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Another hearing set on water-sewer rate changes

Posted: July 24, 2013 - 2:29pm

A proposed new water-sewer rate schedule is back on the table for the Homer City Council. At its Monday regular meeting, the council agreed to reconsider the new rates after it spiked the resolution last month. The council added two amendments eliminating minor fees and postponed action until its Aug. 12 meeting. It also will hold a public hearing then on the amended fee schedule.

At the June 24 meeting, on a 3-2 vote, and with council member James Dolma absent, the council failed to pass a new water-sewer rate schedule. Because four votes are needed to take action, Resolution 13-048(S)(A) died. However, council member David Lewis, who voted against the resolution, moved for reconsideration that night. The motion for reconsideration was on the agenda Monday, and the council without objection agreed to take another look at the rate changes.

The proposed water-sewer rate schedule was crafted by the Water-Sewer Rate Task Force, a committee created in March 2012 by the council to tackle the problem of how to charge fairly about 1,500 customers for water and sewer. The task force came up with a commodity rate or per-gallon model for water and sewer, but also added a cost-causer, cost-payer component for some rates. 

For example, on the sewer side, the fee schedule charges an extra per-customer fee for powering and maintaining sewer lift stations required to move sewage uphill from areas like the Homer Spit to the treatment plant on Beluga Slough.

As amended at the June meeting, the council did away with a distinction between commercial and residential sewer rates and set this proposed schedule:

• The current commercial sewer rate would increase from $12.64 per 1,000 gallons to $14.70 per 1,000 gallons for nonlift station customers and $21.80 per 1,000 gallons for lift station customers;

• The residential sewer rate would increase from $9.97 per 1,000 gallons to $14.70 per 1,000 gallons for nonlift station customers and $21.80 per 1,000 gallons for lift station customers;

• The current commercial water rate would drop from $11.10 per 1,000 gallons to $10.90 per 1,000 gallons;

• The current residential water rate would increase from $4.42 per 1,000 gallons to $10.90 per 1,000 gallons;

• The monthly service fee for commercial and residential of $25 a month for water and $20 a month for sewer, or $45 a month total, would drop to $19 a month for water and nothin for sewer; and 

• The $45 fee for apartments would drop to $19 a month for water and an additional $5 a month service fee per unit for apartment complexes, or $24 a month total.

The amended resolution dropped the water rate to $10.90, lower than in the original resolution at $11.10 per 1,000 gallons. However, there is no record that the council made this amendment. City Manager Walt Wrede said the lower rate came about when Finance Director Zhiyong “John” Li updated 2013 numbers and data. He and Li should have pointed out this change and asked for an amendment, Wrede said. Wrede said he would do that for the Aug. 12 meeting.

Li also gave the council an analysis showing the effect of the rates on various businesses, renters and homeowners. Overall, 56 percent of customers would pay less (about an average of $206 per customer per year) and 44 percent would pay more (about an average of $404 per customer per year). Customers in the lift station zones would generally pay about 20 percent more and customers in nonlift station zones would pay about 3 percent less. Bulk water customers would pay about 17 percent more.

There also had been a proposed $10 a month fee for sewage, such as that from restaurants, that creates an increased biological-oxygen demand and a $5 a month fire sprinkler fee. On a motion by council member Beau Burgess, the council on Monday deleted those charges. Li said those fees would have raised about $7,000. 

Burgess said the task force added those fees as a way to track such usage. Council member Francie Roberts pointed out that Homer Volunteer Fire Department Chief Bob Painter had criticized the sprinkler fee as discouraging fire sprinklers — something the council and city should encourage for public safety reasons.

Representatives with Land’s End Holdings have been critical of the proposed fee schedule, particularly for the lift station fee, but Monday night nine people representing other businesses spoke against the fees or what they said was a general anti-business attitude by the council. A new advocacy group, Homer Voice for Business, has been formed to address that complaint (see story, page 1).

“It’s not just about Land’s End. It’s not just about business,” said Mike Dye, chief executive officer for Land’s End Holdings. “It’s about residents of Homer who are paying more.”

“I urge you not to adopt what has been before you,” said Kevin Hogan, owner of the Auction Block on the Spit. “I think what you need to do is start managing the utility and not the customer base.”

Adrienne Sweeney, owner of the Driftwood Inn and AJ’s Old Town Steakhouse and Tavern, also urged the council to reject the rate changes, although she also said it should discontinue the $45 per unit apartment charge.

“It’s evident to everyone this is a broken rate model,” said Josh Garvey, chief financial officer for Land’s End. “They’re aghast at their city council.”

In an interview with the Homer News, Dye criticized the cost-causer, cost-payer component of the rate model, particularly for the lift station fee. He said if the intent is to have a fair, commodity-based system, it should also be commodity-only for sewer. Dye said that point gets lost in discussions of the water-sewer rates.

“It all makes sense if it’s uniform,” Dye said.

If the rate model imposes a cost-causer, cost-payer model for sewer, there should be discounts on the water side for large-volume users because of economies of scale, Dye said.

In an ad, Homer Voice for Business said Homer water and sewer rates are higher than Kenai, Soldotna, Palmer and Sitka. It also said Finance Department charges were too high.

“Did you know Homer spends nearly $1 million year to process your water bills?” the ad asks.

City Manager Walt Wrede took exception to that claim.

“That’s not even true,” he said at the council meeting. “It’s $300,000 to send the bills out and collect the money and provide customer service and all the other things the administration does.”

The task force used that $300,000 number — about 40 percent of the Finance Department’s budget — to calculate the $19 per month service fee, $18 in its original draft. Included in the cost of water and sewer are services provided by other departments, such as Human Resources, Public Works and Information Technology, to water and sewer operations, Wrede said. That amount set in the 2013 budget for such services is about $150,000 for water and $145,000 for sewer.

Burgess, the council representative on the water and sewer task force, defended the rate model as being fair to all users. 

“We’re back in the same boat where we can politicize this rate schedule over and over again, or we can do what the task force did as a body and come up with the most
equitable model,” Burgess said. “This distinction of business/anti-business is kind of fallacious. The majority of end users will see their bills go down.”

Council member Bryan Zak said the council should listen to businesses.

“I would rather see it voted down and start fresh,” he said. “I don’t feel like the committee that did this was well represented.”

Zak had tried to get passed nine suggestions by Larry Slone, a frequent citizen participant in the water-sewer issue, but those failed, including eliminating the lift station fee by half.

Mayor Beth Wythe thanked Homer Voice for Business and Land’s End for stirring up interest and getting people to speak on the issue. Wythe had been a council member representative on the task force before her election to mayor and stayed on the task force after she became mayor.

“They (Land’s End) have managed to do something this committee tried to do for 10 months,” she said. “Granted, the information they provided wasn’t accurate. They were able to bring small businesses out to enter this discussion.”

The council also passed an ordinance authorizing $98,500 in road and trail improvements for the Old Town area south of the Sterling Highway on Main Street. 

Old Town resident Charles Davis, who said he attended his first council meeting in 1978, spoke about that ordinance and the water-sewer rates at the end of the meeting.

“I note with a little irony where I live in Homer we’re going to have it beautified and calmed, but no sewer or water,” he said. “It’s just been on ongoing thing that somebody’s going to have fix one of these years.”

Business owners, renters and homeowners will have another chance to speak about the issue in a public hearing on Aug. 12. The council also will vote on the proposed rate changes then.

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

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