WATERLOO -- The Waterloo Water Works is staring at a long list of expensive capital projects and system improvements.

And a long, arid summer could provide a huge boost in covering those costs.

The municipal utility's board of trustees voted unanimously Wednesday to approve a 2009 budget, which is driven largely by a projected $3.4 million in capital improvements, ranging from refurbishing the Linden Avenue water tower to extending water main on Shaulis Road to replacing aging water lines when city streets are reconstructed.

While a previously adopted 20 percent rate hike for 2009 is helping cover some of the costs, declining water sales in recent years have prevented the Water Works from reaching its full revenue potential.

"If we had a hot, dry summer like we did back in 2003 it could make all the difference," said Water Works general manager Dennis Clark. "It could almost pay for our water tower (rehabilitation)."

Wet and cool summers and greater use of low-flow plumbing fixtures and toilets have led Water Works customers to pay for less water. Clark fears the announced cut in production at Eagle Ottawa tannery -- a $74,000 annual account -- could cut further into revenues.

But low water pumpage doesn't equate to a large cut in expenses for the utility looking to replace its aging system.

"It's an aggressive capital improvements schedule," Clark said. "There's a lot of items."

The budget anticipates using a large chunk of its cash reserves, new water revenues and $655,000 in remaining bond funds to cover those capital expenses. The move would reduce the Water Works' cash reserves from $2.6 million to about $850,000.

On the operating site, the budget includes 4 percent pay increases for non-bargaining employees, equal to raises awarded to city of Waterloo employees this year. The next cost of the union contract -- a combination of wages and health insurance benefits -- will be up 3 percent, based on the labor agreement.

In other business, the board voted unanimously to approve a three-year agreement for Hogan-Hansen, a Waterloo accounting firm, to handle the annual financial audits for 2008 through 2010. The cost is $12,000 in the first year, $12,500 in 2009 and $13,000 for 2010.

Hogan-Hansen submitted the only bid.

Contact Tim Jamison at (319) 291-1577 or tim.jamison@wcfcourier.com.