News and Opinion from Sisters, Oregon
News and Opinion from Sisters, Oregon
The Sisters City Council appears to be on the road toward establishing an initial water rate increase that would allow the city to start building an acceptable contingency fund and solidify the operations budget.
At a workshop Thursday morning, Mayor Lon Kellstrom directed the city's water rates consultant, Deb Galardi, to bring the council a rate proposal that would be established May 1, 2011, based on the assumption that water consumption will remain basically flat for the next year or two.
No further rate increase would be imposed until after January 1, 2013.
The current base water charge for customers with a 3/4-inch main is $19.80 per month.
Looking out 18 months, the proposal is far from a comprehensive plan for a new water rates structure. Thursday's proposal would stabilize to a degree a fund impacted by declining revenues caused either by conservation or by declining water use due to the economic slowdown (although the city has added accounts in the past two years). The proposal does not address 2012/13 plans for capital improvements to the water system, including such as refitting the city's Well #1 and repairing or replacing meters.
"We don't have any CIP (Capital Improvement Plan) stuff until the next year," Kellstrom told The Nugget.
Capital improvements would not be funded directly by water payments; the city would borrow for projects and service the debt through a portion of the rates.
Some work such as upsizing neighborhood water mains, funded by systems development charges, can go forward in any case.
The proposal for a May 1 rate increase also does not alter the rate structure to tie it more directly to actual consumption.
"This is the first cut at this thing; this is not the final, set-in-stone rate structure," Kellstrom acknowledged.
The city council has wrangled over the issue for eight or nine months, with some councilors and local activists arguing that rate increases are based on growth assumptions that no longer hold water.
"We're talking about worst-case scenarios on every front," said Councilor Pat Thompson. He said plans have been based on decreases in consumption, increases in costs of production and a list of capital improvements based on 2005-era growth projections.
"Where is the assumption that we're not going to need this because we don't have the growth?" he asked.
Councilor David Asson was visibly frustrated by the unwillingness of the council to project further out, arguing that the city needs a five-year plan based on worst-case scenarios.
"No one ever forecasts a business assuming the best - that goes against all accounting principles," Asson said.
He argued that, if the need for capital improvements does not materialize, the city can simply defer them and reduce or not assess planned-for rate increases.
"We're not going to blow it (increased water revenue); we're not going to throw it away," he said.
Galardi affirmed that the city would not necessarily have to stick to a schedule of rate increases.
"You could always hold back a few percentage points on a future rate increase if things are turning out rosier than expected," she said.
There has been some push for a close examination of costs, which would largely mean personnel costs, which are allocated across various city funds. Kellstrom noted that the eight-month focus on water rates has required the city to allocate more personnel time to the water fund than usual.
"Allocations of everybody's time in the water fund is bigger than it was six months ago," he said.
Cost-cutting as a means to a healthy water fund hasn't gained much traction.
"You will never cut your expenses to where you are in a positive revenue stream," Kellstrom said. "There's just not a lot of fat there."
Asson concurred. He said plans could account for cutting costs, but that wouldn't materially alter the need for additional revenue.
"We're not going to make the business grow by cutting costs," he said.
Thompson has emphasized repeatedly that he doesn't want to see multiple years of 15 percent rate increases that would be burdensome in the face of an economy that is recovering slowly at best. He said he wants to be sure that any rate increase is absolutely unavoidable.
"We can always defend it," he said. "I want to feel good defending it."
Kellstrom noted that, with revenues standing at about $460,000, a 10 percent rate increase will net only about $46,000 - which is not a lot more than is required to maintain a minimum industry-standard contingency fund allowing for 30 days of operation of the water system.
"A 10 or 15 percent increase is not going to fund the CIP; not even close," Kellstrom said.
The mayor told The Nugget that he thinks Galardi will come back with a rate proposal that will be acceptable to the council. Longer-term decisions will wait.
"We'll know more then than we know now," he said.
Jim Cornelius is editor in chief of The Nugget and author of “Warriors of the Wildlands: True Tales of the Frontier Partisans.” A history buff, he explores frontier history across three centuries and several continents on his podcast, The Frontier Partisans. For more information visit www.frontierpartisans.com.
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