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Water works: Difference of opinion on Homer’s water-sewer rate structure

Posted: November 1, 2012 - 10:47am

As a member of the city of Homer Water and Sewer Task Force, I want to make it clear that the following is just my take on our progress after six months of work.
It is definitely not the opinion of the city administration. Their position, as recently written by the city manager in his budget message to the city council, reads:
“… we would suggest that the council look long and hard before it makes any new and substantial changes to the rate model. Any change to the model, regardless of how fair it may seem on the surface, will create a new set of winners and losers. The current model is a good one…”
Given that uniformed summation, it must be time to report on the progress made in revising the rate model.
 Thirteen years ago, we had a leaky-creaky water system. We sold (annually) 132 million gallons of water, of which about 15 million gallons were in bulk sales.  It cost $1,087,000 to run the water system. Our worry then was in capacity, so the rate model of the time was designed around the element of “demand.”
Today, thanks in large part to a dedicated sales tax, we have a leak-free system. Capacity has increased to 200 million gallons of water. The bad news is that after sloshing around in the system for a few days some of it ends up in Kachemak Bay, unsold. When I say “some,” what I really mean is, um, actually quite a bit. If you think 75 million gallons is quite a bit.
We now sell 125 million gallons, of which 23 million is in bulk sales. It costs $1,890,000. Water sales down 5.3 percent; costs up 73.9 percent.
Some of the sold water also makes its way into Kachemak Bay. Did you know that the city provides 4.3 million gallons to the fish cleaning tables on the Spit? It makes up more than half of the city’s Spit usage.  About 18 million gallons get sold on the Spit, but only 7 million get pumped back for treatment.
So there are the numbers. Now I’ll tell you what the panel members think should be done in establishing a new rate model.
First, with so much water sloshing around, it makes no sense to create a model around “demand.”  We have instead created a model that simply sells water at a commodity rate that will pay the costs of operation. Every gallon of water (except surplus bulk) costs the same. No residential rate; no commercial rate; no meter-size tariff. A gallon of water is going to cost about 1.2 cents a gallon.  A gallon of sewage will cost about 1.4 cents a gallon.
Next, the single combined monthly service fee will be $18. You will pay that if you are home or away; in town or on the Spit; a big user or a small user. Every month. $18.
The panel is still discussing a modest service fee for multi-unit buildings on a single meter. It is hard to argue that the waste stream profile is any different than a single family residence, but it also is hard to not call those occupants “customers.”
We also are still discussing a rate differential for sewage from the Spit. The lift stations required to pump it uphill to the sewage treatment plant cost about $91,000 a year in maintenance, parts and electricity. Having the Spit users pay for those costs will increase the Spit sewer rate to about 2.7 cents a gallon.
So that takes care of the income side of the equation — what about costs? This is what I have to say about costs: Costs are costs.
Most of the costs are associated with the employees that keep things fixed, clean, and flowing. Those costs are hard to change or challenge.
But then there are the overhead charge.
The water and sewer utility customers double tithe (actually 20.28 percent of all revenues, plus tax) to City Hall. That pays for exactly 20.28 percent of all the City Hall activities. There is perfect mathematical symmetry. Amazing, but true.
Is it possible that one day out of five (Thursdays?) City Hall works exclusively for the water and sewer utilities? Does it take that much effort to watch over expenses, answer questions, bill and bank? What kind of faith is demanded here?
I think of them as the Church of Their Model is a Good One for Them.
Ken Castner was a member of the 1997 water and sewer rate study committee and was appointed in April to serve on the current task force.

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