Council can’t agree on rates

Sean C. Morgan

Disagreement over whether to eliminate a subsidy for water and sewer service and how much to charge for future replacement of the water and sewer system kept the City Council from reaching a decision last week about a rate increase and to set a work session to further discuss the rate structure.

During the council’s regular meeting on July 26, Councilor Jeff Goodwin advocated a rate structure that reduced a subsidy the city has included in the water and sewer rates residents pay for nearly two decades, and he advocated charging the full amount necessary for replacing pipes and equipment as it ages, a prospect that would have increased bills for those who use 400 cubic feet of water per month by more than $24 per month.

The 400-cubic-foot subsidy is automatically included each month for all residential water and sewer users. Those using 400 cubic feet or less pay only the base charge for the utilities. The council incorporated that feature into the rate structure in response to protests from the public and concerns that residents on low and fixed incomes could not afford rate increases at the time.

The cost of treating, distributing and collecting that water is collected through the “commodity charge,” the amount charged per 100 cubic feet of use above 400 cubic feet, which means those who use more than 400 cubic feet cover the cost of producing the basic 400 cubic feet provided to all residential accounts.

Eliminating the subsidy completely and collecting all of the revenue necessary to operate the utilities plus future replacement would increase monthly bills for those using 400 cubic feet by more than $40.

The increase would be smaller for those who use more or less than 400 cubic feet.

Goodwin opposes this practice and wants to end it.

“As long as you don’t use any water, our system’s great for you,” he said. It subsidizes low-usage water users.

Theresa Brown, a Sweet Home area resident attending the meeting, said she didn’t think it was a bad idea to give people incentives not to use more water.

“Consider rewarding those that don’t use a lot of water,” she said.

Water is inexpensive for the city to produce, Goodwin said, and he would like to see a city where the grass is green, people wash their cars and children play in sprinklers.

Eliminating the subsidy and collecting enough money to pay for future replacements in the system will be painful, Goodwin said.

Even without removing the subsidy, the cost of collecting for future replacement will drive rates up by more than $14 per month at 400 cubic feet of usage.

Collecting nothing for future replacement would increase rates at 400 cubic feet would increase the monthly bill by just 42 cents. At 500 cubic feet of usage and above, monthly bills would actually fall.

The responsible thing to do is to collect 100 percent of what’s necessary to pay for future replacement, called “depreciation,” Goodwin said. “It’s going to be painful. It has to be collected sooner or later.”

“You can’t undo the subsidy without seeing a rapid increase for those who have benefited,” he added. The subsidy operates under an assumption that low-consumption water users are poor. He doesn’t see wealth and water usage as connected.

He moved to collect 100 percent of depreciation and reduce the subsidy to 300 cubic feet, but the council rejected it 4-3.

Voting with Goodwin were James Goble, who provided the second to his motion, and Dave Trask.

Mayor Jim Gourley, Ryan Underwood, Greg Mahler and Diane Gerson voted no.

The majority of the community uses 400 to 600 cubic feet of water per month, Underwood said. You’re proposing to raise that bill by $24.62. The majority of the families cannot afford $24.”

That kind of increase could take food off their tables, he said.

Goodwin then proposed collecting just half of the deprecation, the amount the city reserves to use for future replacement, but his motion died for lack of a second. That would have been an increase of $17.88 per month for water users who consume 400 cubic feet per month.

Concerned about potential large increases, Underwood said he would like the council to return in a work session to discuss water rates further.

The council last adjusted rates for the 2014-15 fiscal year, which ended on June 30, 2015.

Public Works Director Mike Adams urged the council to approve some kind of adjustment, enough to pay for the operation of the utilities at least, and then the council could go forward discussing how much to charge to cover depreciation and the subsidy.

Underwood wanted to take a look at the issues one more time, he said. Something as significant as this should be discussed in depth.

Goodwin said he favors a work session too because the council is only talking about depreciation, replacement of the current system, and not about the expenses the city faces in upgrades that must be made in the Wastewater Treatment Plant.

The council agreed to meet in a work session at 6 p.m. on Aug. 22.