Sewer ratesfly higher and faster

Published on Thu, Oct 6, 2005
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Sewer rates fly higher and faster

by Meg Olson

Blaine city council members may have had questions about the date another rate hike would be coming to Blaine sewer customers, or if the rate structure should be changed, but they were stoic when it came to the recommendation rates go up higher, and faster, than was projected last year.

Consultant Edward Cebron said his firm had reviewed current rates, which went up 25 percent in January 2005, and the new Blaine sewer plant project that has led to the ballooning rates. “There is more impact sooner and we have to raise rates more aggressively,” Cebron said at an October 4 Blaine City Council work session.

The new wastewater treatment plant is now scheduled to be on-line in 2009, a year earlier than anticipated, so while last year they were recommending a nine percent increase in 2006, today Cebron suggested the city raise rates another 12.5 percent, from $49.90 to $56.14 for residential customers. From 2006 to 2010 the current recommendation is for rates to rise between 12 and 12.5 percent annually, after which they would level off just shy of $80 a month, up from just under $40 in 2004.

“The main thing happening here is that more of the costs are towards the front,” Cebron said. “That comes from a better understanding of what will be built when.” Projections for the cost of the total project may have dropped by $2.4 million, he explained, but costs in the 2005 to 2009 period rose by $1.4 million. The new wastewater treatment plant slated for Marine Drive just west of Blaine Marine Park and the addition of overflow storage under Marine Drive is anticipated to cost $34 million. Cebron said they had also added costs for replacing aging infrastructure in existing city facilities to their formula when trying to determine what level of rates would be needed to meet the sewer utility’s financial obligations.

Cebron also said they had to adjust figures based on a drop in anticipated grant and loan funds available. “The total amount coming in from outside sources is lower,” he said. Cebron said that state low-interest loans were less available and city public works director Steve Banham said he was concerned federal grant funds would be squeezed just when the city needed them. “I’m concerned about the federal funds,” he said. “With what happened with the hurricanes it’s a lot tougher.”

On January 1, 2006 Cebron is also proposing connection fees go up $275 more than anticipated in 2004, giving Blaine the highest hookup fees in the county by more than $200. “But we’re the only ones building a plant,” reasoned mayor John Liebert. Today it costs $4,200 to connect to the Blaine municipal wastewater system and the current projection is for that figure to go to $6,357 by 2010, Cebron said.
Cebron said they would review the rates every year as the project moves forward, and that a web of factors could move rates higher or lower than now anticipated.

“Growth has an enormous impact,” he said. Their current projections assume a three percent growth rate, which translates to 75 new homes in 2006. If growth is faster in coming years, such as the 140 new homes that paid in 2004 to hook up to the system, that could mean more revenue from connection fees and less of a need for higher rates. “The problem is that creates the need for the new plant sooner,” said city manager Gary Tomsic. “If the high growth rate continues and the project doesn’t speed up we will need to address the growth issue.” Tomsic also said he didn’t want users to think the new plant, and the new rates, were only needed because the city was growing. “We’re sizing the plant to accommodate growth but what we have today won’t work in the future for the people who live here today.”

Cebron said the city could lessen the impact on rates by getting more money up front, whether by issuing revenue bonds to secure low interest rate loans from the state public works trust fund, or by forming utility local improvement districts to collect connection fees from proposed developments. Looking at the first of these scenarios Cebron said “the result was pretty remarkable, about a $3 per month drop in the 2010 rate.”

Blaine sewer rates for residential customers today are fixed – every household pays the same amount. Cebron suggested that rates with a volume-based component could be looked at in the future but would only add to confusion if the transition was layered on top of the current regimen of rate increases. “You could wind up with lots of customers paying $20, but you’d also have the flip side with some users paying $100 a month,” he said.

Council member Bob Brunkow wanted to know where the increase would put the city relative to other council municipalities. “We are significantly more,” Banham said. “In the state small cities looking to replace their plants are all looking at rates like these.”

This was the first presentation of the proposed rate increases and Banham said staff would bring the subject back to council for further discussion before a recommendation is adopted in time for the increases to go into effect at the beginning of 2006.