Ohio municipalities that charge outside customers more for water and sewer services -- including Columbus -- could lose state funding under a bill proposed in the Ohio House of Representatives.

That proposal, House Bill 602, is sponsored by state Rep. Mike Duffey (R-Worthington) in the House finance committee.

It is similar to an amendment Duffey proposed and lawmakers adopted in the state budget last summer.

The biggest difference: It would affect any city that charges different rates inside and outside its borders, not just Columbus.

Gov. John Kasich vetoed that amendment amid protests from Columbus officials, who said forcing the city to equalize rates would threaten regional economic development, including major projects already under consideration.

Under HB 602, a municipality that charges higher water and sewer rates to property outside its limits would face a 20 percent reduction in local government funding and would be ineligible for state assistance for water and sewer development.

Municipalities could lose their local government funding from the state altogether if they require annexation of outside territory or require direct payments unrelated to service costs as a condition of providing water and sewer services.

Municipalities could charge higher rates to outside customers if they show that those rates are linked to "reasonable service costs," Duffey said.

"If it costs more to serve somebody outside, you can include that in your rate charge. As long as you apply that equally and not in a discriminatory fashion, you wouldn't run afoul," he said.

Lawmakers likely will not act on the bill until at least September, when they return from summer recess.

Columbus is concerned about how the term "reasonable service costs" would be interpreted, Richard Westerfield, the city's water-division administrator, said during a June 26 hearing on the bill.

"The concerns remain (about) the impact this legislation could have on the city's ability to partner with communities for future economic growth," said Councilman Michael Stinziano, who oversees Columbus City Council's public-utilities committee.

Columbus manages the water and sewer systems for much of Franklin County, with most suburbs and the county buying their water from the city. The city has three water plants and about 2,500 miles of water lines to serve 22 communities.

The average Columbus household will pay about $464 for water service in 2018, about 30 percent less than the $603 expected for the average household that the city serves outside its borders. Sanitary-sewer service costs about 4 percent more: $599 for the average Columbus household versus $627 for the average outside household.

Columbus officials have said the city charges higher rates to suburban customers because it costs more to provide water and sewer services there, and ratepayers in the city are bearing more of the risk for capital projects.

When Columbus voters approve bond packages, they agree to let the city raise property taxes on its residents if rates do not meet the costs for capital projects. The city cannot charge outside customers property taxes.

The city has never had to raise property taxes because rates have been sufficient to repay bonds. Without charging outside customers more, city officials have said they would have little incentive to shoulder that risk for outside projects.

"What we're charging them is cost of service," Westerfield said.

"We're not charging to make profit or anything else."

rrouan@dispatch.com

@RickRouan