Council Considers Big Hike in Utility Rates

By Gene Williams
Staff Writer

May 31 -- Wary of the political fallout, City Council members are seeking assurances from finance and public works officials that a series of proposed utility rate hikes that could kick in as early as this summer are justified.

Part of the City's $383.1 million proposed budget for fiscal year 2005-06, the proposed hikes come as officials agonize that the City is spending more than it is taking in for water, trash disposal and sewage treatment.

Although the City expects to reap better-than-expected revenues from a rebounding local economy and to loosen some of the belt-tightening measures of recent years, these utilities, officials warn, will go into the red unless fees go up -- way up

"We have not kept up with the cost of providing service," City Finance Director Steve Stark explained to the council in mid May. "The last significant rate increase was in 1996.... so this has been building up for some time."

Stark presented the council with a variety of options -- all of which would raise customers' bills by 25 to 35 percent -- to keep the money-losing utilities in the black.

The biggest increase would be for tap water, which would either see a sudden jump of 31 percent in January 2006, or gradually increase by 40 percent over two years, or as much as 47 percent if the increase is spread out over four years, according to the plan.

Similarly, garbage collection would go up between 20 and 30 percent, and sewer fees between 25 and 30 percent, depending on how quickly the rate hikes were put into effect.

But some council members say that before voting for rate hikes, they need to be convinced that it's the only way out of the fiscal mess.

"We can't vote for a rate increase without seeing an analysis that convinces us," said Council member Bobby Shriver after a presentation by Environmental and Public Works Director Craig Perkins during a council budget study session last Tuesday.

"When you're going to people to ask for, basically, a fifty percent rate increase, you better make a whale of a good case that you've explored every option," Shriver said. "That needs to be done in a very detailed way or I'm not going to be able to vote for it."

Perkins seemed to know he had a politically tough sell ahead of him.

"Although my wife may disagree with this, I am not into self punishment," Perkins told the elected body, "and the last thing I want to do is come before the City Council and ask you to raise utility rates."

Perkins said he knows "it is a difficult issue to deal with," but rate hikes are "inevitable in terms of the world and the services we provide."

But some council members say they want to know more before they start charging their constituents more for basic services.

"I understand that rate payers are going to go through some pain, but we're (the council) going to feel it also," said Council member Ken Genser. "In my view we don't have enough information, or any information, about what kind of rate increase would be justified.

"It will be close to impossible for me to vote for any rate increase," Genser said, without knowing "how the money is going into the fund and what percentages are going where."

Shriver agreed and said he wanted to know "how enormous positive fund balances had been drawn down by tens of millions of dollars."

Utility funds, which were once vast reservoirs of money, have been evaporating over the last three years and will run dry unless "dramatic action is taken soon," according to City officials.

The water fund, which in 2002 held reserves of $17.5, has shrunk to a small pool of only about $5 million, officials say. Similarly, the wastewater fund, which had about $23 million in it three years ago, now has only about $10 million.

The reserves are necessary, the City says, to assure continuous service and, in some cases, because they are required to shore up bond money.

Finance Director Stark gave the council a variety of reasons for the revenue shortfalls that have been eating into the funds.

For one, significant rate increases proposed in 2003 were not adopted out of fear of hurting an already sluggish post 9/11 economy and rising operational costs continue to outstrip small yearly rate increases based on the Consumer Price Index (CPI).

"Year after year of having CPI increases that haven't been as great as the cost of providing the services is the main reason we've got into this imbalance," Stark explained.

Land fill expenses have increased 40 percent in the last two years and are expected to climb an additional 18 percent in the near future, Stark said. During the same period, wages, salaries and benefits have increased some 10 percent, as have costs for fuel and vehicles.

In addition, some of the utilities have bond debt to pay down or are spending more to comply with state and regional mandates.

A week earlier, Council member Kevin McKeown asked that staff gather additional information on the funds and utilities operations. City Manager Susan McCarthy said that most of the information will be ready for the council before it meets on June 14.