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Council postpones action on water-sewer rates

Posted: June 12, 2013 - 4:16pm

Although it held a second reading and a public hearing on proposed changes to the city water and sewer rate schedule, the Homer City Council in a 4-1 vote on Monday postponed action until its June 24 meeting.

The council said little during the regular meeting about why it postponed action, but at a work session earlier at 4 p.m. it discussed the status of the proposed rate changes and why some wanted to delay a vote. 

Homer City Manager Walt Wrede said finance numbers in the resolution and supporting memorandums showing the cost to the city needed revision. A model showing the impact on the city mixes 2011, 2012 and projected 2013 figures, Wrede said. 

The proposed rate schedule uses a cost-causer, cost-payer model that charges all customers a per-gallon fee for water and sewer use. 

“The theory is a gallon of water is a gallon of water; everybody pays the same,” Wrede said.

For example, for water, that fee is based on the overall charge of treating and delivering water divided by the number of gallons used. For example, the water rate per gallon of $.0111 is calculated by dividing the projected revenue cost of $1,297,672 by projected water sales of 116.875 million gallons.

The  resolution also assesses additional fees for users in areas that have lift stations, such as the Homer Spit, and users that increased the demand on sewer treatment, such as restaurants. That fee is called the biological-oxygen demand, or BOD fee.

Customers would pay a reduced service charge per meter in the new schedule. A current per-unit charge of $45 a month for apartments — even if not on a separate meter — is proposed to be reduced to $5 a unit. 

The  resolution also needed to change how service fees are charged for water and sewer, Wrede said. The current version charges a $9 fee for water and a $9 fee for sewer, but because the charge is for meter service and only water is metered, that should be an $18 a month water charge.

Homer Mayor Beth Wythe said spreadsheets prepared by the finance department needed to coincide with the rate system in the  resolution and thus the  resolution needed more work.

At the work session, council member Barbara Howard said she was frustrated with the council acting like it’s the operations department of Public Works.

“Our job is policy,” Howard said. “Have we decided what our user policy is? I haven’t heard us agree to a policy.”

So what is the council’s philosophy? Wythe asked.

“I’m for this model,” Howard said. “I think it’s the fairest way.”

Council member Bryan Zak said he disagreed with fees like the one for lift-station users.

“I think it was simpler when you kept it residential vs. commercial,” Zak said, referring to the approach of charging residential and commercial customers different rates.

Giving some historical perspective, council member Francie Roberts said she remembered being on the council when it went to the “bucket” system, where users were divided into different groups. If a user group took 60 percent of the water, it paid 60 percent of the cost. Smaller commercial businesses were bearing the cost of larger commercial users under the previous system, she said.

“It was better than what we had, but this is even better,” Roberts said. 

Council member David Lewis also said he had issues with the lift-station and biological-oxygen demand fees.

“Some of the businesses are going to be hit with a double whammy,” he said. “Is that fair in charging them more when with the gas line everybody pays the same?” 

One business that will suffer the impact of paying lift station and biological-oxygen demand fees is Land’s End Resort on the Homer Spit. Three Land’s End executives spoke against the proposed water-sewer rates during a public hearing at the regular meeting.

“If any of you are supporting this ordinance, I think you’re rejecting our facts,” said Land’s End owner Jon Faulkner. “We want fairness in our system, but fairness is an elusive concept.”

In a written statement, Mike Dye, chief executive officer for Land’s End, noted that if the accounting and billing cost was spread equally among all meters, the monthly fee would be $44 and not $18. That’s not fair, he said. 

Faulkner also submitted figures showing what Land’s End would pay based on rates for other cities. Its Homer bill is $78,000 yearly, while the same use would be $20,000 in Palmer and as low as $17,000 in Kenai.

Land’s End chief financial officer Josh Garvey said he had calculated the increased water-sewer bill would go up $30,000 a year.

Justin Arnold, who owns and lives in a triplex and rents out two of the units, questioned why apartments still would pay a service charge when units are not on individual meters and the city won’t allow apartment owners to put in per-unit meters.

“The usage fee is the idea that we have to maintain each of those shut-off valves in those meters,” Arnold said.

In comments at the end of the meeting, Wrede later said the city had been talking to apartment building owners about how to set up per-unit metering. The problem is that most buildings have only one service line and meter, he said. If a tenant is delinquent in a bill, it would not be fair to shut off water to the entire building. Some apartment owners have suggested putting individual meters in the owner’s name and let the landlord work with tenants over delinquent payments, Wrede said.

In closing comments at the end of the meeting, Zak said he had wanted to vote on the proposed water-sewer rate changes on Monday and would have voted against it.

“There are a lot more pieces to it that seem complicated,” he said. “The cost to the large business owners kind of concerns me from an economic standpoint.”

Lewis also said he wasn’t sure if he favored the new rate schedule.

The council will consider the water-sewer rate resolution and a possible substitute at its June 24 issue. A public hearing will be held with opportunities to testify. The regular meeting is at 6 p.m. with a committee of the whole meeting at 5 p.m. and a work session at 5:15 p.m.

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

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