With municipal utility funding tapped out, City Council started reaching for the rate faucet on Monday.
By a 5-1 vote, the council instructed city staff to prepare a resolution to raise residential and commercial sewer and water rates by about 45 percent starting Feb. 1, 2002.
Council will consider the resolution in its next meeting, Jan. 14.
For the typical home, the monthly sewer rate would go up from $26 to $36, while the water rate would rise from $14.35 to $22.17.
"The sewer funds are all broke," City Manager Lynn Guenther told the council. "We spent all our money on debt service and (sewage plant) construction and that's why we're in the hole."
The city must pay for last year's expansion of the sewage treatment plant, and build up reserves to fund a new water line, at an estimated $19 million.
The council action was based on a report presented Monday by Raymond Bartlett, a Portland financial analyst under contract with the city.
"The sewer utility is running a deficit that increases monthly," Bartlett reported. "To avoid having to borrow money from a non-sewer fund (such as the General Fund) sewer rates will have to be increased as soon as possible," Bartlett reported.
"While the water utility for the moment is recovering enough revenue from rates to cover its costs, in the near future the city will begin construction of a new water main from its wells on Mount Hood to the City that may cost as much as $19 million." The city will have to increase water rates to cover the interest on loans needed for water main construction, Bartlett said.
Bartlett said the city could get by if it raised the sewer rate to $32 effective Feb. 1 and then again to $36 by July 1. He noted that at the proposed rates of $36 for sewer and $22 for water, Hood River would be below the state average of $40 for sewer and $25 for water among similar-sized rural Oregon cities.
Council Member Andrea Klaas voted against Monday's motion, after pointing to Hood River County's per capita income being among the state's lowest, and unemployment rates among the highest.
"It's so expensive to live in the city," Klaas said. "We just raised our garbage rates, and it costs a lot to live here. Part of affordable housing is being able to pay these utility costs."
But Guenther urged the council to move toward the full $36 rate rather than going in increments.
"We should take our lumps one time, and be done with it," Guenther said in urging the council to support the idea of moving toward one rate increase rather than the incremental approach.
"Set the schedule and stick with it, so everyone knows it's going to happen -- an annual increase in water and sewer," Guenther said.
The council also took a step toward creating a surcharge for the 140 city water users who live outside of the city limits and pay no city taxes. Passing unanimously Monday was Council Member Chuck Haynie's separate motion to order staff to prepare a resolution that would make non-city water uses pay a 50 percent "differential" charge above the basic rate.
Haynie had argued in favor of passing the $32 sewer rate in February rather than the full $36.
"If you don't need the taxes, you shouldn't pass them," Haynie said.
"Less is needed now," he said, given the current economic recession. "I see this is as a $4 fudge factor." But Guenther pointed out that any unspent utility revenue would be carried over to the next budget year.
Bartlett told the council, "At $36 you will be close to breaking even at the end of the the fiscal year but you will start building cash reserves at the end of the year."
Annual rate hikes expected
The rate hike proposed for January could be a first-annual.
Based on the city's projected revenue needs, according to analyst Raymond Bartlett, the city would need to ask for annual utility hikes. This is a sample of how they would go:
Residential and commercial water:
$22.17 in 2002
$25.50 in 2003
$28.04 in 2004.
(three-quarter-inch meter service)
$36 in 2002
$40 in 2003
$42 in 2004
$61.20 in 2002
$68.00 in 2003
$71.40 in 2004
(one-inch meter service)