Annual operating deficits of over $300,000 for sewer and $62,000 for potable water may soon find their way to the residents of the city of Jackson via rate hikes.
The Jackson City Council discussed the issue of how to balance both the water and sewer accounts at its meeting Monday night. After a lengthy discussion that saw heated debate from both the public and among councilmembers themselves, it was decided that a public hearing will be held at the council's Sept. 13 meeting to allow the public an opportunity to voice its concerns.
Jackson City Manager Mike Daly opened the discussion by summarizing a lengthy staff report prepared for the agenda item. Daly told the council that the notion of raising sewer and water rates came about nearly two years ago when a committee was formed to evaluate and present recommendations on how to bridge the gap in the sewer fund. The committee did so and provided three potential solutions to resolve the deficit.
Water and sewer are enterprise funds, meaning expenditures are supported by fees charged for services rendered. Sewer rates in the city have basically remained unchanged since 1995.
"Things have changed dramatically on the wastewater side in the five years since the last study," Daly told the council. Those changes include the addition of a new staff person at the city's wastewater treatment plant and increasingly more stringent requirements passed down by various state agencies. These factors and more all combine to equal additional operating costs for the treatment facility, necessitating rate increases, Daly said.
Additionally, the questions of whether or not the city will be allowed to continue to dispose of its treated effluent into Jackson Creek and what capital improvements will be needed in order for it to do so pose further issues requiring a potential rate increase.
"The city is presently in discussions with the Regional Water Quality Control Board and other stakeholder agencies to determine the type of physical upgrades that might be required, however, it is still very uncertain when a specific plan for capital improvements will be completed and the maintenance and operation of the water treatment plant can no longer wait for this other component of the rate structure to be completed," Daly wrote in his staff report.
Raising sewer rates isn't as simple as it appears at face value, however. While the most simple way to bridge the gap - about a 38 percent deficit, Daly said - between revenues and expenditures would be to institute an across-the-board rate increase for both residential and commercial users, each category places different draws on the system. An increase of 38 percent would change the current residential rates from $20.40 per month to $28.15 per month.
Instead, the committee opted to dig deeper into the city's rate structure to evaluate the equity of the present rate structure concerning usage and revenue. Over a two year period the committee found that the water usage is roughly equal between the two categories of users.
However, there is a much greater difference in the revenue generated by the two categories, Daly said.
"The residential users are paying 61.5 percent of the revenue into the system, while the commercial customers are paying 38.5 percent," Daly's staff report states.
Residential rates are a flat amount of $20.40 regardless of how much water is used. However, the commercial rate is based partially on the amount of water consumed during wet weather months.
The commercial rates are calculated using the same $20.40 per month during wet weather months as residential customers, however, an additional charge is levied if the commercial user consumes more than a specific amount of water.
Due to this disparity a simple, across-the-board rate hike would not address the imbalance.
The committee recommended adjusting the commercial base rate threshold downward, lowering the specified amount of water a commercial user can use without incurring additional costs. Increasing residential rates to only $23.87 per month, rather than to $28.15, would be supplemented by lowering the commercial water usage threshold.
The net effect would be that commercial users would pay 47.2 percent of the revenue generated for the plant, rather than the current 38.5 percent. Residential customers would see a 17 percent rate increase total, while the rate for commercial customers using more than the allotted amount of water could see an increase of approximately 75 percent.
Daly said other options were looked at as well.
After his presentation, the council began discussing the issue. Councilwoman Marilyn Lewis said city staff knew a rate increase was imminent and chose to simply sit on the information.
"My concern is that this committee met and dissolved over a year ago," she said. "This information should have been in front of the public before we adopted our budget. We just kind of sat on this deficit for a year and a half."
Daly responded by noting the budget did address rate increases but no quantification was put on those potential rate increases. Councilwoman RosaLee Pryor told Lewis that the council would have wronged the public by addressing the potential rate increases when it didn't have all the information it needed to do so.
Daly also spoke to the potable water rates and said that the fund's deficit of $62,000 could be made up by instituting a 4 percent increase. For those using up to five units of water per month, the increase could change their rates from the current $20.18 per month to $20.98 per month. For those using 10 units of water and paying $30.96 per month the rate would increase to $32.18 and for those using 20 units per month the rate would jump from $54.06 to $56.80 per month.
The last water rate increase was in July 2000.
Several members of the public also spoke at Monday's council meeting regarding the role the Amador Water Agency's pipeline project has had on the city's water rates through a trickle-down effect.
Eventually, the council decided to direct Daly to prepare a letter to be mailed to all water and sewer customers notifying them of the public hearing Sept. 13.
