Brace for city water and sewer rate hikes

Sarasota City Commissioner Shannon Snyder has been a proponent of exploring new options for city revenue. Photo by Norman Schimmel

June 19 was the date for the annual “State of the Utilities” workshop for the City of Sarasota. To prevent long-term debt from increasing, the city commissioners tentatively agreed to a 4% rate increase in water and sewer rates in 2013 and 2014. They will come on top of 4% increases in 2011 and 2012.

The decision is not final until the public is notified, two public hearings are held and the commissioners vote. Public hearings are scheduled on July 16 and Aug. 20 for the proposed rate increases.

But Wednesday’s discussion is a strong indicator the rates are headed up. It came after almost two hours of review by staffers and consultants on the physical and fiscal health of the utility system.

The bulk of the presentation was an overview of the city’s freshwater and wastewater systems. Stormwater, which is a county responsibility, was not addressed.

“Sarasota has a full-service utilities system for fresh- and wastewater,” explained Interim Utilities Director Bill Hallisey. “We have our own sources of water, and did not participate in the water wars.”

By contrast, Sarasota County still buys millions of gallons per day from Manatee County.

It was Hallisey’s first appearance before the City Commission since his appointment as interim director following the resignation of Javier Vargas late last month. “We had a difference of opinion on leadership expectations,” Interim City Manager Terry Lewis explained about Vargas’ leaving. Hallisey was called back from retirement, as he was the city’s former utility director.

On June 19, Hallisey and utility staffers figuratively walked the commissioners through the system for nearly two hours, explaining about compliance with state permits, the mechanics of deep-well injection of brine produced by the reverse-osmosis purification system, the use of new technology and the pace of work.

“We have about 20,000 work orders every year,” said Hallisey. “About 15,000 are preventive measures.”

In addition to producing potable water from two well fields (downtown and at Verna), the city collects wastewater for advanced treatment and eventual re-use for irrigation. The city is in negotiations with Lakewood Ranch to sell reclaimed water, and for possible use of the ponds there for storage of reclaimed water in the summer.

The city also is in conversation with Manatee County about the two local governments working together on treatment of “bio-solids,” the semi-solid residue remaining after wastewater treatment. By shutting down the city’s 1970s-era system, an estimated $1.5 million would be saved (including savings from discontinued operations at the Hi-Hat Ranch).

After all the pumps and pipes were accounted for, talk turned to finance. Consultant Andrew Burnham with Burton and Associates had examined the city’s utility bond indebtedness and the impact of rate changes. He reported that if the City Commission maintained the 4% annual increase in water and sewer rates, no additional bonds would be required for ongoing and proposed utility projects.

And the city could pay back $27 million of the $61 million in total utility debt over the next decade. He said, “That’s a sizeable pay-down over the next 10 years.”

He reported other cities are boosting their user rates, too. Fort Myers, he said, has an automatic 5% boost, while Cape Coral’s rates last year jumped 5.5%.

“Staff recommends a rate increase,” said Hallisey.

There was some discussion about moving any extra income from the utility system into the city’s general fund. “That’s what Tallahassee does with its electric rates,” said Commissioner Shannon Snyder. “They pay a higher rate than FP&L.”

Using utility rates to support the general fund would allow the city to get revenue from the approximately 25% of property that is exempt from property taxes. “If it makes revenue, I’m OK with that,” said Snyder.

“We have competitive rates,” said Hallisey. “Water demand is picking up, and our customer base is solid.”