Water contract runs final course before approval

Published on Thu, Mar 21, 2002 by Pat Grubb

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Water contract runs final course before approval

By Pat Grubb

Following a sparsely attended public study session, Blaine city council appears poised to approve a water supply contract at next week’s council meeting. Just two citizens bothered to show up for a presentation and discussion of a contract that will govern water sales to the Birch Bay water and sewer district for the next 30 years.

“This is a very fair way to set rates,” said city manager Gary Tomsic, adding, “It was a goal of our negotiations that neither party would look to come away with a major financial victory.” The contract replaces an existing contract that began in 1988 and whose term would have run for 25 years until 2013. Tomsic said the new contract incorporates a “fairly sophisticated model” that takes into account water usage and allocation of costs based on the infrastructure and assets of the water distribution system.

As a wholesale customer the Birch Bay water and sewer district would only be allocated costs based on those elements of the system used to provide water to the district. In other words, the city of Blaine has costs associated with providing water to its retail customers such as hook-ups, line construction and maintenance and administration costs. Those costs would not be borne by the Birch Bay district. This explains, Tomsic said, why Birch Bay represents approximately 52 percent of total water usage but only 25 percent of Blaine’s water revenues. In turn, the district has similar additional costs in providing water to its retail customers.

Tomsic said the new contract provided numerous benefits over the current contract, namely, it allowed for a predictable revenue stream, better planning and financing of capital improvement projects, represented a better method to set rates, enabled sensible growth management and avoided litigation over water rights. Each September, the district would submit its estimated demand for the coming year and following four years. On November 1, the city would announce new rates that would be billed monthly. Both partners are obligated to share short- and long-term shortages. The contract also provides for ‘stranded costs’ to be recovered. These are costs incurred during the middle and end of the contract term which are not amortized by the end of the contract should the district elect not to renew the contract. This provision would allow the city to make needed infrastructure improvements near the end of the contract’s life without worrying that the district would fail to pay its share of the costs.

Former council member David White was critical of the proposed contract, asking why Birch Bay was guaranteed 1.58 million gallons a day until the year 2013. “Why should Birch Bay get a guarantee while Blaine residents aren’t?” he asked. “It’s a gift,” he said. Tomsic replied “If it’s a gift, it was a gift given to them by an earlier council,” pointing out that the contract being replaced also guaranteed the same amount of water.

Tomsic said Birch Bay water commissioners could hardly be expected to go back to their ratepayers with a contract that negotiated less water than they had before. Council member John Liebert weighed in, saying, “We know it’s better to work with them ... whenever you go into a negotiation, there will be some points that can’t be negotiated.” Downplaying the importance of the clause, Tomsic said “If I thought there was a great risk of {Blaine residents being shortchanged as a result] of that happening, I wouldn’t recommend this contract to council.”

White remained critical of how much Blaine would charge the district for water, asserting it allowed the district to charge its customers less than what Blaine residents paid. According to White, in the summertime Blaine lawns are brown and parched while Birch Bay’s lawns remain green.

Referring to a letter White had recently sent to The Northern Light making that accusation, Tomsic provided a comparison of a residential water bill which showed Birch Bay charges were, in fact, slightly higher. Tomsic said even though there are differences in the way that Blaine and Birch Bay billed customers, he did not believe Blaine ratepayers would hold with the city selling its water at higher rates than those paid by Birch Bay residents.

Doug Connelly, the sole remaining member of the public present, asked whether the contract would restrict future growth of Blaine given the percentage of water allocated to Birch Bay and anticipated growth in water needs. Tomsic allowed that it was possible but that the contract took projected growth into account and that both the city and the district expected to work in a cooperative manner on developing new water sources.

Council is expected to take action on the contract at its regular meeting held Monday, March 25 at 7 p.m. ..

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