Wastewater Rates Can Be Offset

Budgeted contingencies in the wastewater (sewer) fund greatly exceed policy requirements and can be returned to the ratepayer.

There are several steps Council can take to return the wastewater contingency money to the ratepayer/taxpayer. Let’s begin with some background on where we have been, why the money should be returned and how it can be done.

Where Have We Been? In August 2007 Council recommended replacement of the backbone of the City’s wastewater collection system with a combination of pile supported pipe and a buoyant gravity flow pipeline in the lake (LOIS). The LOIS project began in 2009 and except for administrative close-out is complete. $95 million in debt was issued and is approximately equal to project cost.

Prior to beginning construction, contingency dollars were in line with policy. City policy requires contingency dollars for the wastewater fund to be minimally 10% of operational requirements (payroll, materials/services, transfers/overhead, and debt service). Prior to LOIS project approval typical bi-monthly wastewater rates were flat or had seen small increases. Substantial increases in yearly construction costs, contingency dollars and wastewater rates were coincident with LOIS construction beginning. The typical wastewater bi-monthly bill increased $5 in 2007/08, $5 in 2008/09, $18 in 2009/10, $23 in 2010/11 and $17 in 2011/12. For 2012/2013 the typical wastewater bi-monthly bill is $121.48, a yearly increase of $3.54. The biggest increases in wastewater rates coincided with specific knowledge of the LOIS project proceeding and an estimate of its cost.

Why Return the Money? Long standing City financial policy requires $1.2 million in contingency. In 2012/2013 the budget has $15.5 million in contingency. Contingency dollars can only be used for unforeseen circumstances e.g. a city wastewater pipe unexpectedly bursting. Contingency dollars can’t be used for projects which might happen at some unknown time, like modifying the Portland owned Tryon Creek wastewater plant.

The June 2012 Council approved 5 Year Capital Improvement Plan (CIP) has no wastewater projects that are unfunded. Total funded project dollars in the 5 year CIP is $3.5 million. The Tryon Creek facility is not in the 5 year CIP. The Council has not decided to proceed with the Tryon Creek project other than establishing a Portland/LO working group. No timeline or dollars have been established for the project. Portland has indicated they support the upgrade of the facility but at this time are not interested in paying. Rates for LOIS did not begin their substantial increase until the project began in 2009. Clearly, the $15.5 million contingency in the wastewater fund is more than is needed.

What Can be Done? The wastewater contingency is at least $10 million overfunded. There are 13,350 utility accounts (single family, multi-family, commercial and irrigation). That means for at least 6 months (3 bills) the Council can provide a $100 credit ($300 in 6 months) to every bi-monthly account. This means every billing cycle (2 months) the contingency overfunding will be reduced by $1.3 million (13,350 accounts times $100). For a typical bi-monthly wastewater bill of $121.48, a $100 credit is substantial. After 6 months the council can renew the $100 credit until such time contingency dollars come back to a reasonable policy level.

Adopting this program or some variation will temporarily offset past increases in wastewater rates in a financially responsible way.

After all, it is the citizen’s money.

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