaccurate before.

“We have raised rates every year I have been on council,” Alexander said. “We could raise rates to eternity but throwing money at this is not going to fix the problem.”

Utilities Director Johann Coetzee cautioned council that not increasing rates would lead to a further deficit for the city and additional deterioration of the water and sewer system.

“Every month we don’t address this, we fall behind,” he said. “We will hit the ground somewhere. We need to slow the decay and turn it around so that we can keep up and make improvements.”

City Manager Jerome Kitchens gave his recommendation to council that they accept the rate changes presented at the last budget workshop, which were the ones in the budget amendment up for discussion.

“My recommendation is that we take these numbers, as bad as they are, and use them to fund the necessary improvements that need to be made,” Kitchens said.

The amendment for the utility rate changes passed on a 4-3 vote, with Richard Tester, Jeff Treadway, Bill Carter and Bob Cable voting in favor. Wes Frazier, Shipley and Alexander voted against.