Kenai talks rate increases

Posted: Monday, February 21, 2011

At a work session last week, members of Kenai's city council discussed water and sewer rate increases proposed by a consulting firm hired to study the city's water and sewer rates.

For unmetered one- and two-family residences, the proposal suggests a monthly increase of about $6 a month for water, and between $2 and $3 dollars for sewer.

Currently, unmetered residences make up about 79 percent of sewer accounts and 80 percent of water accounts. The current rates at those dwellings are $40.35 a month for sewer and $13.78 for water. Commercial rates, residential apartments and metered rates would also increase under the plan.

Consulting firm CH2M Hill did the study of Kenai's water and sewer rates and concluded that within a few years, the costs to operate and maintain the city's water and sewer systems will be more than the city receives in revenue from those accounts.

According to CH2M Hill's report, the water and sewer fund is only breaking even because the two are combined. The money residents pay for water doesn't cover expenses. Necessary improvements mean that sewer will not be able to carry water very much longer.

CH2M Hill recommended making the rate change in fiscal year 2013, which begins in July 2012.

Under the proposal rates would increase in 2013, and again each year after that. After the initial increases, rates would increase a much smaller amount in subsequent years -- say 2 percent or 3 percent of the cost -- to keep pace with inflation.

City Manager Rick Koch said the smaller increases could be a more stable funding source. Kenai Mayor Pat Porter said that the last time the city increased rates, the final increase was smaller than what the city was projected to need because of public opposition to the increase. This would avoid that blood battle every five to seven years, Koch said.

The proposed rates could also allow for some money to go into a savings account each year, and then be spent when the city faces bigger expenses, like major maintenance.

Koch noted that if the balance on the savings account got higher than needed, the city could forgo an increase for a year to let things balance out.

Kenai's current water and sewer system is from the 1980s.

Koch said it will probably need a significant amount of work in the future. Planned improvements were included in the projections for the rate study, but unexpected expenses are likely to come up.

"We would hope for a catastrophic incident, that way the insurance would pay for it," he said. But more likely, the city will be faced with the cost of repairs in coming years.

The report predicted needs such as replacing some water mains, constructing new ones and even a new water truck in 2026. Sewer needs a truck in 2012, treatment upgrades and a sewer extension.

Kenai's rates are currently at the low end of the sample CH2M Hill looked at, which included Palmer, Soldotna, Cordova, Anchorage, Juneau, Kodiak, Seward and Homer. The changes proposed by CH2M Hill would increase rates so that the combined water-sewer cost is closer to the middle of the pack.

"I think the public needs to see what it costs in other communities," Porter said.

Koch said comparing Kenai's rates to other Alaska communities isn't wholly accurate -- different systems have different costs and local rates ultimately need to be based on the cost to provide the service -- but comparison does provide a general metric for what people around the state pay for their water and sewer use.

Koch praised the local operators for the low costs.

"They've very efficient," he said. "They do a wonderful job."

He explained that pipes and maintenance, not the water itself, make up the bulk of the cost.

"Water is the cheapest part of what we do by far," Koch said.

Councilman Bob Molloy asked why the report suggested waiting until 2013.

Koch said the city should probably wait until it is delivering water with less color. Plus, it gives the council time to work with the community on the rate increases.

"I think that's an appropriate lead time," he said.

The council will not take any action on the study right away, but could look at implementing new rates in a future budget cycle.

Molly Dischner can be reached at molly.dischner@peninsulaclarion.com



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