Columbia City Council, in a tough spot over water and sewer rates, is considering cutting them for large-volume users, slashing the citys plans to upgrade the utility system or finding another way out of the pinch.
None of the six plans suggested recently by city staffers would help nearly 90 percent of Columbias 142,000 customers, including any homeowners.
Council is searching for a way to placate customers angered by rate hikes that took effect in July and still try to satisfy federal environmental regulators who are about to come down with tough sanctions for years of neglecting to maintain pipes and plants, in violation of national pollution standards.
But slashing rates too much introduces even more troubles, assistant city manager Missy Gentry told council during its annual retreat.
The AA bond rating the water and sewer system enjoys with rating agencies could drop, making it more expensive to borrow the projected $400 million in loans Columbia has been planning to get over the next five years to finance $500 million in improvements, Gentry said. The $100 million difference would come from money generated by customers.
Its unclear when council would take up voting on the thorny issue, even though the utility division has suggested next month so changes could take effect on New Years Day.
Councilman Cameron Runyan captured councils dilemma.
We can do it now or we can do it later, he said. But we are absorbing a lot of risk if we put this off ... it could be more expensive, because interest rates and construction costs could rise.
What is unspoken is an impending sewer system consent decree with the EPA and the U.S. Justice Department. Federal officials have instructed city leaders not to talk publicly about their sewer upgrade plans, citing a confidentiality agreement the city signed. Sources have told The State newspaper a fine might reach $1.5 million and mandated improvements could be hundreds of millions.
Meanwhile, most of the outcry from customers was triggered by startling increases in availability fees for those with large water meters or with fire sprinkler systems, utility division officials have said.
Thats because council last spring decided to shift from a decades-long practice of fixed availability fees, called base rates, for all customers to a fee structure that makes customers with large pipes or meters pay much more.
Hikes varied from a few percentage points per month to bills that shot up 28 times higher.
Making matters worse for ratepayers, availability fees are imposed every month regardless of whether customers use any water. Availability fees are imposed on customers to offset the citys expense for being able to respond to their worse-case needs, such as a catastrophic fire, utility officials have said.
Generally, the staffs proposed alternatives for roughly 15,200 affected customers looks like this:
• Cut rates in half which would drain $4.4 million from this years revenue and slash $50 million from the amount the city had planned to borrow for its first phase of upgrades, Gentry told council.
That would mean no savings from the new $6 monthly availability fees that homeowners have been paying since summer. But 6,300 customers with 1-inch meters the next largest group would save $4.50 per month if they live inside city limits. The 30 largest consumers, those with 10-inch meters, would save $273.48 per month if theyre in-city customers, according to Gentrys figures.
Cut rates by 25 percent which would drain $1.9 million from revenues and slash $13 million from this years borrowing plan.
That wouldnt help homeowners, either. But in-city customers with 1-inch meters would save $2.22 monthly while those with 10-inch meters would save $186 a month, Gentrys figures show.
Rates for out-of-city water and sewer customers are higher and comparative figures were not readily available, Gentry said.
• Cut rates by 10 percent for about 1,750 of the citys 72,000 sewer customers which would drain $200,000 from this years revenue. Residential customers would not qualify for the cut. Its unclear how a 10 percent reduction would affect borrowing.
Reduce rates for 1,300 dual-meter customers, but a breakdown of that cut was not readily available, Gentry said. That would drain $500,000 from this years revenue. Its not yet clear how that would affect borrowing.
When council asked the staff to come up with suggestions, Mayor Steve Benjamin recommended creative solutions.
It might be hard to thread that needle.
We need to suck it up and take the hit, Runyan said of keeping rates as they are.