Council feels water pressure

Kenai residents may have to soak up maintenance costs

Posted: Monday, March 31, 2003

Having access to clean, treated water is a convenience of living in a city, but that convenience comes at a price -- which may soon rise in Kenai.

The city council is considering increasing water and sewer rates for Kenai residents in order to generate money to replenish the city's dwindling water and sewer fund.

At its March 19 meeting, the council was presented with an ordinance proposing a 30 percent increase in the water rate and a 35 percent increase in the sewer rate. That would increase monthly water and sewer bills from $41 to $54.82, effective June 15.

The council did not vote to enact the measure, but a rise still is on the horizon.

This measure was brought on by concern over the city's nearly depleted water and sewer fund, which foots the bill for operational and maintenance costs of the city's water and sewer infrastructure, as well as any water- and sewer-related capital expenditures that are made.

According to Larry Semmens, the city's finance director, the current recommended city budget for the fiscal year 2004 has the fund ending up at $103,000 at the end of the year, which is nearly a $89,000 deficit.

"That is not sufficient to operate this fund," he said.

The city has not raised its water and sewer rates since 1993. Traditionally, the revenue generated by water and sewer fees has raised enough money to pay for the operational and maintenance aspects of the utilities but has not generated enough money to cover the costs of capital expenditures, according to information provided by City Manager Linda Snow.

As a result, water- and sewer-related capital expenditures over the past 10 years have depleted the fund to the point where it is not adequate to cover increased operational and maintenance costs for the utilities, much less future capital expenditures.

According to Public Works Manager Keith Kornelis, there are several water- and sewer-related capital projects on the horizon for the city, including a waste water treatment plant and a new well house, with a cumulative price tag in the millions. Half the cost of these projects is paid by the city, while the other half is paid by the Department of Environmental Conservation. Even so, current projections of the water and sewer fund show the city won't be able to cover even its half of the costs.

Semmens said these projects are paid for by existing money in the water and sewer fund, not through loans, so the fund has to have money available to complete the projects. The DEC does offer loans, but it would take a public vote to take out such a loan, he said.

"We've done (these projects) with cash over the years," Semmens said. "Even if we didn't have capital projects on the horizon, this fund balance is unacceptable."

The city commissioned a water and sewer rate analysis from CH2M Hill, which found that if the city had raised its rates by 21 percent in increments over the past nine years, the water and sewer fund would be healthy today. Since that did not happen, the consultant recommended the 30 and 35 percent rate increases. According to Semmens, this increase would result in a $337,000 surplus in the water and sewer fund.

Council members were not all in agreement with the recommendation.

"I will not support this," said council member Jim Bookey. "I expected different numbers on the increases. I think everybody in the community knows they're going to get a mill rate increase in the near future. I'm not in favor of giving them a 30 percent water and sewer rate increase (as well)."

Bookey went on to argue that not all of the impending water and sewer improvement projects on the list Kornelis gave need to be done immediately.

"Kenai is not in the position to be taking on a lot of new projects," Bookey said. "... If we do have an increase of 30 to 35 percent, we're going to have a tremendous amount of people in here on our necks."

Another option facing the council was to phase in the increase over two years by instituting a combined water and sewer increase of $7 to bill payers in fiscal year 2004 and another $7 in fiscal year 2005. Instead of approving this option, council member Linda Swarner suggested raising the rates by 10 percent each and the council approved an amendment to the ordinance to that affect.

Ultimately, however, the council postponed a vote on the issue until more information on rate schedules and the revenue different rate increases would generate could be provided.

"I think we need a clear picture of what we've generated here," Kenai Mayor John Williams said. "I agree with administration that the fund balance (of the water and sewer fund) is way too low."

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