Utilities director says raising impact fees would not raise significant revenue to reduce rate hike
On Aug. 19, the Sarasota City Commission ended up with the same 3-2 vote it took on July 15, as it approved a 3.5% increase in city residential water and sewer rates over the next 11 years.
Commissioners Shelli Freeland Eddie and Hagen Brody reprised some of the arguments they made last month before voting “No” once again.
Commissioner Willie Shaw made the motion to adjust the rates, after the board members addressed issues during the required second reading of the proposed ordinance. Vice Mayor Jen Ahearn-Koch seconded the motion, and Mayor Liz Alpert joined them in the majority.
The rate increase will go into effect on Sept. 1, a month before the 2020 fiscal year begins. It will continue through the year 2030, according to a memo city Utilities Director William Riebe provided the commission in advance of the Aug. 19 meeting.
The last time the board raised those rates before this week was on Sept. 1, 2015, the memo pointed out.
The funds generated by the higher fees will help pay for improvements to the city’s water and wastewater systems that Riebe and his staff have estimated at $298.5 million on the basis of a comprehensive study they undertook. The average expense will be $27.1 million per year through the 2030 fiscal year, according to a chart prepared for the commission.
The drinking water system should see a total of $123.3 million in improvements; the wastewater system, $175.2 million.
The impact fee question
Commissioner Freeland Eddie suggested again on Aug. 19, as she had in July, that Riebe and his staff could have proposed incremental improvements to the systems, instead of the nearly $300-million program over 11 years.
She also voiced concern that staff had not undertaken a more thorough exploration of the use of water and sewer impact fees to assist with paying for the upgrades.
Freeland Eddie referred to emails that city resident Dan Lobeck, president of the nonprofit organization Control Growth Now, had sent the board members and Riebe over the previous few days.
The last adjustment to the impact fees, based on his understanding, Riebe replied, was in 2006 or 2007. (Riebe joined the city staff in early 2018.) Staff plans to look into that issue over the next year, he told Freeland Eddie. Nonetheless, he added, “We’re pretty much in line” with the impact fees charged by other utility departments.
This year, Riebe continued, the city has collected a total of about $650,000 in water and sewer impact fees, plus charges for new water meters. Total revenue for his department, he added, is expected to be $48.7 million, “roughly.”
“It’s not a lot of money,” he said of the impact fee payments. “Certainly won’t support a massive capital improvement program.”
Moreover, Riebe noted, staff did project impact fee revenue in the study it undertook before proposing the adjustment in fees.
City Manager Tom Barwin also pointed out that impact fees are designed to help pay for system capacity expansion, to serve new structures.
Riebe explained that impact fees also pay for system capacity that already is in place. Staff tries to recapture expenses laid out “years and years ago,” he said.
In an Aug. 19 email to Riebe, Lobeck asked whether the city could charge impact fees in conjunction with the replacement of water and sewer main lines, in an effort to expand capacity. “That is a growth-related improvement,” Lobeck wrote.
“To be clear,” Riebe responded in an email the same day, “there are no pipeline projects to provide additional capacity to address new development or otherwise subsidize new development.”
Later, after the vote, Lobeck emailed all the city commissioners, as well as Riebe, to emphasize, “There still remains an opportunity to reduce the rate hike by increasing the utility impact fee on developers.” Lobeck added — again with emphasis — that “the costs of growth should not be placed on the backs of the residents and businesseswho pay for water and sewer services. Instead, growth should be made to pay for the capacity increases caused by that growth.”
A focus on averaging
Commissioner Brody questioned Riebe about Utilities Department staff statements to the news media — and a city fact sheet produced before the July 15 City Commission meeting — that the average customer uses 4,000 gallons of water a month, which costs $70. (A chart Riebe provided the commissioners last month put that figure at $80, but Riebe did not contradict Brody on Aug. 19.)
He had had a number of complaints from city customers, Brody indicated, asking how staff arrived at the average expense for 4,000 gallons a month. Brody especially questioned its legitimacy in view of the number of seasonal residents the city has.
The 4,000 figure was result of a staff calculation of the amount of water per month that “a multitude of … customers” use over a year, divided by 12, Riebe explained.
“My fear is that that number is artificially low,” Brody responded.
Some people use 1,000 gallons a month, Riebe replied. “There’s some that use 8,000. … It all depends on the number of people in the house.”
“It’s not fair to the full-time residents,” Brody told Riebe.
Riebe then explained that every city water customer pays a base facility charge. “We capture a significantportion of our fixed and other costs that don’t really change every year” through that base charge, Riebe added. “It’s a smart way of doing business.”
Any customer who wants to determine his or her actual increase for the first year the new water/sewer rate is in effect, Riebe continued, can multiply the customer’s average monthly bill by 1.035.
“Who has a $70 water bill?” Brody asked again. Many full-time city residents, Brody continued, are “at the lower economic scale than the seasonal residents.” It behooves the commission and city staff to be honest about the actual increases those customers will see, Brody said.
No matter whether a customer is seasonal or full-time, Riebe responded, that customer is going to have to pay the base facility charge.
“I don’t think it’s all that fair to be charging people for water that they don’t use,” Brody said.
As Brody continued to press the issue, Riebe told him, “I think what you’re mixing is apples to oranges. … To do an analysis for every single customer is literally impossible at this point.”
City Manager Barwin added that he believed Brody was “looking for … something that doesn’t exist right now: It’s a homestead vs. a non-homestead [fee].”
“Nobody I know has a $70 water bill,” Brody insisted.
Riebe reiterated that staff arrived at an average among all city residential water customers.
After Commissioner Shaw made the motion to approve the rate increase, Brody said, “I support the concept of replacing our aging water infrastructure.” Still, Brody continued, he believes that the new fees will be something, “flat out, a lot of people will not be able to afford.” He added to his colleagues, “You are, with one vote, going to be excluding people from our community,” both residents and businesses, over the next 10 years.
“With all due respect to Commissioner Brody,” Shaw said, “We well understand it. I well understand it. … You haven’t come up with a better idea. [The Utilities Department staff members] haven’t come up with a better idea.”
Moreover, Shaw continued, the rate increase could be lowered, if the city finds other means to pay for the new infrastructure. “We may be able to change it in two years.”
Shaw also pointed out, “[Riebe] picked up what was left here 25 years ago,” referring to long-deferred upgrades needed for the water and wastewater systems.
Riebe noted that many of the structure in the city date to the 1950s and 1960s.