Lebanon to Review Water, Sewer Rates
Lebanon — The City Council plans to evaluate how water and sewer users are charged as debt continues to weigh on the city’s ability to maintain its aging infrastructure.
Earlier in the month, city councilors indicated that in the beginning next year they would consider a structure that would levy a fixed fee on all water and sewer users in addition to the volume-based charges currently imposed.
Additionally, o ne-time fees to be applied to new sewer connections are also likely to be considered.
The City Council will hold a public hearing on Dec. 4 on whether to raise the municipal sewer rate by 9 percent, which would come on the heels of another 9 percent increase that was approved a year ago.
If the rate is increased again, an average sewer user would see an annual bill of about $285, an increase of $24.
There is no proposed rate increase for municipal water users, who pay an average of $147 annually.
If city councilors don’t consider changing the fee structure in the next year, they may regret it in the future, Mayor Georgia Tuttle said at a City Council meeting earlier this month.
“I think we’re all hovering, trying to decide when is that critical decision going to be made and how are going to justify that?” Tuttle said.
Demographics are key to the city’s challenge.
At the council meeting on Nov. 20, c onsultant Steve Clifton, of Portsmouth, N.H.-based Underwood Engineers, said about 10 percent of sewer and water users pay the lowest-possible bill, otherwise known as the “minimum service charge,” which amounts to $112 in annual water fees and $201 in annual sewer fees. In Lebanon, the minimum service charge applies to users who consume less than 57 gallons of water per day.
Clifton said, however, the minimum payment that the city requires of that lowest bracket doesn’t cover the city’s actual cost of providing those services.
Clifton has advised the city for several years to tweak its rate structure to incorporate the fixed fee, which he estimated could be double the current minimum service charge.
City councilors worried that such a change would burden low-income residents.
Tuttle said at the Nov. 20 meeting that councilors have shied away from what they have known to be the most fiscally sound policy decision “because of that 10 percent of people we felt we might push right out of the city.”
Clifton said a charge to address fixed-use cost, he said, would offset consumption-based fees. He said the challenge of how to adjust the rate system was a “philosophical question.
“The engineering answer is that any time you change your rate structure, you’re impacting somebody different,” he said.
At the Nov. 20 meeting, city councilors signaled that they were ready to at least start discussing a new rate structure.
City Councilor Suzanne Prentiss said the reluctance of councilors to address water and sewer rates was reminiscent of the debate on charging impact fees, which were discussed at considerable length before being approved.
Prentiss said impact fees, which are designed to offset the cost of providing city services to new developments, were “talked about for a long time, and now we have had a lot of missed opportunities.
“If we’re really going to formally consider (a new rate structure), I think we’re at a point where we need to see it,” she said.
City Councilor Carol Dustin expressed concern about low-volume residential users paying more.
“We need young families to be part of this community in order to ensure our future,” she said. “I just wonder how this affects them in a way that makes it difficult or impossible for them to be living in the city.”
City Councilor Erling Heistad asked if there was any way to “make a fairer playing field” by putting more of the burden on industrial and commercial users.
“They should be more responsible for the additional costs coming up than somebody running a bathtub for a two-year-old,” said Heistad. “How do you balance that out? I don’t know, but I’m definitely concerned about the low-end user, because I think a lot of these low-end users aren’t the ones who can afford a higher-end price.”
The Debt Burden
Lebanon Finance Director Len Jarvi wrote in a memo to city councilors that existing and projected debt from capital projects has had a “significant influence” on suggested utility rate increases.
More than a quarter of the city’s 2013 sewer budget went to pay off debt, and projections indicate that debt payments will consume a third of the budget in 2015, and nearly half of the budget in 2016 through 2019.
On the water side, more than a third of this year’s budget is earmarked for debt payments. By 2019, the proportion is expected to increase to 40 percent.
The majority of the debt comes from two major sewer-related projects: a citywide separation of sewer and stormwater drains, otherwise known as “combined sewer overflow” projects — or CSOs — and wastewater treatment facility improvements. (Sewer work at the intersection of Etna Road and Route 120, which is anticipated to cost about $4 million, has also added to the debt burden.)
At the year’s end, the city will have $28.4 million in debt that has been authorized by the City Council but not yet issued. Nearly $15.5 million of that is slated to go toward CSO projects and utility replacement, and nearly $11 million will be used for wastewater treatment facility improvements.
Of the $28.4 million, about $7 million will be supported by property taxes, about $4.6 million through water service rates, and about $16.7 through sewer service rates.
The city has been under a mandate from the Environmental Protection Agency since 2000 to address the combined sewer overflows because the untreated mixture sewer and stormwater discharged into waterways violates the Clean Water Act.
The need to complete the CSO initiative is often referred to by city councilors in the context of a major misstep by past councils, which neglected for years to leverage federal funds for the work. By the time the city started work on the CSO projects, the money from Washington had dried up.
The City Council has authorized spending about $43 million on CSO projects since the EPA issued its mandate, and 30 percent of that total will come from both water and sewer fees. The entire overhaul is scheduled to be finished by 2020.
At the Nov. 20 meeting, City Councilor Bruce Bronner asked Jarvi if there was a point where water and sewer rates could be expected to “plateau.”
Jarvi responded that the water fund could be at that point “over the next couple of years,” but the “sewer scares me.
“For the next four or five years,” Jarvi said, “I am looking at five years of 9 percent increases, and that may be light.”
The public hearing on the sewer rate increase will be held at 7 p.m. Wednesday in the City Council chambers at City Hall.
Ben Conarck can be reached at email@example.com or 603-727-3213.