The Haines Borough is proposing a 4 percent rate increase for most water and sewer customers, partly to help cover the cost of the borough’s purchase of Crystal Cathedrals Water and Sewer System.

The Crystal Cathedrals acquisition, though, ultimately might have a much heftier cost than its initial $370,000 pricetag.

According to a July letter from engineer James Dorn of Carson Dorn Inc. of Juneau, connecting the formerly private utility to the borough’s water and sewer system could cost more than $2 million. That’s one estimate of the cost for resolving a difference in water pressure between the two systems.

How much of that cost will be passed on to borough customers is unclear. Borough officials say they’re seeking grants to knock down the cost to the borough.

Dorn wrote that combining the utilities project would have planning, design and construction phases, and the first two phases would cost about $200,000.

The third phase, an estimated $2 million, would pay for “a reservoir and pump station along with associated site preparation, piping and electrical,” Dorn wrote.

The Haines Borough Assembly on Nov. 9 introduced an ordinance for rate adjustments that would become effective once the Crystal Cathedrals purchase is complete. Crystal Cathedrals is a private provider for water and sewer services.

“The Regulatory Commission of Alaska (RCA) did approve, finally, the request granting the transfer of the sale of Crystal Cathedrals to the borough (effective Nov. 1),” Earnest said.

Crystal Cathedrals served about 50 customers on the west side of town as of October 2009, when the borough met the $370,000 asking price from Vicky Cox, ex-wife of former owner John Floreske.

Jila Stuart, chief fiscal officer, said Dorn’s plan would “use our Piedad water source, which is a ground water source, not a surface water source, to serve that area, which is certainly our ideal, as far as I know, but not our only option.”

“I wouldn’t be too concerned about this $1.5 million to $2 million number,” Stuart said. “…From what Mark (Earnest) and I know, we will be acquiring the well field and the well, so we don’t have to interconnect the systems. We can continue to run the system, although it’s not ideal and although it wouldn’t add fire protection for them, or better fire protection for them, we can continue to run the individual systems as they are.”

A second alternative, she said, “is to combine the systems but continue to use Lily Lake as our primary water source and continue to use our existing water treatment plant to process all of the water for the combined systems.”

Earnest said the borough had requested grant funding from the Alaska Department of Environmental Conservation for the project.

Borough facilities director Brad Maynard said a pump station and water tank likely would be needed to take the well fields offline, and he didn’t see the cost coming in much lower than Dorn’s “rough” estimates.

A first public hearing for the rate adjustments ordinance has been scheduled for Tuesday, Nov. 30.

“Most of the Haines Borough water and sewer customers currently are residential, flat-rate customers, and those customers pay $73.05 (monthly) right now,” Stuart said. “Under this ordinance, they would pay $75.80. That’s an increase of $2.75, and $1.52 of that is for the purchase of Crystal Cathedrals, and the other $1.23 is, basically, because we haven’t had a rate increase in three years. It’s actually a pretty conservative number, just to cover the rising operating costs.”

A draft of the ordinance shows that Crystal Cathedrals residents would pay an additional surcharge of $22.45.

“Why aren’t we treating everybody equally and charging the same to everyone?” asked member Greg Goodman. “If it becomes a borough facility and everybody’s getting sewer and water, why are they going to pay more than everybody else?”

Stuart said the switch in services likely would result in “a huge increase” in the value of properties as they connect to the borough system.

“By the same argument that people in the current system wouldn’t pay to extend the main to someone outside of the system, you can make the argument that they shouldn’t pay to extend the city-subsidized system to people who were on a private system,” she said.

Mayor Jan Hill said residents in the Crystal Cathedrals area would be seeing a discount from previous rates.

The most recent residential base rate for Crystal Cathedrals was $121.50.

“When this came to us to see if we would buy it, people were okay with paying more, because paying more to us is still less than what they were paying to Crystal Cathedrals,” Hill said.