After eight weeks of consultation with senior Haines Borough staffers, manager David Sosa is recommending the assembly raise water and sewer rates.
Final numbers haven’t been hammered out, but Sosa said if his recommendation is adopted, the average water and sewer user will likely see a minimum $10 per month cumulative increase over the next three years.
For example, rates may increase $3 this year, $3 next year, and $4 the year after that, so users would be paying $10 per month more in three years than they are now.
The increases are necessary to cover operating costs, meet loan obligations, and save money for future improvements to the water and sewer facilities, Sosa said.
The borough has approximately 805 water customers and 760 sewer customers, said chief fiscal officer Jila Stuart.
Residential water and sewer rates are flat fees at $34 and $44.40 per month, respectively. Commercial rates for a three-quarter-inch line are $31.70 per month for water and $42.45 for sewer for the first 5,000 gallons.
Sosa, Stuart, water/sewer plant operator Scott Bradford and public facilities director Carlos Jimenez have been meeting for two months to discuss potential rate increases.
One of the reasons rates need to increase is so the borough can put aside money for future capital improvements to water and sewer infrastructure, Sosa said. Historically, Alaskan communities haven’t put their own money aside because they have relied on government grants for major projects.
“They’ve always had oil money. You’ve always had the grants coming in. You could almost always rely on a grant at some point to address the problem,” Sosa said.
With dwindling oil revenues, however, the borough needs to become more self-sufficient, he said.
Chief fiscal officer Stuart estimated 4 to 5 percent of each water/sewer bill would be set aside for future improvements.
The borough’s water and sewer funds are enterprise funds, meaning their operations should be fully funded by rates paid by customers. That also isn’t happening, Sosa said.
The borough also didn’t take in enough revenue through rates in fiscal year 2014 to meet its debt service requirement, Stuart said.
The borough took out a 40-year loan in the early 1990s to pay for sewer improvements. A couple years ago, the borough refinanced the loan to get a better interest rate. One of the bond holder’s requirements is the borough collect a certain amount of money through its rates.
“They want to make sure our utility remains solvent, so they require us to set our rates so we clear a certain threshold of revenue,” Stuart said.
Instead of taking the rate increase recommendation straight to the assembly, the Government Affairs and Services Committee will take up the issue.
“That way, it can get out there to the public and people can come in and start to take a look at this because it’s going to take a lot of explanation,” Sosa said.
Mayor Jan Hill hasn’t made board appointments yet, but Sosa said he hopes to have the GAS committee meet before the New Year. “We have to demonstrate to the bond holders that we are addressing our debt service,” he said.
To accomplish all three goals – covering operating costs, meeting the debt service, and saving for future improvements – the rate increase is necessary, Sosa said.
The wastewater treatment plant is in desperate need of repair, he said. Within a year, something will need to be done regardless of whether the borough can secure a loan or grant. “The facility is getting to the point where it’s not going to be safe to operate,” he said.
The borough this year applied for a $3 million Department of Environmental Conservation matching grant to pay for the first phase of replacing the wastewater plant. If the borough receives the grant, the municipality would be responsible for 30 percent of the $3 million project cost.
Stuart said the borough can’t use any of its $2.5 million areawide fund balance or $1.5 million townsite fund balance for the water and sewer funds. According to charter, if the borough were to use either of those fund balances to pay for water and sewer expenses, the water and sewer enterprise funds would have to repay that money back into the general funds.