Water and sewer rates in the city of Kenai will rise 10 percent effective July 1.
The Kenai City Council voted at its Wednesday meeting to implement the rate increase in response to the depletion of the city's water and sewer fund, which is where the money to cover the costs of maintenance and improvements to the utilities comes from.
Water and sewer rates have not risen in Kenai in 10 years, yet operation costs have risen by 30 percent, water production has risen by 40 percent, and the amount of sewer lines in the city has risen by 5 percent in that time.
Those increases, coupled with recent fund expenditures totaling about $1.2 million for work on a new well house and other projects, have shrunk the water and sewer fund to the point where it is expected to end up with about $150,000 at the end of this year, compared to the nearly $1,180,000 it had at the end of 2002.
According to Finance Director Larry Semmens, that is not enough money to operate the fund, especially in view of the impending water and sewer projects that face the city, like buying a new vacuum truck, recoating a water tank, constructing a new well house and treating its water to be in compliance with the more stringent arsenic water quality standards that the Department of Environmental Conservation has implemented.
The 10 percent rate increase is expected to raise the level of that fund to about $260,000 at the end of the fiscal year 2004. The flat monthly residential water and sewer rate bill will change from $41 to $45.10 as a result of the increase.
The city's administration and CH2M Hill, a consulting firm commissioned to do a water and sewer rate study for the city, recommended raising the water rate by 30 percent and the sewer rate by 35 percent this year, or by 15 percent and 17 percent, respectively, each year for the next two years.
The firm also recommended using loans instead of cash to finance projects in the future. Most council members found these increases too drastic to implement.
"I don't think it's time to have an increase this high," said council member Pat Porter.
In its report, CH2M Hill said if the city had increased its water and sewer rates incrementally during the past 10 years, the fund would not be as drastically depleted as it is now. Council members Jim Bookey and Linda Swarner questioned the city's administration as to why rate increases hadn't been brought before the council before the fund was almost broke.
Semmens replied that until the recent $1.2 million expenditures, the fund wasn't in that bad of shape. Even so, he said he had warned of the need to increase rates prior to this ordinance.
"We expected this, and I, personally, have talked about this for a year," he said. "I don't know why it's a surprise."
Kenai Mayor John Williams was the only council member to support the higher rate increase.
"There are some things this council cannot shirk their responsibility of -- public safety and public health (issues)," he said. "... If it requires we raise the price of water 15 percent, then I'm going to do it."
Williams argued it was too risky to not implement the higher rate increases because if some part of the water and sewer utilities broke down this year, there might not be enough money in the fund to cover the cost to fix it.
"Shrinking the budget in maintenance only asks for trouble," he said. "Some parts of that system are 30 years old. If anything major goes wrong with that (sewer) plant, it will be a health issue."
John Mellish, a commercial property manager in Kenai, agreed with Williams.
"Personally, I say go ahead," Mellish told the council during the public comment section of the meeting. "You can't sit here in this city and say we're going to run our water and sewer bare bones and find money from somewhere else to pay for maintenance down the road."
Council member Joe Moore responded that he didn't want the community thinking the council was cutting corners in public safety.
When it came time to vote on the ordinance, council members Moore, Bookey, Swarner, Porter and Amy Jackman voted for the 10 percent increase, apparently on the belief that the increase will generate a satisfactory amount of revenue for the fund. Williams voted against it, since he supported the higher rate increase.
Bookey said he had gotten a call from a car wash owner in town who was concerned about his water bill.
"It's hard for me to put more on the backs of the people," Bookey said.
The council put to rest another challenging issue Wednesday when it directed the continuation of the paving of McCollum and Aliak drives and selected a method for assessing the cost of the project to benefiting property owners. The decision ended a debate over the issue that the council and property owners had been having for the past several meetings.
The council had to decide whether to assess the cost to property owners on a linear-foot or square-foot basis. Because of the size and shape of some of the neighborhood lots, the decision could have meant a difference in thousands of dollars to some property owners. As such, the neighborhood was split on which method to recommend to the council and the council had a hard time deciding which to implement.
As a compromise, the city's administration developed an alternate square-footage method of assessment that put more cost on the Kenai Peninsula Borough (which owns lots in the area) and evened out the cost to other property owners who had been faced with unusually high or low bills under the previously proposed methods of assessment. The property owners at the meeting recommended this method to the council.
"It costs me more, but looking at it, I think it's more fair to the neighbors," said Janine Espy. "(The previous options) put the neighbors against each other, and that's not a healthy thing."
The council voted unanimously to approve the continuation of this project and the recommended method of assessment. Council members also agreed to have the city cover the cost that would be assessed to the Kenai Lions Club for a triangular-shaped lot of land at the end of Aliak, which was donated to the club and is only used to post their "Welcome to Kenai" sign.
In other action Wednesday, the council:
Approved applying the $315,975 received as a settlement for litigation related to the Inlet Woods subdivision to the debt service fund, which will pay off the debt the city previously faced in this matter.
Approved transferring $8,000 from the maintenance and operation salaries portion of the airport land system special revenue fund to the maintenance and operations overtime portion of the fund to pay for overtime costs.
Set a budget work session time for 6 p.m. Monday. The council will discuss the administration's prepared fiscal year 2004 budget, as well as hear a presentation from the Kenai Boys and Girls Club about operating the Kenai Recreation Center.
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