Another sewer rate hike looms in 2010
Costs from the $110 million Lake Oswego Interceptor Sewer project will require another sewer rate hike beginning July 1, 2010.
The Lake Oswego City Council heard the results of a rate analysis done by FCS Group last week.
The rates will likely be discussed again at an annual study session on city rates and charges on Nov. 17. The public hearing on the city rates will be on Dec. 1.
The rates would rise for 85 percent of the city’s customers who are connected to pipes that flow effluent across Oswego Lake to the Tryon Creek Wastewater Treatment Plant on Foothills Road.
The rates would support sewer maintenance projects, such as the LOIS project — which replaces an 18,000-foot sewer pipeline in Oswego Lake and repairs or replaces connecting sewer lines — and operating costs to treat sewage.
The city plans to pay for LOIS using bonds backed by property taxes and higher utility rates. In April, the city approved a 30 percent increase for the 2009-2010 year to cover the debt service of $60 million for the first phase of the LOIS project. At that time, the council authorized a full analysis of waste water utility rates and anticipated future increases to correspond with future bonds.
The analysis shows a need for rate increases through the 2013-2014 year. The recommendation is a 30 percent rate increase for 2010-2011 and 2011-2012, a 14 percent in 2013-2014 and three percent cost of living increase thereafter.
The study gave two options: 1) an increase to both the fixed charge and the rate applied to volume of water that is used, and 2) an increase to just the fixed charge with the volume rate staying steady.
Currently, average winter useage is 800 cubic feet of water, which would cost $38.93. An across the board rate change (option 1) would be $50.58, while the alternative option would cost $50.40.
The study found that an equal increase to both charges would be less stable as a funding source as the second option. Option 1 would leave up to 33 percent variable depending on how much water people use. But if the increase is to the fixed charge only, 18 percent of waste water utility rates would be variable. The question is: How much revenue does the city want to leave unpredictable?
Councilor Donna Jordon said she preferred putting the weight of the revenue onto the fixed charge so that the city is more secure in the amount of money it can plan to use for its debt. However, she also expressed concern for those individuals on a fixed income who might be more impacted by that option.
The study found that with the alternative option — where the burden of the revenue is on the fixed portion of the rate — people who use less water would appear to have the greatest increases to their bills. For example, a household that uses only 200 cubic feet of water would pay $37.50 for an across the board rate hike and $40.32 for the alternative option.
Councilor Sally Moncrieff added the concern that the alternative option appears as if water conservation is not rewarded in the rate structure, such as in the case of the city’s recently authorized surface water charges.
“Taking the long view as a city, the less we use as a city, then the less we have to expand our treatment plant, the less is coming through our waste water system … I just would hate to lose the incentive to use less water,” said Moncrieff. “Long term that seems it’s the best way to save on our utilities.”
The study considered the future debt service in its analysis. The current bond, which was issued in April, is meant to fund the LOIS project through June 2010. In the 2009-2010 year, the city is only paying interest. In 2012-2013 the city will begin to pay interest and principle on the bond.
Additional bonds will also be needed to fund the LOIS project. In 2010-2011 the city plans to go out for a new bond, which will likely require payments on interest for one year and larger payments on both principle and interest beginning in 2011-2012.
The new sewer rates are designed to meet those future obligations and bring in revenue for maintenance of the sewer system beyond the LOIS project.