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Council considers new rates on Monday

Discussion likely to flow again on water-sewer plan

Posted: July 17, 2013 - 5:08pm

A proposed new water-sewer rate schedule comes back for reconsideration at 6 p.m. Monday for the Homer City Council’s regular meeting. Near the top of the agenda right after public comments, the motion to reconsider asks the question “Does the council want to look one more time at changing water and sewer rates?”

If the motion to reconsider fails, the proposed new fee schedule dies, and the current water and sewer rates remain unchanged.

If the motion to reconsider passes, the fee schedule is back on the council’s table. The council could take action Monday night, but it’s more likely that the rate plan would be postponed for another public hearing, said Homer City Manager Walt Wrede.

As amended at the last meeting, the council raised a proposed sewer commodity rate to $.0147 a gallon, or $14.70 per 1,000 gallons, and the lift station commodity rate to $.0218 a gallon, or $21.80 per 1,000 gallons. 

Wrede said the council has asked to look at the impacts on a range of users if the new schedule took effect, including scenarios where a $5 apartment unit service fee went away or a lift station fee was socialized — the cost spread out among all users.

“There’s really a lot to talk about,” Wrede said. “Any of these would be significant enough changes the mayor is talking about scheduling another public hearing on Aug. 12.”

City finance director Zhiyong “John” Li is preparing an analysis of the proposed rates, including the break-even point showing how many gallons various customers would have to use before they saw an increase their bills. That analysis should be released today, Wrede said.

The proposed rate schedule uses a cost-causer, cost-payer, commodity based model that charges all customers a per-gallon fee for water and sewer use. It also assesses additional fees for users in areas that have lift stations, such as the Homer Spit, and users that increase the demand on sewer treatment, such as restaurants. That fee is called the biological-oxygen demand, or BOD fee. The schedule was developed over the past year by the Water-Sewer Rate Task Force, an ad-hoc committee created by the council to re-examine rates.

Under the proposed commodity fee schedule for water, except for bulk water buyers, all users pay a slightly lower rate of $11.10 per 1,000 gallons. The per-gallon fee for bulk water increases from $12.69 to $15 per 1,000 gallons.

The major change is in the sewer rate. No distinction is made among commercial and residential users. The residential rate goes up from $9.97 to $14.70 per 1,000 gallons and the commercial rate from $12.64 to $14.70 per 1,000 gallons. On the logic that customers in lift-station zones — that is, lines which require lift stations to move sewage uphill, such as the Homer Spit — a new lift-station sewage rate is added. That fee is $21.80, as amended at the last meeting. A new monthly service charge of $10 a month is added for customers with sewage that creates a biological oxygen demand.

Customers do gain a cost savings in reduced customer fees. Under the current plan, customers pay monthly service fees of $25 for water and $20 for sewer, or $45 total, per home, including apartment units. That fee had been controversial with Homer Senior Citizens and other low-income apartment renters, since it added $45 to monthly rents. The proposed fee drops that to $19 a month for water. For apartment units, there is a $5 monthly customer fee on top of that $19 for sewer. Still, at $24 a month, it’s a $21 a month savings.

That $19 service fee represents the individual billing costs to manage accounts and read meters of the about 1,500 water and sewer customers in Homer.

Li presented a chart at the last council meeting looking at actual customers and their water usage, but that was before the rates were amended. The biggest increase would be for high-volume customers who would now pay a lift-station commodity fee. For example, a customer using 2.4 million gallons a year and on a lift station would see an increase of $19,000 a year. Customers with similar volumes but not on lift stations would see annual bills about $2,000 higher.

The biggest savings would be for customers in the 98,000 to 240,000-gallon range, who would see annual bills decrease from $4,000 to $3,200. The break-even point is about 2,400 gallons a month, Li said. A customer who uses 29,000 gallons a year would see no increase in an annual bill of about $960.

For big users like Land’s End Resort, a frequent critic of the proposed water-sewer rate changes, based on 2012 usage of 2.8 million gallons, that’s an increase of about $12,800 with the amended lift station sewer fee. Land’s End chief financial officer Josh Garvey said that by his calculation, with the rates as amended Monday, Land’s End total water and sewer bill would be $23,000 more than its 2012 bill.

The council amended the proposed rates at its last meeting in response to an error pointed out by Li. He said that in looking at the actual cost of treating sewage, the original proposed rates fell short. The system can only capture 25 million gallons in billing when the projected actual discharge is 107 million gallons.

“Our revenue system is getting a wee short of what’s happening,” Li said then. 

The shortfall would be about $244,000 under the first version of the proposed rate changes. The rate fee was amended to cover that shortfall.

Wrede explained the discrepancy by saying that there are “in flow” issues with the city sewage system. The system takes in storm drainage on top of actual household and business discharge. Water gets into the system because of leaks in the storm drainage system as well as some buildings directing rain runoff and sump pump drainage into the storm system. More water is going into the treatment plant than is billed for.

The public will have an opportunity to comment on the motion for reconsideration in the “public comments on other matters on the agenda” portion of the meeting right before the vote to reconsider. 

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

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