Same increase proposed through 2030
On a split vote this week, the Sarasota City Commission approved a 3.5% rate increase for its utility customers that will take effect on Sept. 1 and continue through 2030.
The funds generated will help pay for approximately $298.5 million in projected expenses to upgrade the city’s water and wastewater systems, as detailed in a master plan staff unveiled in June.
Staff has proposed borrowing $130 million to cover the rest of the anticipated costs of the improvements.
Bill Riebe, director of the Utilities Department, emphasized just before the July 15 board vote that the list of 135 projects identified through an in-depth staff analysis does not have “any fluff.” He told the commissioners that if the city did not undertake the projects, “There’s going to be pipe failures; there’s going to be sewage on the ground; there’s going to be water [line] breaks; there’s going to be continued poor water quality in terms of taste and odor” and regulatory issues with which to contend.
Water and sewer systems, he emphasized, are “critical to life.”
A chart produced by consulting firm Raftelis, which worked with city staff on the rate increases, showed that a customer paying for 4,000 gallons of water and wastewater service each month would see his or her bill rise from $80.05 this year to $116.87 a month in 2030.
Another chart compared that average City of Sarasota customer’s rate of $82.85, as of Sept. 1, with rates paid by customers in peer communities. The average on the chart was $79.79, with a low of $58.67 per month in Bradenton and a high of $106.09 in Charlotte County, based on research Raftelis undertook in preparation for the July 15 City Commission meeting. A North Port customer is paying $88.85, the chart showed.
Thierry Boveri, senior manager of Raftelis, pointed out that some of the local government entities listed in the chart are engaged in rate studies. Many utility departments across the region, he added, “are going to need to raise rates.”
Vice Mayor Jen Ahearn-Koch made the motion to approve the ordinance amending the city’s water and sewer rates, and Commissioner Willie Shaw seconded it.
“We have no choice,” Ahearn-Koch said. “You have to invest in infrastructure. … This city is going to be in big trouble if we don’t.”
Shaw, who is the longest serving of the commissioners, pointed out that, since 2014, city commissioners have deferred upgrades to the utilities systems. The vote was necessary, he said, to start dealing with that fact.
Mayor Liz Alpert, who joined Ahearn-Koch and Shaw in the majority approving the motion, said she felt it was more sensible to spread out the rate increases over 11 years. That way, new customers would help pay for the improvements. Moreover, referring to speakers’ comments during the public hearing, she added, “This is a user fee; it is not a tax.”
However, Commissioners Hagen Brody and Shelli Freeland Eddie protested, saying they felt staff had not done enough to try to find funding alternatives.
They also voiced concerns about the fact that low-income residents will have to shoulder the same amount of increase as those with more disposable income. Most of the seven speakers during the public hearing made the same point.
Freeland Eddie characterized the attitude among staff members — including City Manager Tom Barwin — as “This is just the cost of doing business,” instead of their trying to find ways to bringing down the costs “to our customers.”
“These rates are going to keep people from moving here, and they’re going to make people move away,” Freeland Eddie added.
Brody also criticized staff for proposing almost $300 million in infrastructure expenses “without one penny coming from a cut to our budget. … I just don’t think that we’ve done our job on the finance side of this.”
He stressed the need for staff to seek out all potential grants, in an effort to lower the fees customers will pay.
“We’re going to pursue every grant that we can pursue,” Riebe said. However, a limited number of grants are available for water and sewer initiatives, Riebe pointed out.
Brody did emphasize that he is “completely in favor of revamping our water and wastewater systems,” while Freeland Eddie acknowledged, “I know that we’ve gotta do the work.”
A widespread need
A staff memo provided to the commission in advance of the July 15 regular meeting pointed out that no Utilities Department rate increase had been imposed since Sept. 1, 2015.
When Deputy City Manager Marlon Brown referred to that at one point, Freeland Eddie replied, “We’re making up for it now.”
“This is the worst case,” Riebe told the commissioners, noting the proposal before them and the potential of find some funding assistance.
Utilities departments everywhere have infrastructure that needs updating, Riebe said. However, he continued, few are as open as he and his staff are being when it comes to talking about the share of the expense customers will have to handle.
For example, he said, the City of Orlando utilities department raises its fees 5% a year, “every year, but they don’t forecast that long-term.”
Mark Nichols, finance manager of the Sarasota Utilities Department, told the board members that he joined the department in 2006. His first year on staff, he said, the City Commission approved a 16% rate increase. Then, in 2007, the board agreed to another 6% hike, for a total of 22% in two years. “Prior to that, we were averaging 2% a year.”
Emphasizing that the plan before the commission on July 15, called for an increase of just 3.5% a year, Nichols referred to the far higher hikes in 2006 and 2007. “I don’t want to go back to that time.”
Out of the 3.5% a year, Riebe explained, up to 1.6% would cover general operating expenses, such as workers’ salaries. The rest of the new revenue will be allocated to projects and debt service on money the city borrows to help cover the cost.
Furthermore, Riebe told the commissioners, since he became the department’s director in February 2018, projects have been coming in on budget and on schedule.
Freeland Eddie protested that staff should have organized the projects by priority and then grouped them in the five-year periods the city’s Capital Improvement Program covers.
“They are prioritized now,” Riebe replied, referring to the draft master plan he presented to the board in June. Still, he added, “You can pretty much throw a dart at the city’s water and wastewater map; chances are, we’re going to need to approve something.”
The draft master plan that Riebe reviewed with the board on June 17 noted that some of the buried pipelines in the city date to the 1920s, while some of the wastewater treatment structures were built in the 1950s.
Methodology and recommendations
On July 15, Thierry Boveri of Raftelis provided an overview of how the rate increase plan was developed. “It’s a fairly data-driven process.”
Raftelis analyzed five years’ worth of city utility records, including customer bills, he explained. Ninety-seven percent of the department’s budget is covered by user fees, he said.
Boveri noted of customer growth, “It’s been fairly low” during the past five years. However, he continued, in 2018, “We saw a pretty big uptick, around 2½%.”
A conservative forecast, he said, puts the growth at half-a-percent a year.
Showing the board a pie chart, he added that about 90% of the city’s water customers also have wastewater service.
Boveri recommended that city staff reassess the utility rates approximately every two to three years, to ensure they continue to be appropriate.
Additionally, Boveri suggested that staff review the utility impact fees. “We’re trying to get growth to pay for growth.”
The last time the City Commission approved updated utility impact fees, he added, was in 2016.