Council puts rate hike plans on hold

Sean C. Morgan

The Sweet Home City Council will hold off on water and sewer rate increases this year until it conducts a study of its rate structure, councilors decided Tuesday, June 30, in a work session to consider rate increases.

Councilor Jeff Goodwin has objected to the current structure and the amount of the rates. Public Works Director Mike Adams had offered three options that would have raised every user’s water and sewer bills by up to $10.19 per month. Two options would have increased bills by lower amounts at various consumpion levels.

At a previous work session, Goodwin had proposed lower rates at higher levels of consumption, while those using 500 cubic feet or less would face higher bills, with the highest increase, nearly $9, going to those who use 400 cubic feet.

Those using more than 500 cubic feet would have seen decreases in their bills under his proposal. Goodwin told the council that the decrease in the commodity charge, the rate per 100 cubic feet, would encourage users to consume more water each month and thus raise enough revenue to cover the costs of the utilities.

Goodwin said during the council’s second work session to discuss rates that he didn’t believe he was going to convince the council that water and sewer consumption would increase, but he said that the city needs to start imposing the commodity charge on all of the water consumed by residents.

Currently, the city does not charge for the first 400 cubic feet of water and sewer used. Up to 400 cubic feet, the monthly bill for water and sewer is $54.60, the combined “base” charges for the utilities.

The city charges $7.48 per 100 cubic feet of water and $6.45 per 100 cubic feet for sewer above 400 cubic feet. Beginning in 2000, the city implemented this program and increased the commodity charge to offset the program.

A hundred cubic feet is 748 gallons, and the average resident in Sweet Home uses about 648 cubic feet per month.

Goodwin objects to not charging for the first 400 cubic feet. That practice has driven increases in water rates, he said. Rates have gone up 42 percent in the past six years, while usage has decreased by 33 percent.

“If you sell less water, it (the spreadsheet for calculating rates) tells you to raise rates,” Goodwin said. That drives down consumption, requiring the city to increase rates again to pay for the utilities.

The increasing rates, he said, are resulting in less revenue. He called it a “death spiral.”

Usage is actually up, compared to two to three years ago, Adams said.

Ultimately, the practice punishes those who use more water, he said. They have to pay more because those using less don’t pay the commodity charge at all. At 400 cubic feet, bills look similar to other cities, but at higher levels of usage, Sweet Home is higher than most.

“If you’re using 400 cubic feet, you’re the winner in this city,” Goodwin said.

Councilor Bruce Hobbs said he was open to changing the way the city handles the first 400 cubic feet, and evening out the cost of water and sewer services. His big concern is covering the costs of the utility.

Councilor Dave Trask said he uses less than 400 cubic feet. Last year, he decided to water his lawn in July. His bill jumped up by $30.

“Once you get past 400, you pay dearly, you pay dearly for water,” Trask said.

City Manager Craig Martin said that charging for the first 400 cubic feet at a level needed to run the utility would increase monthly bills on low-level users, a group that includes low-income residents and seniors on fixed incomes. The council implemented the idea to avoid large rate increases on them.

Eliminating the practice would require even larger increases on those low-level users to pay for the utilities than Goodwin proposed, Martin said, and raising those bills by $30 or more would cause more problems than raising them by $10.

The council stopped charging for the first 400 cubic feet after residents complained that the increases would be too much for people on fixed and low incomes.

The demographics of Sweet Home have changed, said Councilor Greg Mahler. “I feel that’s why a lot of water consumption has gone down.”

Sweet Home’s rates are high because the city has incurred debt in its sewer and water systems over the past 15 years, most of it as part of an agreement with the Oregon Department of Environmental Quality, which makes up roughly a third of Sweet Home’s expenses. In addition, the rate includes “depreciation” costs, which is collected to replace infrastructure as it ages.

The council has not adopted rate recommendations that pay for all of those kinds of costs because the rate increases would have been more substantial than they have been in recent years.

That’s something other communities haven’t had to do yet, Hobbs said. “Their cost to produce their water is still less. They do not carry the debt load we carry.”

Their rates will remain lower until they have to replace infrastructure the way Sweet Home has had to, he said, noting that while he doesn’t like rate increases, he thinks the city should take care of the replacement costs now to head off future debt and rate increases, to avoid “kicking the can” down the road. Even if the city doesn’t collect all of it, it should still collect part of it.

The city needs to plan for the future, so it and the residents aren’t in this position again, Hobbs said.

Mayor Jim Gourley said that if Sweet Home were not paying off debt for repairing the sewer system and building a new water plant, its rates would be more competitive with other communities, Gourley said.

Councilors balked at Goodwin’s belief that decreasing rates would increase consumption.

“You can’t guarantee it,” Gourley said. “I don’t think, in good conscience, I could do this because we’re saying, ‘hopefully, we sell more.’”

And if the city doesn’t collect what it needs to operate the water and sewer utilities, it’ll be in deep trouble, Mahler said. He’s concerned about not raising enough revenue to pay for the utility, but he’s also concerned about raising rates too much at a time when residents are facing other increases, like a proposed increase in the cost of garbage collection service.

“If we leave the rates alone and do nothing, what’s the consequences?”

If it’s all too much, “citizens are gong to start balking at it,” he said. At the same time, he said, he hates “playing it close to the vest” with revenues and expenses.

Adams said it would use up projected carryovers, although it would meet the absolute minimum requirements for funding this year.

Adams suggested leaving wastewater rates along and increasing water rates this year, and Trask said that seemed to be the consensus among councilors. The councilors and Adams began plugging in different rate increases for water but failed to come to a consensus on how much to increase it.

Goodwin suggested hiring a consultant and studying the rate structure, like the city did in 1999 when it developed the current rate structure.

Adams said that could work if he can move ahead in sending out requests for proposals right away for the study.

“It’s running tight,” Adams said. “Can we do it? Yeah. It’s not necessarily the recommended (choice).”

“I think, as a group, we want to get this done as soon as possible,” Trask said.

It won’t be fast, but if Adams can get started right away, and if he can get results by the end of the calendar year, he said, “we’re doing pretty good.”

Goodwin said he would work up some numbers that the other councilors might like that would also meet revenue requirements and present them at the next council meeting, July 14.