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Task force to present new water, sewer rates

Posted: April 3, 2013 - 4:57pm

After a year-long review of Homer’s water-sewer rates, the Water and Sewer Rate Task Force will present its final recommendations to the Homer City Council at the council’s 4 p.m. work session Monday at city hall. 

For new rates to take effect, the council must consider and pass by July 1 a resolution adopting a new schedule, meaning the council will consider a resolution sometime in May or June.

The Water and Sewer Rate Task Force takes one last look at the draft fee schedule in a meeting at 2 p.m. Friday in the city hall conference room. It will consider and possibly approve its final memorandum and presentation to the council at Friday’s meeting.

A larger question about water-sewer rates is the issue of infilling, that is, getting more potential customers on existing lines to hook up. Council member Beau Burgess, also a Water and Sewer Rate Task Force member, said he plans to open a discussion about infilling along with consideration of new rates. Burgess said the only way to bring costs down per user is to add more users.

The draft water-sewer rates are similar to earlier proposals debated at meetings of the task force in February. That schedule uses what the task force calls a “cost payer-cost causer” or commodity model. 

The rates distributes costs equally among all users, and for user groups that add an additional cost, charging them additional fees. For example, areas served by lift stations would pay an additional monthly fee of $10 per 1,000 gallons.

The draft fee schedule has these main changes:

• The new water fee for commercial and residential customers is $11.11 per 1,000 gallons;

• The new sewer fee for commercial and residential customers is $13 per 1,000 gallons;

• Each building with a meter pays an $18 a month service fee;

• Each additional apartment unit in a building pays a $5 per month fee, and

• Since the city as a whole uses services such as fire hydrants, the charge for maintaining hydrants will get charged to the general fund.

In terms of making water and sewer more affordable, “infilling” means making customers hook up to water and sewer who should, adding new customers to existing lines, and expanding the system to bring in more customers. Currently, the city has about 50 miles of water and sewer lines and about 1,500 customers. The cost of treating water and sewer and servicing those 50 lines is about the same no matter the number of customers. The more customers, the lower the rate per customer.

“Like in any business, when you can get more customers and not invest more in operations or maintenance costs, that’s good thing for the business,” said Public Works Director Carey Meyer.

Homer city code says that water and sewer connections are required for buildings in a water and sewer special assessment district that are occupied, and that when a property joins an assessment district, that building has to be connected within a year. That kind of infilling is small, Meyer said.

“When we talk about infilling, we’re talking about lots that are still undeveloped and have road improvements, water and sewer for the property, but nothing has happened on that lot,” Meyer said.

Burgess said the city could build out water and sewer to the entire city, but that would be expensive, about $30 to $40 million, he estimated. That’s economically prohibitive, he said.

“The only one that makes any short term immediate sense is infilling where we do have infrastructure,” Burgess said.

Meyer said he estimated that there are about 100 to 200 such undeveloped lots on existing lines that could hook up. If 200 new customers hooked up, that would bring in about $8,500 more a month under the new rate schedules.

Sharon Minsch, one of the Water and Sewer Rate Task Force members, said the city also should look at another kind of infilling: treating additional units, such as mother-in-law apartments or guest cabins, as separate customers. The meter service fee is calculated by looking at the cost of the finance department to bill customers. Minsch suggested using a business model where the customer pays a unit share of actual maintenance and overhead, including that finance fee.

Encouraging construction of undeveloped lots on water and sewer lines also is a business decision related to the Homer’s real estate market. How do you do that?

“You encourage developers with an open hand, not a closed fist,” said Chris Story, a Realtor and owner of Story Real Estate. “The fundamental question is, ‘Why would somebody want to build inside the city limits and not out? If you can answer that question, the market will take care of itself.”

Another Realtor, Philip Alderfer of the Alderfer Group, said infilling happens when the demand for housing isn’t being met.

“Right now there isn’t much pressure on infill properties, even for those folks looking to buy and build,” he said.

Customers looking to buy a home are more likely to buy existing homes rather than build a new home, he said.

“Buying vacant land has not been the priority,” Alderfer said. “Buying existing construction has been a priority.”

Alderfer said he saw one factor that could motivate development of undeveloped lots: the Homer natural gas line expansion.

“The gas line is the wild card. That’s the potential ace in the hole,” he said. “That might tip the balance between something farther out of town and more expensive, but slightly more desirable now.”

The Water and Sewer Task Force presentation to the city council work session on Monday only brings the task force’s work to the council. It won’t move forward until the council considers an actual resolution, probably in the next few months. Minsch praised the work of the task force and said in general she agrees with most of the schedule, but does have a concern about the extra lift station fee, calling it unfair.

“I am hoping that when it gets to the council there are discussions of extra fees on lift stations,” she said.

Burgess said he wants to include a discussion on infilling as part of the proposed water-sewer rate changes. He plans to introduce some resolutions addressing infilling.

“If people have ideas, ways to incentivize infilling, that’s what I really want to talk about,” Burgess said.

Information on the Water and Sewer Rate Task Force and the draft schedule is available on the city’s web page at www.cityofhomer-ak.gov/finance/water-sewer-rate-task-force-19.

Michael Armstrong can be reached at michael.armstrong@homernews.com.

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