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Council gives OK for large rate hike
Enumclaw residents upset at seeing their sewage rates increasing by 55 percent this week can blame two crucial factors.
First is the expanded wastewater treatment plant, the largest public works project in city history, which cost $10 million more than anticipated. Second is the economy, which put a damper on the housing industry and kept new ratepayers from moving to town, as was planned.
Those details were discussed in depth the evening of Aug. 24, when members of the Enumclaw City Council were faced with a wastewater utility that has simply run out of money; bills are coming due and, without an infusion of cash, the debts won’t be paid, they were told by Public Works Director Chris Searcy.
The discussion among council members wasn’t whether to raise sewer rates, but when and by how much. Options included a 35 percent rate hike immediately, followed by perhaps a 20 percent increase in January; or a smaller bump now and a larger jump with the coming of the new year; or no increase now and maybe a 60 percent increase when the calendar flipped to 2010.
In the end, council members chose to implement a 55 percent increase effective Sept. 1. Aside from proving Searcy’s department with a financial infusion sooner, the rate is slightly less than it would be if the council waited.
Before casting their votes, Searcy had led led the council and City Hall audience through a detailed presentation, detailing how the wastewater utility came to be in such a financial predicament.
He first reminded that the city’s Sewer Utility Fund is an “enterprise fund” and, as such, revenues are supposed to meet expenditures.
At the completion of the last full-fledged rate study, the council had authorized three consecutive years of 27 percent rate increases; those monthly jumps in customers’ utility bills came in 2006, 2007 and 2008. Despite those three healthy increases, Searcy wrote in a memo to the council, the wastewater utility “operated at a deficit of approximately $900,000 for the fiscal year 2008” and there will be an imbalance of about $850,000 this year.
The specific reasons for the financial mess that brought this week’s rate increases include:
When the wastewater treatment was being planned, in 2005, it carried as estimated price tag of about $23 million. Now that the project is about complete, the cost is being pegged at about $33 million. The city borrowed money to get the work done and the annual payments are much larger than was initially figured.
The 2005 rate study assumed the city would be taking in approximately 280,000 annually in connection charges, based on all the new homes being built thanks to completion of the treatment plant. The revised figure for 2009 is $54,000.
“The lack of new growth pushes the burden to existing ratepayers,” Searcy told the council.
Since 2005, city customers have reduced their water consumption by 10 percent; additionally, a change in the city’s billing software recalculated rates, bringing less in revenues that was expected; and, finally, there are more than 100 accounts on the city books using minimal water, many of those being vacant homes.
Here’s what all that means to the average ratepayer in the city of Enumclaw. In 2005, the average monthly wastewater fee was $xx.xx and, when the city enacted the three consecutive years of increases, those fees jumped first to $31.50 and then to about $37 and finally to the $43.30 being charged this year.
If the math doesn’t quite add up, it’s because the city altered its billing formula part-way through the three years of rate hikes. Searcy said the change has added to the city’s dilemma, as single-family ratepayers haven’t seen their rates jump as dramatically as expected. It was anticipated the monthly rate would be in excess of $50 by now.
But what’s to come?
“Operating the utility costs a lot of money,” Searcy said, adding that no further cuts can be made to reduce expenditures. That means more will coming from residents’ pockets.
The option selected by the council – to implement an immediate 55 percent increase – will bring about a monthly rate of $77.15. Other options presented to the council carried rates ranging from $78.34 to $80.83.
Aside from the pressing need to pay its bills, the city has also considered what the unstable financial situation might do to its credit rating.
Finance Director Dianne Nelson has met with a bond adviser, who warned that Enumclaw faces an unfavorable rating if its wastewater utility continues to scrape by.
“Our financial house is not in order,” Nelson told the council. “The sooner we get things in order, the better we will look.”
When asked for her professional advice regarding the rate increase, Nelson supported the immediate 55 percent hike.
City Administrator Mark Bauer concurred. “The best alternative would be to take all the increase now,” he said.
Council members made it clear that they didn’t like the position they were in, but passed the increase unanimously.
“This stinks. This is not fair,” Jeff Beckwith said moments before the vote was taken. “We’re faced with a utility that’s losing money. We have to get the ship righted.”
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