Council considers graduated sewer rate increases

Published on Thu, Nov 18, 2010 by By Tara Nelson

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Blaine ratepayers will see their monthly sewer bill increase beginning in 2011 but by how much is still unclear.

In a special budget review session Monday, Blaine City Council examined a planned 24 percent increase over the next three years and debated whether to increase sewer rates by 14 percent, as proposed by Blaine public works staff, or by a more modest 8 percent followed by subsequent increases.

The first option would increase the monthly rate from about $81 to $92 followed by another 8 percent increase in 2012 and a 2 percent increase in 2013, when the rates would max out at about $104. The second option, however, would spread out those increases evenly with a series of 8 percent increases over the next three years.

Council members said they favored the second option and asked Blaine public works director Steve Banham to review if that would be possible. The second option also allows public works staff time to revise rates if growth increases and more ratepayers connect to the system.

“The second option also gives us a chance to see if more ratepayers come along and connect to the system,” Banham said. “The only issue is going to be if it will generate the cash flow so we can make payments and not end up with a zero fund balance at the end of 2011. We don’t know if it’s possible but we are going to discuss it with our rate consultant.”

Banham said the city’s sewer rates have been scheduled to increase each year to help repay low-interest loans used in the construction of the city’s new $33 million Lighthouse Point water reclamation facility.

 “We’re trying to level those three increases out so we don’t have as big of an increase this year,” he said. “I don’t know if that’s going to be possible, we’re going to start talking with the rate consultant, there’s going to be a lot more debt payments due next year.”

Council also decided they wouldn’t support a voter-approved levy to help repay Lighthouse Point construction costs. The levy would have added an additional .68 cents per $1,000 of assessed value for nine years beginning in 2012 and could be partially offset by the federal income tax deduction, saving ratepayers about $6.48 per month or $78 per year. Council members, however, rejected that idea because they said it would “unfairly tax” those with higher-end homes and commercial businesses.

“An office building typically doesn’t use that much sewer capacity, but they would pay a pretty substantial property tax increase,” Banham said.

Another strategy Banham suggested included re-imposing general facility fees (GFF), which are generally paid before a building permit can be issued.

Council voted in August of 2009 to remove those fees in an effort to spur economic development in Blaine’s downtown core, but Banham said he is now concerned about how that decision has put a  financial burden on existing ratepayers. He said this will become more of a problem in 2013 when the city begins paying the principal on the rural economic development (RED) loans it borrowed to construct the plant.

“I realize there’s a political argument there against them, but it’s a very difficult time not to have GFF fees in place,” Banham said. “Over the next few years, we’re going to have the greatest capacity plant on one of the smallest base of ratepayers and that’s a difficult thing.”

A 2009 study by city staff determined that connection fees collected during the month of July 2009 were approximately $36,000 for sewer and approximately $18,000 for water. If development rates stay the same over the next five years, the city will have forgone approximately $470,000 in revenue.

Some council members such as Paul Greenough and Harry Robinson said they might support bringing those fees back to help offset the extra burden on Blaine citizens.

“We recognize it is costing the citizens instead of people building here,” Greenough said. “Someone who owns a modest little house on F Street is paying extra on their monthly bill to recoup that lost revenue.”

Robinson agreed: “We’ve spurred absolutely zero activity in the downtown core (with the exception of Ken Imus’ project). There’s got to be a lot more offered to get developers to come here.”

Council member John Liebert disagreed, adding that it should come as no surprise to Blaine ratepayers their monthly sewer bill was going to increase.

“This should not be a shock to anyone,” Liebert said. “These rate increases have been planned for years.”

Banham said while this was true, the extent to which the rates have increased was not planned.

“This is higher than we originally expected,” he said. “Because we didn’t experience the growth we once anticipated, we don’t have as many ratepayers by which to distribute the cost. Right now this is the only source of revenue we have to repay that debt.”

Council members also agreed to raise the monthly rate for low-income seniors and disabled customers by 2 percent, bringing it from $48 to $55 and increase the inactive or vacation rate for sewer by about $12 per month, bringing it to $52 per month.
Water rates

City council also rejected a proposal to reduce the volume allowance for water as recommended by the city’s rate consultant. The amendment would have reduced the volume allowance for a standard connection from 300 cubic feet (about 2,250 gallons) to 200 cubic feet (about 1,500 gallons).

Council members who had originally supported the idea changed their minds in Monday’s meeting after staff informed them water consumption has not increased and growth has slowed.

”What we’re seeing is because consumption is not going up we can put off some of those projects for some time and as a result we can put off those rate increases as well,” Banham said.

The council will discuss the issue again during their next regularly scheduled meeting at 7 p.m. Monday, November 22. A final vote is scheduled for December 13.