Sean C. Morgan
The City Council has abandoned plans to hire a consultant to review its water and sewer rate structure and the methodology for calculating what rates the city should charge to pay for the utilities.
The council, in recent weeks, has been discussing whether to change water and sewer rates and how to change them. During its last work session on water and sewer rates, held June 30, the council agreed to leave the rates alone and told Public Works Director to check into hiring a consultant to review the the rate structure and methodology. The agreement did not constitute formal action.
Councilor Jeff Goodwin submitted a new rate proposal during the council’s regular meeting on July 14. Councilor Dave Trask seconded, putting the proposal on the council’s July 28 agenda. Adams told the council that a study would cost up to $35,000.
The proposal restructures the rates by decreasing the commodity charge, the price of water and sewer service per 100 cubic feet and decreasing the base charge, a fixed amount paid by every water and sewer user each month.
Ultimately, it would increase monthly bills for those using lower amounts of water and sewer service, while decreasing monthly bills for those using more.
The proposal achieves this by eliminating a feature in the current rate structure that provides the first 400 cubic feet of water and sewer service each month for just the base charge, $54.60. The city then adds a commodity charge for each additional 100 cubic feet used. The city charges $7.48 per 100 cubic feet of water and $6.45 per 100 cubic feet for sewer above 400 cubic feet.
Under the current rate, a residence that uses 400 cubic feet or less pays $54.60 per month. At 600 cubic feet, near the average monthly consumption in Sweet Home, the monthly bill is $82.46. At 1,000 cubic feet, the monthly bill is $138.18. At 1,200 cubic feet, the charge is $166.04. At 2,000 cubic feet, the charge is $277.48.
The figures may be different during the summer because the city charges for sewer based on the average use of water during the winter, a program set up to recognize that many residents water their lawns, wash cars, fill pools and use water during the summer for activities that do not put runoff through the sewer system.
Adams submitted several options for new rates to the council during two work sessions last month. They included an option increasing every bill by $10.19 by increasing the base charge. Other options included reduced commodity charges, leaving the highest increase at the lowest level, those using 400 cubic feet or less. Under those plans, those using more would see smaller rates of increase. At high enough levels, it would even decrease monthly bills.
Goodwin has argued that decreasing the commodity charge further would result in more revenue through the utilities, based on what is called the “elasticity of demand” in the study of economics. But his proposal does not particularly reflect this argument.
Goodwin plugged in numbers to achieve the minimum revenue to operate the utilities this year, although he argued in an email exchange with Adams that the lower commodity charge will encourage more use of water anyway.
For residential service, Goodwin proposes a base charge of $14.25 for water and $20 for sewer, a combined $34.25. For water, his proposal charges $4.75 per 100 cubic feet. For sewer, he proposes $5.25 per 100 cubic feet. That includes the first 400 cubic feet.
Under his proposal, 100 cubic feet would cost $44.25 per month; 400 cubic feet would cost $74.25; 600 cubic feet would cost $94.25; 1,000 cubic feet would cost $134.25; 1,200 cubic feet would cost $154.25; and 2,000 cubic feet would cost $234.25.
At the June 30 work session, Adams told the council that the minimum revenue the city needs to collect for water and sewer usage is $2.04 million in water and $2.4 million in wastewater. Those figures are based on the 2015-16 budget approved last month by the council and would use up budgeted ending fund balances, which is money carried over to the next budget year.
Goodwin said that his proposal would raise $2.088 million in water revenue and $2.607 million in sewer revenues, providing some of the planned ending fund balances.
Adams has recommended increasing rates to cover the full cost of depreciation in the water and wastewater utilities. Doing nothing or implementing Goodwin’s proposal would not do this. If revenues arrive as budgeted, the city could cover some 32 percent of the depreciation expenses for water and none for sewer. Depreciation is used to collect revenue for future replacement of the infrastructure.
Goodwin asked to add the proposal to the July 28 agenda. Councilor Dave Trask seconded, moving the proposal to that date, the council’s next regular meeting.
The council reached a consensus not to pursue a new study of the rate structure. Following the June 30 work session, Adams looked into the cost of a new study. He told the council it could cost $30,000 to $35,000.
“I’m not willing to spend $30,000 to $35,000,” said Councilor Greg Mahler. With the rate for Sweet Home Sanitation increasing and a police and library levy renewal necessary this year, he’s concerned about increasing rates.
Mahler said he doesn’t think the citizens will absorb all of it, and the council should probably leave it alone for the year.
“I’m still concerned with where lowering our rates is going to put us long term,” he said. “We’ve got a lot of debt we’re incurring in the future.”
“I guess we’ll have it out at the next meeting,” said Mayor Jim Gourley.
Present at the meeting were Ryan Underwood, Mahler, Gourley, Trask, Bruce Hobbs and Goodwin. Marybeth Angulo was absent.