Sean C. Morgan
Water and sewer rates for the average Sweet Home customer will likely rise about $12 per month, based on directions the City Council gave Public Works Director Mike Adams last week.
The council met on April 1 to review and discuss rates for fiscal 2014-15, which begins on July 1. Adams presented several options for new water and sewer rates based on whether the council wanted to capture the full cost of the utilities plus “depreciation” and a “debt ratio.”
“Depreciation” represents revenue used to repair and replace sewer and water lines as they age, while the “debt ratio,” 1.25 percent of the overall budget, represents the ability of the city to collect enough money to cover debt payments.
The “debt ratio” is something lenders look for when a city is attempting to borrow money for projects, Adams said. City officials anticipate borrowing money to pay for improvements to the Wastewater Treatment Plant to help meet Oregon Department of Environmental Quality requirements, a multimillion dollar project, with an estimate cost as high as $30 million.
The city needs to replace a water reservoir, which costs up to $3.5 million, he said.
The “debt ratio” money can be used to replace and repair lines, like “depreciation” funds.
The current utility charges for residential service include a base charge of $17.90 for water and $28 for sewer and a rate of $5.95 per hundred cubic feet for water and $7.66 per hundred cubic feet for sewer, with an additional charge of $1 for storm water drainage. The base charge includes the first 400 cubic feet of water and sewer service.
The average residential customer uses 600 cubic feet per month and receives a total bill of $74.12.
Possible increases for the average customer, based on these two factors, ranged from $6.11 to $35.60.
The council’s consensus was to build the utilities budget based on collecting the full debt ratio and no depreciation in sewer and neither debt ratio or depreciation in water, resulting in an increase of $12.09 for the average residence, a total bill of $86.21 per month.
Under this scenario the base charge for sewer service is $38.11 plus a 62-cent inflow and infiltration (I&I) charge with a rate of $6.33 per 100 cubic feet. The base charge for water is $18.80 with a rate of $7.51 per 100 cubic feet. The storm water fee remains $1.
To calculate your bill, add the two base charges, I&I charge and storm water fee together. Subtract 4 from the number of cubic feet you use in a month. Multiply that number (the billable number of hundred cubic feet) by the two rates and add them to the combined base charges.
These figures will be used to propose a budget, which must be approved by the Budget Committee this spring and adopted by the City Council before the end of June. After approving the budget, the council still must adopt the new rates before they can take effect.
Adams said the rate proposals at this point are approximations, and the final figures will likely be slightly different as he manipulates line items in the budget.
The rates are designed to recover the cost of operating the utilities, raising about $2.6 million in revenue for wastewater and $1.9 mllion for water, Adams said. The base charge captures the fixed costs. The rate, called the commodity charge, is based on expenses incurred in producing each unit of water, measured in hundred cubic feet. He calculates the rates by inputting needed revenues into a spreadsheet.
The utilities staff has two full-time vacancies right now, Adams said. Not filling those positions would save less than 70 cents per month for the average home.
“Your big cost drivers in both water and wastewater is our debt,” City Manager Craig Martin told the council. That’s what has caused the rates to increase so much since the mid-1990s.
The city has borrowed to pay for a new Water Treatment Plant two years ago and sewer line repairs and replacements over the past decade.
The city owes about $10 million for the Treatment Plant and nearly $15 million for sewer repairs. The loans are zero-percent interest or low interest and will be paid in about 18 more years.
The sewer debt has been incurred in attempts to meet DEQ requirements to reduce inflow and infiltration, which is water that leaks into the city’s sewer system through deteriorating pipes and cross connections with storm water drainage. The requirement will drive improvements at the treatment plant too. The plant can handle about 7 million gallons of water per day. The Water Treatment Plant only produces about 1 million gallons per day. At one point, during heavy rains, the plant would receive flows of up to 22 million gallons per day through its leaky sewer system, requiring the city to bypass untreated wastewater into the South Santiam River, an action that is prohibited by the DEQ.
Last year, the city did not raise rates, Adams said. This year, “doing nothing is not really an option.”
“I’m not inclined to do this huge rate increase,” said Councilor Dave Trask, but “I don’t know what the options are.”
He said he is concerned that the rates won’t go down after debts are paid off, he said. He referred to the Golden Gate Bridge, which was supposed to be paid for by a toll. Even after the debt was paid off, the toll was never removed.
Knowing the history of the utilities, Councilor Craig Fentiman said the city should look at charging the debt ratio in both utilities.
“We’re going to venture down this road a ways,” he said. “It’s not going to get prettier.”
Mayor Jim Gourley said he supported an increase capturing the debt ratio for sewer but not for water and no depreciation in either.
Councilors Scott McKee and Greg Mahler agreed, while Councilor Bruce Hobbs said that the city ought to include the debt ratio component and depreciation in both water and sewer rates, the largest increase discussed, to ensure the utilities can be maintained in the future.
Councilor Marybeth Angulo was absent.