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While it’s not perfect, current proposal is fair assignment of water-sewer costs

Posted: February 4, 2013 - 1:41pm

The Homer Water and Sewer Rate Task Force is fast approaching its final phases. Currently it’s reviewing its rate model for an April presentation to the city council. One issue within the rate-model that remains controversial is it’s “fairness,” as applied to all users. Although the model will assuredly be tweaked in response to recent public input,  fundamentally I believe it’s a fair assignment of costs.  

As a city water user I have closely followed the task force’s discussions. In fact, the rate model closely parallels my initial proposal from last spring, thus I feel a certain sense of authorship. 

So, here’s my analysis: Perhaps you recall that Homer’s water and sewer system is essentially an enterprise fund, meant to be self-sustaining. However, it’s also a relatively expensive system to operate, mainly because of fixed personnel costs. Consequently one gallon of water costs, figuratively speaking, as much to produce as 200 million. The system is capable of providing enough high quality water for a town twice Homer’s size. Unfortunately Homer’s population growth has slowed, so a limited number of meter customers, currently only 1,500 or so, must share the cost burden.

Initially the task force chose the principle of political neutrality in establishing a rate model.

That translated into the “fairness” theme,  as defined by the formula of “cost-causer=cost-payer.” It soon became evident, however, that the system’s complexity, with the inter-relativeness of  its numerous valves, pipe sizes, fire hydrants, pumps and tanks, etc., precluded specific assignment of costs to individual users. Even so, the cost distinction between users was essentially irrelevant because all, with certain exceptions, put essentially similar demands on the system.

The solution chosen was to have these multiplicity of factors be reflected in a fixed price, approximately 2.7 cents per gallon, of the desired commodity — water. Just as the price of a loaf of bread reflects all costs incurred in its production, so too, with water usage. Consume more, pay more; consume less, pay less.  

By using one gallon of water, you’ve implicitly also used a gallon of sewer. It’s that simple. True, it’s not a perfect system. Those consuming more water (additional loaves of bread) clearly pay more overall, but that’s their choice.

Additionally, a monthly administrative processing fee of $5 per multiplex unit and $18 per meter for everyone else will be applied to a user’s bill, as will tax. So, that’s the “basic” rate model. It will apply to approximately 99.9 percent of city users, excluding bulk providers whose customers, generally not using city sewer, distort the city water and sewer revenue balance.

Now for the “differential” add-ons: Some users such as restaurants place an additional demand on the system due to high grease and septic sludge. Others, such as Spit users, utilize an infrastructure system with apparent proportionally higher operating and maintenance costs, requiring continuing servicing, even in winter. These users will have a “differential” fee added to the basic fee.

This is where the “fairness” issue, mentioned earlier, comes especially into play. Should the limited number of Spit customers, for example, be required to pay an additional fee for their sewage’s higher disposal costs or should those costs be socialized — distributed equally — across the total customer base? 

I’m all for fairness, if it can be demonstrated that significant cost differentials between users and geographical areas are minimal.  If, however,  a distinquishable cost-factor is clearly evident, then — for the purposes of the rate model proposal — it should be assigned to the cost-causer. 

Personally, I believe that the rate model has a lot of integrity built into it. Modifying it at the task force level by socializing/politicizing it will only make the model more confusing, diluting  its effectiveness and legitimacy. Such an attempt by the task force members would constitute unbearable hubris, requiring of them the patience of Job, the administrative machinery of the IRS and the wisdom of Solomon, all in limited supply — even for Homer.

Much better to present it  in its pure form to the city council for their review and disposition. Then, in front of God, country and the public, the council can politically massage it as deemed necessary. In so doing they will leave their fingerprints for all  and sundry to see, bearing responsibility for the ensuing result. 

Larry Slone is a semi-retired 20 year Homer resident and a Homer Advisory Planning Commissioner who is otherwise interested in and observes city government activities.

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